Union Finance Minister Nirmala Sitharaman on Thursday said importing Russian oil was part of India’s strategy to manage inflation. She added that other countries were also following similar strategies. She said Russian oil share in India’s crude basket increased to 12-13 per cent within a couple of months of discount, compared with about 2 per cent of Russian component in February.
“I give credit to the statesmanship of the PM to make sure that we keep our relationship with all countries & yet manage to, till today, get the Russian fuel… Sanctions, sanctions but countries (including Japan and Italy, among others) are finding their own way to get that Russian fuel (crude, gas)… That also is a part of inflation management,” Finance Minister Nirmala Sitharaman said on Thursday at an event in New Delhi.
In order to increase the market share amid competition, Russia is offering oil to India cheaper than Saudi Arabia. During April-June 2022, Russian crude was cheaper than Saudi Arabia with the discount widening to almost $19 per barrel in May. Recently, against this backdrop, Russia surpassed the kingdom as the second-biggest supplier to India in June, ranked just behind Iraq.
Sitharaman said, “I respect the prime minister for his courage to get it (crude oil) from Russia because they are willing to give us discount… and how speedily we have ramped it up where we had about 1.5-2 per cent of Russian oil in our crude basket, it was ramped up to 12-13 per cent within a couple of months.”
India increased Russian oil imports by 4.7 times in April-May 2022, or by more than 400,000 barrels per day (bpd), year-on-year, thanks to a price discount. The Russia-Ukraine conflict started at the end of February. In the three months of the Russia-Ukraine war, India spent $5.1 billion on Russian oil, gas and coal, more than five times the value of a year ago.
India is dependent on imports to meet 85 per cent of its oil needs. Russia has been offering big discounts on its energy exports, which prompted India to buy more from the country. Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to data from Kpler.
After Russian President Vladimir Putin approved a special military operation in Ukraine’s Donbass region on February 24, the Brent crude oil prices hit USD 100 per barrel for the first time since 2014. In the following days, the US’ West Texas Intermediate crude futures even skyrocketed to $130.50 a barrel, its highest since July 2008, before retreating. Brent also hit a high of $139.13, also its highest since July 2008.
Following this, Russia offered as much as $35 per barrel discounts on the crude oil prices prevailing before the Russia-Ukraine war.
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