NEW DELHI: India has been buying Russian crude from traders since the conflict began in Ukraine, and not oil marketing companies directly. As a result, there is no liability on the importer of insurance. Also, the G7 proposed oil cap for Russia will have no bearing on imports to India.
"Both private and national oil marketing companies in India have been buying Russian oil primarily through traders since the conflict began in Ukraine. The cost includes insurance and logistics and is referred to as C&F (cost and freight),’’ said sources.
Since the outbreak of the conflict in Ukraine, India has upped its import dependence on oil from Russia from a mere less than 2 per cent to nearly 30 per cent now, and this is not likely to change anytime soon.
The leading traders include Vittol, Glencore, and Trafigura. They are commodity traders who also deal in oil. Some oil marketing companies too (like Shell, Total) have their trading divisions.
In the past, India wasn’t buying oil from Russia as freight and logistics were barriers. It used to take longer to reach India and very large crude carriers (VLCC) were not available. However, things changed after the conflict began in Ukraine. The cost of crude is higher in Middle East and Russia offered a discount. Besides, most of our refineries in India were capable of processing Russian crude - which is a plus point,’’ sources added.
The price cap of $60 per barrel on Russian crude, that the G7 nations have put on Russian crude, will not have any bearing on India.
"The cost of crude ranges around $85 per barrel in the international market at present. If the traders buy the crude from Russia say at $65 and sell it for $70 per barrel, the buyers (including India) end up saving $15 per barrel – which is very viable,’’ sources added.
India imports nearly 85 per cent of its crude. The total requirement is 250 million tonnes. During the month of November, India was buying close to 10 million barrels per day of crude from Russia (which amounts to around 5 million tonnes per month).
Russia, which made up for just 0.2 per cent of all oil imported by India in the year to March 31, 2022, supplied 9,09,403 barrels per day (bpd) of crude oil to India in November, according to data from energy cargo tracker Vortexa.
Meanwhile, even though India has begun to trade in rupee and rubal in their defence trade, it will be a while before the same mechanism is applied in crude purchase.
"The traders work internationally so their purchase is in dollars and it is likely to continue that way for a while,’’ said sources.
Crude oil pricing continues to fluctuate due to demand and supply. With winter having set in, demand has already surged.
External Affairs Minister, Dr S Jaishankar, has pointed out many times that oil is a finite source of energy and "we will procure it from wherever we get the best price.’’
(With online desk inputs)