INDIA’S OIL IMPORTS FROM RUSSIA

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Context: India's rising imports of Russian oil.

Details

• India's oil imports from Russia reached a record high of approximately 1.95 million barrels per day (bpd) in May.
• India, as the world's third-largest oil consumer and importer, heavily relies on imported oil, with more than 80% of its oil sourced from overseas.
• The increase in imports from Russia is attributed to sanctions imposed on Moscow following its invasion of Ukraine.

Impact on Crude Imports

• Russian oil accounted for around 40% of India's crude oil imports in May, surpassing imports from Iraq and Saudi Arabia.
• Imports from Iraq dropped to a three-year low, while imports from Saudi Arabia reached their lowest level since September 2021.
• In May, India imported approximately 801,400 bpd of Iraqi oil, down 13.7% from April, and Saudi supply declined by 15% to 616,100 bpd.

Factors Driving Increased Russian Oil Imports

• Cost Advantage: Russian oil offers a competitive advantage due to its lower landed price compared to crude oil from West Asian countries.
• Price Comparison: In April, the landed price of a tonne of Russian oil was around $500, equivalent to $68.21 per barrel, whereas Iraqi oil cost $570 and Saudi Arabian oil cost $637.40 per barrel.

Long-Term Outlook

• Continued High Imports: India is expected to maintain high imports of Russian oil as its cost remains comparatively lower than West Asian crude.
• Impact on West Asian Suppliers: Due to increased purchases of discounted Russian oil, the share of imports from West Asia, which has traditionally been India's primary source, decreased to an all-time low of approximately 39% in May, down from 44% in April.

Economic Implications

• Cost Savings: Importing cheaper Russian oil can help India reduce its overall import expenditure and contribute to cost savings for Indian refineries.
• Diversification of Sources: The rising imports from Russia highlight India's efforts to diversify its sources of crude oil and reduce dependence on any single region.

Geopolitical Considerations

• Impact of Sanctions: India's increasing reliance on Russian oil reflects the consequences of Western sanctions on Moscow, shaping India's oil trade dynamics.
• International Relations: The shift in oil imports can have implications for India's relationships with oil-producing nations in the Middle East and Russia.

PRACTICE QUESTION Q) Discuss the factors contributing to India's rising imports of Russian oil and the implications for its oil trade with Iraq and Saudi Arabia. Analyze the economic and geopolitical implications of this shift in India's crude oil imports. (250 words)

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