Indian Oil Corporation To Buy Russian Crude Oil At Low Price

According to reports, the Indian Oil Corporation (IOC), the country’s largest oil company, has purchased up to 3 million barrels of crude oil from Russia at a severe discount to current world prices.

The purchase, made via a merchant, is the first since Russia’s invasion of Ukraine on February 24, which prompted international efforts to isolate Putin’s administration.

According to sources familiar with the situation, IOC purchased Urals oil for May delivery at a USD 20-25 a barrel discount to dated Brent.

As the United States and other Western countries imposed sanctions on Moscow, Russia began supplying cheap oil and other goods to India and other significant importers.

IOC made the acquisition under modified terms that compel the vendor to deliver it to the Indian shore in order to avoid any issues caused by sanctions in arranging transportation and insurance.

Unlike the sanctions placed by the US on Iran for its controversial nuclear program, oil and energy trading with Russia has not been prohibited. According to them, this indicates that international payment channels are available to settle any transaction made by Russia.

This was not the case for Iran, which was blocked off from the SWIFT international money and secure transfer system. Companies or entities that invest in or acquire oil from Iran have also been sanctioned.

India, which imports 85 percent of its oil, is aiming to reduce its spiraling energy expense by purchasing from anywhere it can obtain it at a lower price.

Oil Minister Mr. Hardeep Singh Puri told the Rajya Sabha on Monday that the nation will review Russia’s offer to sell crude oil at discounted rates after taking into account factors such as insurance and freight necessary to transport the fuel from a non-traditional source.

“Let me stress that in a circumstance like the one characterized by the pandemic in the past two years, and in the last few weeks by a conflict or military action taking place between Russia and Ukraine,” he had remarked.

The minister stated that he had met with Russian government officials.

“Discussions are now taking place. There are various difficulties that must be addressed, such as how much oil is accessible in Russia, new markets, or with new suppliers that may enter the market. There are also concerns with insurance, freight, and a variety of other issues, including payment arrangements,” he had noted.

New Delhi has long-standing diplomatic and defense ties with Moscow, and while it has called for an end to the violence in Ukraine, it has refrained from denouncing the invasion.

Many countries, notably European nations, continue to rely significantly on Russian fuel, the world’s second-largest crude oil exporter after Saudi Arabia.

Russia supplies about 1.3 percent of India’s total oil consumption.

According to the White House, its plan to purchase cheap Russian oil would not breach any of the US sanctions imposed on Moscow.

US President Joe Biden declared last week an embargo on Russian oil and gas imports in response to the country’s invasion of Ukraine, so severing Russia’s key economic artery.

“Our message to any country continues to be that they adhere to the sanctions that we have put in place and advised,” White House Press Secretary Jen Psaki said at her daily press briefing on Tuesday.

When asked about a media report that India would accept Russia’s offer of cheap crude oil, Psaki stated, “I don’t believe this would be breaching that (sanctions).”

According to GlobalData, a renowned data, and analytics organization, given India’s neutral posture in the Russia-Ukraine war, Moscow’s offer of reduced oil and other commodities will bring budgetary respite.

“India’s endeavor to diversify its import sources will tend to lessen the government’s financial burden, so minimizing the possibility of a high import bill. Furthermore, cheaper crude may lower current production costs and assist to alleviate inflationary pressures,” said Gargi Rao, Economic Research Analyst at GlobalData.