Ukraine crisis: Why is India buying Russian oil?

By Shruti Menon
BBC Reality Check

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Man at petrol station filling vehicleImage source, Getty Images
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Rising global oil prices are a concern for India's policymakers

There's been a significant increase in India's imports of Russian crude oil, according to the latest shipping data.

The US has said India shouldn't go "too far" with its oil purchases from Russia, but India has defended its continued buying of Russian crude.

Where is India getting its oil?

India is the world's third-largest consumer of oil and over 80% of it is imported.

Historically, Russia has not been a major supplier to India. In January and February this year, India did not import any crude from Russia at all.

But in March, imports began to rise.

According to tanker tracking data in May, Russian oil imports are now the second-largest source for India after imports from Iraq, according to data analytics firm Kpler.

Indian contracts for Urals crude - the type most commonly exported by Russia - for March, April, May and June and projections for deliveries in July and August (around 66.5 million barrels in all) - amounts to more than the quantity purchased during all of 2021, according to Kpler.

Last year, India's top three suppliers were in the Middle East, followed by the US and Nigeria. Only around 2% of total oil imports (12 million barrels of Urals crude) came from Russia, according to Kpler.

Why is India buying Russian oil?

India has taken advantage of discounted prices to ramp up oil imports from Russia at a time when global energy prices have been rising.

Following its invasion of Ukraine, there were fewer buyers for Russia's Ural crude oil, with some foreign governments and companies deciding to shun Russian energy exports, and its price has fallen.

The US has urged India not to buy too much Russian oil, although it's acknowledged that it can't stop these purchases because there are no secondary sanctions on countries doing business with Russia.

US State Department official Amos Hochstein has said that he told Indian officials not "to look like you're taking advantage of the pain that is being felt in European households and in the US".

While the exact price of the sales to India is unknown, "the discount of Urals to Brent crude [the global benchmark] remains at around $30 per barrel", says Matt Smith, an analyst at Kpler.

These two types of crude normally sell at a similar price.

At one point in March, as the price of Urals crude continued to drop, the difference between them reached an all-time record, he adds.

Image source, Getty Images
Image caption,
India imports more than 80% of its oil

The price difference has continued since then.

So "India is likely to purchase at least some of this [Russian] crude at a significant discount," says Matt Smith.

What's the impact of financial sanctions?

Although the price is attractive, India's big refining companies are facing a challenge trying to finance these purchases, because of sanctions on Russian banks.

It's a problem facing trade in both directions.

One of the options India is looking at is a transaction system based on local currencies, where Indian exporters to Russia get paid in roubles instead of dollars or euros.

The US has made clear its reservations with this, saying it could "prop up the rouble or undermine the dollar-based financial system".

Image source, Getty Images

Where else is India buying oil?

India's oil imports from the US went up in February and March, but then fell in April and fell further in May.

While India continues to buy a large amount from Middle Eastern countries, the most significant increase in imports is from Russia.

Foreign Minister S Jaishankar has said that because of sanctions on other major producers such as Iran and Venezuela, Western countries had "squeezed every other source of oil we have."

India has also denied recent reports that Russian crude imported by India was being shipped on as refined products to other countries, including the US.