Surge in global oil prices after the Ukraine conflict

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According to insiders, India’s legitimate energy transactions should not be politicised, despite claims that New Delhi is going to buy Russian oil at a reduced price as a result of the global oil price spike following the Ukraine conflict.

India is highly dependent on imports for meeting its energy requirements, nearly 85 per cent of crude oil requirement (5 million barrels a day) has to be imported. Most of the imports are from West Asia (Iraq 23 per cent, Saudi Arabia 18 per cent, UAE 11 per cent). The USA has also now become an important crude oil source for India (7.3 per cent), sources informed.

Imports from the US are expected to increase substantially in the current year, probably by around 11 per cent. Its market share will be 8 per cent, according to sources. “Geopolitical developments have posed significant challenges to our energy security. For obvious reasons, we have had to stop sourcing from Iran and Venezuela. Alternative sources have often come at a higher cost,” the sources said.

The sources further stated that the jump in oil prices after the Ukraine conflict has now added to our challenges. The pressure for competitive sourcing has naturally increased. “Russia has been a marginal supplier of crude oil to India (less than 1 per cent of our requirement, not among top 10 sources). There is no G2G arrangement of import,” the sources said.

“Russian oil/gas is being procured by various countries across the world, particularly Europe. 75 per cent of Russia’s total natural gas exports is to OECD Europe (like Germany, Italy, France). European countries (like Netherlands, Italy, Poland, Finland, Lithuania, Romania) are also large importers of Russian crude oil.”

Notably, recent Western sanctions on Russia have carve-outs to avoid impact on energy imports from Russia. Russian banks that are the main channels for European Union payments for Russian energy imports have not been excluded from SWIFT, as per sources.

“India has to keep focusing on competitive energy sources. We welcome such offers from all producers. Indian traders too operate in global energy markets to explore best options,” said the sources. They further said countries with oil self-sufficiency or those importing themselves from Russia cannot credibly advocate restrictive trading.

According to some media reports, Indian Oil Corporation purchased 3 million barrels of Russian crude oil, the first such transaction since Russia invaded Ukraine on 24 February. Meanwhile, a report by PTI also reported that Bharat Petroleum has also purchased 2 million barrels of Russian crude.

India, the world’s third-largest oil consumer and importer and one of the few countries not to condemn Moscow’s invasion of Ukraine, currently imports 80 per cent of its oil, but only about 2 per cent to 3 per cent of those purchases come from Russia.

Meanwhile, the United States has said India would not be violating US sanctions by purchasing discounted Russian oil but added that such a move would put the world’s largest democracy on the “wrong side of history”. The US has banned all Russian energy imports in the wake of the Ukraine conflict.

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