The circulation of Russian oil across three seas: strange details of export to India revealed

India has named the volumes of oil exported from Russia. As stated by the Secretary of the Indian Ministry of Oil and Gas, Pankaj Jain, his country in 2024 continues to receive raw materials from Russia in the same volumes as in the past – about 1-1.4 million barrels per day. However, supply dynamics have their ups and downs: they may change depending on seasonal factors. But how stable are Russian energy exports to this friendly Asian country really? Is it only weather conditions that affect it? MK addressed these questions to Russian energy market expert Igor Yushkov.

In 2023, the share of Russian oil in the structure of Indian imports averaged 22-27%, Pankaj Jain said. In general, the country received 5 million barrels of raw materials per day last year from foreign suppliers. Earlier, Petroleum and Natural Gas Minister Hardeep Singh Puri confirmed Delhi’s readiness for further trade deals with Moscow. The official denied the possibility of reducing purchase volumes, noting the positive nature of energy cooperation between the parties.

Meanwhile, as Bloomberg writes, Indian state-owned refineries are increasingly cautious about long-term contracts for the supply of Russian oil due to fears of falling under US sanctions. According to the agency, the country’s largest plant, Indian Oil Corp. intends to reduce the volume of raw materials received from the Russian Federation under such conditions. Two more state-owned enterprises – Bharat Petroleum Corp. and Hindustan Petroleum Corp. – decided not to make firm commitments to accept contract oil in the next financial year.

“While Russia remains India’s largest oil supplier, there are signs that refiners are starting to buy more crude from other producers, including Saudi Arabia,” said an anonymous Bloomberg source. “It is likely that such spot and one-time transactions will cost more than contracts with the Russian Federation.”

Today, India ranks firmly on the planet in terms of growth in energy demand: according to forecasts by the International Energy Agency (IEA), consumption of raw materials in the country will increase by 3% per year in the next 10 years. Moreover, the Indian authorities are counting on more intensive dynamics in the next 5 years – 7.5% growth per year. According to Prime Minister Narendra Modi, India’s share in world oil consumption will increase from the current 6% to 11% by 2030, and the capacity of oil refineries will increase from 250 million tons to 450 million tons per year.

“India is the largest buyer of Russian oil, which is transported by sea,” Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, told MK. “In 2022 and 2023, supply volumes reached a maximum of almost 2 million barrels per day. Of course, there are certain fluctuations in dynamics, the situation may change from month to month. On the one hand, Russia has no particular desire to put all its eggs in one basket, focusing exclusively on India. And she constantly negotiates on the terms of the sale: the size of the discount is important to her, and she prefers to pay for everything in her national currency. Frankly speaking, we have nowhere to put these rupees. They can be converted into other currencies, but this will simply result in additional costs. However, Indian refineries today pay for part of their supplies in UAE dirhams, which they purchase through traders in Dubai. We have a lot to spend dirhams on: they are used in many parallel import schemes.

The same situation is with the yuan. Russia buys a lot of different goods from China, therefore, if our raw materials companies sell their products in India for yuan, they can then freely sell them on the domestic foreign exchange market to importing companies. In general, our oil exports are concentrated in two countries – India and China, which account for 75% of all supplies. And if you add Turkey and South Korea (third and fourth places), you get 90%. But when there are alternative buyers, Russia tries not to miss these opportunities.

– Why does India buy so much Russian oil?

– For two reasons – infrastructure and price. By the beginning of 2022, India had a ready-made business in the form of oil refineries built on the coast, where oil was transported by sea from the Middle East – mainly from Iraq, Saudi Arabia and the UAE. These countries were the top three suppliers until 2022. India then sold the petroleum products obtained from their raw materials in Southeast Asia and Europe. For her, it was cost-effective and profitable even at normal world prices. And in the case of Russian oil, Indian refineries began to receive excess profits due to a large discount. Our offer remains unconditionally the best for them. In addition, India has replaced Russian oil products with its oil products, which were previously present on the European and partially American markets. This is not prohibited by sanctions: these petroleum products are considered produced in a third country.

– But, as Bloomberg writes, Indian refineries are refraining from concluding long-term contracts with Russia due to fears of falling under sanctions. How true is this?

– Bloomberg draws a false conclusion: they say that since negotiations between Russian suppliers and Indian refineries dragged on for several weeks, and long-term contracts have not yet been concluded, it means that bilateral contacts have failed due to the threatening sanctions background. But here the matter is completely different: India prefers medium- and short-term contracts, since it is easier to negotiate some additional discounts with them. In general, India has no problems providing itself with raw materials: if Russia redirects supplies to other markets, the country will simply switch to Middle Eastern producers. It is clear that long-term contracts are more profitable for us: the size of the discount on Russian oil is constantly changing (on average $10 per barrel), and they do not allow the price to fluctuate greatly during shipment.

– Could these problems with the negotiations lead to losses in Russian oil exports?

– There is an international portal S&P Global, which every two weeks thoroughly monitors where and how much Russian oil is transported by sea. So, in December 2023, India bought 1 million 394 thousand barrels per day from the Russian Federation, in January – 1 million 486 thousand, in February – 1 million 303 thousand. As we see, there is no critical decline. Bloomberg points out the risks of sanctions, but which ones exactly are unclear. Sanctions against Russian oil do not prohibit anyone from buying it; moreover, the United States is interested in saturating the world market at its expense so that prices do not rise. As for the tightening of various kinds of financial obstacles by the West (relating to interbank payments for supplies), we have been sending large volumes of oil to India for more than two years and, at the very least, we have learned to solve this problem.