As international players refuse to deal with Moscow over its invasion of Ukraine, India is looking to increase its Russian oil imports, with state-owned refiners eager to take more heavily discounted supplies from Rosneft PJSC.
According to people familiar with the companies’ procurement plans, state processors are working together to finalize and secure new six-month supply contracts for Russian crude to India.
Cargoes are being sought from Rosneft on a delivered basis, with the seller handling shipping and insurance, they said.
If these supply agreements are reached, they will be separate from the shipments that India already receives from Russia under other agreements.
The people who asked not to be identified because the discussions are private said that details on volumes and pricing are still being negotiated with banks set to fully finance all cargoes.
As top international traders such as Glencore Plc wind down their dealings, refiners will increasingly purchase directly from Russian companies such as Rosneft, they added.
India’s dependence on Russian oil
Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum are state refiners, while Reliance Industries and Nayara Energy, which is partly owned by Rosneft, are private refiners.
Procurement for both public and private companies is handled independently. When contacted about the matter, spokespeople for the three largest state-owned companies couldn’t immediately comment.
Indian refineries, both public and private, have increased their purchases of Russian crude as a result of US, UK, and European Union sanctions and trade restrictions, which have caused most buyers to flee and offer levels to plummet.
Last month, an unprecedented amount of Russian crude was on its way to India and China as European buyers scrambled for substitutes, looking as far as the United Arab Emirates for alternatives.
Since late February, when Russia invaded Ukraine, the resulting panic and rerouting of global oil flows has lifted oil by more than 20%.
Refiners in Asia’s second-largest oil consumer have seen increased profits from converting cheap crude into fuels that are sold both domestically and to customers in Europe and the United States.
India’s overall crude oil feedstock basket includes Russian crude as well as other long-term and spot purchases from the Middle East and Africa.
According to the people, the potential increase in Russian crude purchases will have an impact on the South Asian country’s spot imports.
According to Bloomberg calculations based on trade data, India purchased more than 40 million barrels of Russian oil between late February and early May, which is about 20% more than flows for the entire year of 2021.
According to Kpler data, Russian oil arrivals into India in May totaled 740,000 barrels per day, up from 284,000 barrels in April and 34,000 barrels a year ago.
Despite the fact that India’s purchases of Russian crude are not illegal or in violation of any sanctions, the Biden administration and the EU have pressured the country to stop doing business with Moscow in order to cut off the Kremlin’s access to oil revenue and funds.
The Asian nation has reiterated that Russian imports are insignificant in comparison to European purchases, accounting for only a small portion of the country’s total consumption.
Discounted Russian oil has provided some relief to India, which imports more than 85% of its oil, just as inflation and the cost of everything from food to fuel is skyrocketing.
Access to low-cost crude is already boosting India’s oil imports, which increased by nearly 16 percent in April over the previous year. According to data from the oil ministry, the share of oil from the Eurasian region, which includes Russia, increased to 10.6 percent in April from 3.3 percent a year earlier.