By Nidhi Verma
NEW DELHI (Reuters) -India, the world's third-biggest oil importer and consumer and the largest buyer of Russian seaborne crude, is caught in the crossfire of diplomatic negotiations between Russia and the United States to end the war in Ukraine.
WHY HAS TRUMP IMPOSED ADDITIONAL TARIFFS ON INDIAN GOODS?
An additional 25% duty by President Donald Trump takes total tariffs on Indian goods to as much as 50% from Wednesday, among Washington's highest, in retaliation for New Delhi's increased
buying of Russian oil.
White House trade adviser Peter Navarro said India's purchases of Russian crude were funding Moscow's war in Ukraine and had to stop.
This month, Treasury Secretary Scott Bessent said India was profiteering from its sharply increased imports, making up 42% of total oil purchases, versus less than 1% before the war, a shift Washington has called unacceptable.
Trump's strategy is in a sharp contrast to the former Biden administration, which had welcomed India's Russian oil purchases in order to help keep global oil prices, which hit a peak of $139 a barrel in 2022, in check.
WHY INDIA IS BUYING RUSSIAN OIL?
India and China have become the biggest Russian oil buyers since the Ukraine war broke out in 2022 and Western nations shunned energy imports from Moscow and imposed price caps on Russian oil trade. However, there is no blanket prohibition on the purchase of Russian oil if the deals meet parameters of the Western sanctions.
The Indian government aims to reduce its massive crude oil import bill and provide energy at affordable rates to its 1.4 billion citizens. Additionally, the import of discounted Russian oil has allowed India to diversify from more expensive Middle Eastern grades.
India has said its national interests will guide its energy import policies. The country imports over 85% of its total oil requirements for its refining capacity of 5.2 million barrels per day.
WILL INDIA CONTINUE TO BUY RUSSIAN OIL?
For now, India is unlikely to stop importing Russian oil due to energy security, people familiar with the matter said.
However, India's imports of Russian oil are expected to fall in September from August, after state refiners paused their purchases due to smaller discounts, according to LSEG trade flow data.
India's Russian oil imports are expected to remain subdued as state-refiners are not keen to buy at reduced discounts and are instead scouting for only distressed cargoes, said Indian refining sources.
Discounts for Russian Urals crude delivered to India have narrowed to about $2.50 per barrel to dated Brent, trade sources said, versus discounts of $20–$25 per barrel when the war began in February 2022.
India officials said it is difficult to replace Russian oil supplies as the cost of replacement barrels will rise significantly.
HOW MUCH OIL DOES INDIA BUY FROM RUSSIA?
India imported 1.73 million bpd of crude from Russia between January and July, accounting for more than a third of India’s total imports, trade data showed.
Previously, Russian oil made up only a small fraction of India’s overall imports due to logistical constraints, including costly and longer shipping routes.
India reduced its crude intake from Middle Eastern and African nations after increasing Russian imports.
WHO ARE THE TOP BUYERS OF RUSSIAN OIL IN INDIA?
Indian private refiners Reliance Industries and Nayara Energy are the top buyers of Russian oil. Reliance operates the world’s largest refining complex, while Nayara is majority owned by Russian entities, including Rosneft.
Reliance has a term contract with Rosneft, India’s largest oil import deal with Russia. Together, the two companies account for about 60% of India’s total Russian oil imports.
In contrast, state-run refiners purchase Russian oil from the spot market on a delivered basis.
ALTERNATIVES TO RUSSIAN OIL
Indian companies have raised crude imports from the U.S. and the Middle East in recent months to replace Russian supply.
(Reporting by Nidhi Verma; Editing by Florence Tan and Lincoln Feast.)
