India, the world’s third-largest oil consumer, imported $2.8 billion worth of crude oil from Russia in July, underscoring Moscow’s position as a key supplier to the South Asian nation.
Despite global tensions stemming from the Ukraine conflict, India’s reliance on Russian crude has surged, placing it second only to China as Russia’s largest oil buyer.
Discounts propel Russian oil dominance
Russia’s emergence as India’s top crude oil supplier can be traced back to significant discounts offered on its oil following sanctions and boycotts from European nations. Pre-Ukraine conflict, Russian oil made up less than 1% of India’s total imports. Today, it accounts for nearly 40%, a dramatic shift driven largely by economic incentives.
The Centre for Research on Energy and Clean Air (CREA) reported that in July, China bought 47% of Russia’s crude exports, with India following closely at 37%. The European Union and Turkey, meanwhile, accounted for 7% and 6%, respectively.
India’s relationship with Russia extends beyond oil. The country has also increased its coal imports from Moscow. According to CREA, China purchased 45% of Russia’s coal exports from December 2022 to July 2024, with India acquiring 18%. The growing dependency on Russian fossil fuels reflects a broader trend of economic pragmatism overshadowing geopolitical considerations.
While China remains the largest buyer of Russian fossil fuels, accounting for 43% of Russia’s monthly export earnings from its top five importers, India’s purchases are notable. Nearly 80% of India’s Russian imports in July, valued at €2.6 billion (approximately $2.86 billion), were crude oil.
In July alone, India spent $11.4 billion on importing 19.4 million tonnes of crude oil. The discount on Russian Urals crude oil widened by 9% month-on-month, with prices $16.76 per barrel lower than Brent crude.
These discounts have made Russian oil particularly attractive to Indian refineries, which convert crude into essential fuels like petrol and diesel.
CREA's report further noted that 36% of Russia’s seaborne crude oil and its products in July were transported by tankers subject to the oil price cap imposed by Western nations.
The remainder was shipped by ‘shadow’ tankers, a fleet of second-hand vessels with opaque ownership, evading the price cap and complicating the enforcement of sanctions.
The rise of the 'Shadow Fleet'
The emergence of a shadow fleet of oil tankers has played a crucial role in maintaining the flow of Russian oil to global markets, despite sanctions. These tankers, often old and with dubious ownership structures, are key to Russia’s strategy to circumvent the Western-imposed oil price cap of $60 per barrel.
CREA reports that 81% of the value of Russian seaborne crude in July was transported by shadow tankers, while only 19% was carried by vessels owned or insured by countries enforcing the price cap.
The shadow fleet has not only helped Russia sustain its oil exports but has also weakened the leverage of the G7+ coalition in controlling Russia’s oil revenue.
There have been growing calls to prevent the proliferation of these shadow tankers, with some experts suggesting that sanctioning countries should ban the sale of old tankers to owners in non-compliant nations. Such measures could potentially curtail the growth of this fleet and reinforce the effectiveness of the price cap.
India's strategic calculations
India’s growing imports of Russian oil and coal reflect a strategic calculation driven by economic needs rather than geopolitical alignments. The country, which relies on imports for over 85% of its oil needs, has found in Russia a reliable supplier offering competitive prices. This economic pragmatism has led India to continue its trade with Russia, despite Western pressures to isolate Moscow.
However, the increasing dependence on Russian energy also raises questions about the long-term sustainability of this strategy, particularly in light of the geopolitical uncertainties surrounding Russia’s actions in Ukraine.
As India continues to navigate these complex dynamics, its energy policies will remain a critical area of focus for both domestic and international observers.
As the global energy landscape continues to evolve, India’s relationship with Russia will likely remain under scrutiny. The country’s ability to balance its economic interests with its geopolitical commitments will be tested in the coming months.
The rise of the shadow fleet and the ongoing shifts in global energy markets will play a significant role in shaping India’s energy strategy.
While the immediate benefits of cheap Russian oil are clear, the long-term implications of this dependency could pose challenges for India, particularly if geopolitical tensions escalate further.
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