Russian Crude Imports 'Big Deal' For India, Says Analyst

India sees several advantages from buying Russian oil, a top academic from the country's premier higher educational establishment, Jawaharlal Nehru University (JNU) has said.

The remarks by Dr. Anuradha Chenoy, an ex-professor of the Centre for Russian and Central Asian Studies at JNU, come at a time when a Western media report suggested that India was facing pushback from its refining sector against Russian crude.

According to the publication, Russia's Ural blends were making it difficult for Indian refiners to process large volumes of crude and that's why the demand for oil from the Eurasian nation could see a decline in the next few months.

Rising Russian Crude Purchases Leaves West Fuming

This claim, however, was rejected by Chenoy who said that the amount of cheap oil India is importing from Russia continues to increase.

Indian open sources and energy tracker Vortexa show that India imported 1.96 million barrels a day from Russia in May 2023, this is 15% more than the previous high in April this year.

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Russia's share in the Indian energy basket mix, which was just 2% in 2021, has jumped to 46% and appears to be mounting even further.

"These dramatic increases of Russian crude are raising eyebrows internationally and [causing] anger in the West, since this helps shield the Russian economy from the impact of the deadly sanctions," Chenoy told Sputnik.

She added that India was a fast-growing economy and dependent on imported fuel, which was a lifeline for its growth.

Furthermore, Indian private refineries like Reliance Industries and Nayara Energy process Russian crude which is then legally treated as Indian oil, and can be exported to third countries in Europe and this arrangement is not outside the prevailing international laws regulating oil transactions.

"Do Indian refineries have the capacity to process such large volumes of crude from Russia? Why would they keep stepping up imports just to store up crude?" Chenoy asked.

Director General of the Federation of Indian Petroleum Industry, Gurmeet Singh, recently said that India has even more room and interest in processing Russian crude.

"In fact, this is a growth industry in Indian plans, and they intend to increase the capacity for refining to almost double the current capacity over the next ten years. Clearly, this India- Russia partnership continues to have mutual benefits so far and even more in the future," the former JNU professor stressed.

Why Are South Asian Buyers So Attracted to Russian Crude ?

Chenoy then listed the benefits for India in buying crude from Russia. The biggest of them all, she reckoned, was the discounted price, which for an oil-dependent and developing economy was a very big deal, because this helps government revenues.

Also, India has the prospect of paying for Russian crude using a Rupee/Ruble exchange arrangement, thereby bypassing the dollar, a longtime ambition of New Delhi.

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She pointed out that the Reserve Bank of India has allowed foreign banks to open 'Vostro accounts' to enable rupee payments which is very useful for Russian crude which would help India save billions of dollars in foreign exchange expenses.

Chenoy underlined that trade with Russia poses no risk, since it has always been unconditional. India and Russia oppose unilateral sanctions that the US and/or the EU slap on any country that does not toe the Washington-led Western line.

"India still faces the CAATSA, which is the 'Countering America's Adversaries Through Sanctions Act', designed for India. So unilateral economic coercive measures are part of Western foreign policy, whereas India has no such fear from Russia," she elaborated.

India-Russia Trade Yet to Realise Full Potential

Indian-Russia trade has increased by 400% over the last year, but is mostly thanks to petroleum products.

Chenoy believes India-Russia trade is in reality nowhere at the level it should or can be. In other words, its potential is yet to be realized.

Then she spoke about the factors hampering this growth, even though the leaders of both India and Russia have been encouraging an increase in trade, outside the traditional sectors of defense and oil.

Factors Hampering India-Russia Trade

Among the core reasons, she presumed, was that Russia's markets had gotten more used to Western goods in the last two decades and lost confidence in Indian goods.

Additionally, banks need to be more flexible and understand each other. Now that the Vostro system has been made available, Russian business houses need to use this. This is an opportunity to move away from the dollar. While it has been done by energy companies, this should now shift towards the entire trade sector.

Chenoy asserted that improving logistics could play a major role in boosting trade between the two nations. Through new transport corridors, like the Vladivostok-Chennai port, the links have been operationalized, therefore these need to be used more than they are now.