The imports from Russia surged 28% over the previous month as an embargo on Russian crude by the European Union made more supplies available to the Indian refiners and the G-7 price cap didn’t quite obstruct trade. Historically a minor user of Russian oil due to costly logistics, India imported less than 1% of its crude from Russia in 2021 and no oil at all in February last year.
“The strong uptick is a clear sign that Russian crude is well-received by Indian refiners in lieu of its attractive price,” said Serena Huang, analyst at Vortexa. The surge in Russian supplies has hit Iraq and Saudi Arabia, whose combined share in Indian imports has fallen to 34% from 43% in February 2022, when the Russian invasion of Ukraine began, triggering a massive reshuffle of the global oil trade. The shares of Africa and the US in the Indian market have also dropped.
India’s import of refined products from Russia has also risen. Import of naphtha rose 15 times from 3,800 barrels per day in January to 57,000 barrels per day in February. Imports of Russian fuel oil, however, fell a quarter in a month to 123,000 barrels per day in February. “Imports of Russian fuel oil have fallen as a result of more supplies diverted to Saudi Arabia and China last month,” Huang said.
The price cap hasn’t dented imports but made it harder for Indian refiners such as HPCL, BPCL and Indian Oil to pay for Russian oil, according to people familiar with the matter. The western banks are seeking trade details to ensure payments are being made only for Russian oil purchased below the cap. Since all dollar transactions are settled in the US, Indian refiners are switching to UAE’s dirham and Russian roubles to pay for cargoes bought at prices above the cap, they said.
“India’s continued import of Russian crude is predicated on having financial and logistical services to support the trade, for sure,” Huang said. “Given the favourable economics that Russian crude offers, I believe the Indian government will work with HPCL and any other public sector refiners facing payment challenges to resolve the issue.”
The G-7 countries imposed a price cap on crude in December and on refined products in February. Any deal struck above the cap cannot be supported by the financiers, insurers and shippers based in G-7 countries. Russia exports multiple grades of crude but its flagship Urals, which comprises about 80% of India’s Russian imports, has been trading below the cap of $60 per barrel. This has made the cap redundant for most trades.