India shows no sign of slowing its purchase of Russian oil

New Delhi
CNN Business
 — 

India’s appetite for cheap Russian oil is swelling, even as the West continues to hit Moscow with unprecedented sanctions.

Russian Crude flows to India are expected to reach 3.36 million metric tonnes in May, according to estimates from Refinitiv. This is nearly 9 times higher than the 2021 monthly average of 382,500 metric tonnes.

Overall, the country has received 4.8 million metric tonnes of discounted Russian oil since the Ukraine war started, Refinitiv added. Urals oil from Russia currently trades at about $95 a barrel, while the global benchmark Brent crude is above $119 a barrel.

Part of the reason for the price disparity: The West has shunned Russian oil. On Monday, the EU agreed to ban 90% of Russian oil imports by the end of the year. Europe is the biggest buyer of Russian energy.

The United States, Canada, United Kingdom and Australia have already banned imports.

The embargo from a huge importer like Europe would pile pressure on the Russian economy, but Moscow has found other buyers in Asia.

India, which imports 80% of its oil, usually buys only about 2% to 3% from Russia. But with oil prices shooting up this year, the government has steadily increased its intake from Moscow, taking advantage of the heavy discounts.

According to Refinitiv, Russia crude flows to India soared to 1.01 million metric tonnes in April from 430,000 metric tonnes in March.

India’s Ministry of Petroleum and Natural Gas did not immediately respond to a query on the impact EU’s partial ban will have on the South Asian economy’s oil ties with Moscow.

Earlier in May, India played down the import spike. In a statement, the Ministry of Petroleum and Natural Gas said the country imports oil from all over the world, including a significant volume from the United States.

“Despite attempts to portray it otherwise, energy purchases from Russia remain minuscule in comparison to India’s total consumption,” the ministry said in a statement. “India’s legitimate energy transactions cannot be politicized,” it added.

The world’s biggest democracy has refrained from taking a tough stance against Moscow over the war in Ukraine. Russia and India have a long history of friendly relations, which stretch back to the Soviet era when the USSR helped India win its 1971 war with Pakistan.

India isn’t the only Asian giant buying Russian oil. China, historically the single biggest buyer of Russian oil, is expected to go on a shopping spree, too.

OilX, which uses industry and satellite data to track oil production and flows, found that China’s imports from Russia by pipeline and sea rose by 175,000 barrels per day in April — an increase of about 11% over average volumes in 2021. Seaborne imports are rising more sharply in May, according to early data.

Demand is expected to pick up as the world’s second largest economy begins loosening its strict Covid-related restrictions in major cities.

While Asia’s purchase of Russian crude is surging, the EU on Monday resolved to block most of it by the end of this year.

Russian crude accounted for 27% of the bloc’s imports in 2021, according to Eurostat.

Russian oil delivered by tankers would be banned, while an exemption will be made for the southern segment of the Druzhba pipeline, said Ursula von der Leyen, president of the European Commission, in a press conference.

The northern segment of the pipeline serves Poland and Germany — who have agreed to the embargo. The southern part goes to Hungary, Slovakia and Czech republic and accounts for 10% of imports of Russian oil.

After the embargo, Moscow may look for new customers more aggressively, but it won’t be easy.

A significant portion of Russia’s oil exports to Europe travel to the bloc via pipelines. Rerouting those barrels to markets in Asia would require costly new infrastructure that would take years to build.

– CNN’s Julia Horowitz and Vedika Sud contributed to this report