From Russia to Canada: How India is snapping up cheap crude oil, cutting dependence on Middle East

NEW DELHI: "Every country tries to get the best deal possible for its citizens," external affairs minister S Jaishankar said this in August while defending India's decision to buy Russian oil amid the ongoing conflict in Ukraine.

While the West, particularly America, has been raising eyebrows over India's move to snap up discounted Russian oil during the war, New Delhi has remained quite clear about its priorities: keeping energy prices in control and growing inflation in check.

"It is a situation today where every country will try to get the best deal possible for its citizens, to try to cushion the impact of these high energy prices. And that is exactly what we are doing," Jaishankar had said.

As a result, oil refiners in India snapped up nearly all grades of Russian crude in the last few months, taking advantage of discounts after some entities in the West halted purchases.


Middle East imports at 19-month low
According to a report in Reuters, India's oil dependence on Russia increased so much that its imports from the Middle East fell to a 19-month low in September.

India's imports from the Middle East fell to about 2.2 million bpd, down 16.2% from August, the data showed.

On the other hand, imports from Russia increased 4.6% to about 896,000 bpd after dipping in the previous two months.


Russia's share of India's oil imports surged to an all-time high of 23% from 19% the previous month while that of the Middle East declined to 56.4% from 59%, the data showed.

According to data, Iraq remained India's top supplier while Russia overtook Saudi Arabia as the second biggest after a gap of a month.


Rs 35,000 crore gain & counting
India has emerged as Russia's second biggest oil buyer after China, taking advantage of discounted prices as some Western entities shun purchases over Moscow's invasion of Ukraine.

As a result, it is estimated to have gained Rs 35,000 crore till September by importing Russian crude at discounts since the war began in February.



Oil prices are critical for India as it meets 83% of demand through imports, which makes the economy vulnerable.

The country’s oil import bill doubled to $119 billion in 2021-22, stretching government finances and weighing on the post-pandemic economic recovery.

India has maintained that as a rapidly growing economy, it needs affordable energy to improve the lives of its citizens.


Like Jaishankar, Union oil minister Hardeep Singh also defended India's decision to increase Russian oil imports.

“When the price goes up and you are left with no option, you will buy from anywhere. We have a very well defined understanding of what India’s interests are,” Puri had told reporters 2 months back.

Finance minister Nirmala Sitharam, however, termed it as a part of India's inflation management strategy. She had said that India's inflation management was "an exercise of so many activities, most of which are outside the (purview of) monetary policy".
She said Prime Minister Narendra Modi deserved credit for balancing trade and other ties with various countries.

Looking beyond Russia
Though India has benefited tremendously from Russian oil imports, the profits are now getting squeezed due to Moscow limiting discounts, tighter sanctions kicking in and refiners lifting more term supplies.

Last month, India's monthly oil imports from Russia declined after hitting a record in June.

"In the end you cannot cut Saudi supplies because of clauses in term contracts and Russia was able to reduce its discounts because of high demand especially in Asia," Ehsan Ul Haq, an analyst with Refinitiv told Reuters.

As a result, India's overall crude imports in August had declined to a five-month low of 4.45 million bpd, down 4.1% from July, due to maintenance at some refineries, the data showed.

India is turning to Africa and the Middle East instead of Russia due to higher freight rate, Reuters reported.

To secure supplies, Indian Oil Corporation (IOC) in September signed its first 6-month oil import deals with Brazil's Petrobras for 12 million barrels and Colombia's Ecopetrol for 6 million barrels.

Bharat Petroleum Corporation (BPCL) has signed an initial deal with Petrobras as it seeks to diversify oil sources.

IOC is also looking for more short-term supplies, including a contract for US oil, according to sources quoted by Reuters.

IOC already has an annual deal that provides an option to buy 18 million barrels of US oil. Of these, IOC has already bought about 12 million barrels so far this year, they said.

The sources also said that BPCL, which has already ramped up US oil purchases, is looking for more term contracts.

Moreover, with Canadian heavy crude’s discount to West Texas Intermediate crude on the Gulf Coast expanding to a record, Indian refiners have opportunistically increased purchases.

A total of 3.3 million barrels of Access Western Blend, a crude grade produced in the oil sands of Alberta, are scheduled to arrive in India next month after departing the US Gulf, according to Vortexa Ltd.



"On net back basis after factoring in the freight, the landed cost of ESPO is turning out to be $5-$7 a barrel costlier in comparison to similar grades from other countries such as UAE's Murban," an Indian industry source familiar with the matter told Reuters, adding that Russian oil has previously been cheaper.

Thus, instead of Russian ESPO, Indian companies are buying other grades such as those from West Africa that give better yields, he said.

India has also loaded 2.35 million tonnes of African oil so far this month versus 1.16 million tonnes in August.

Russian ESPO exports in September slipped to 720,000 barrels per day (bpd) from more than 800,000 bpd in July and August, the data showed.

(With inputs from agencies)