On September 28, refiners in India disclosed to Reuters that Russia was selling oil to India at approximately $80/barrel, over $20 above the G7 price cap on Russian oil, which limits the price at which Russia can sell oil in transactions involving Western insurers. The news comes as trade data shows Russian exports of crude to India rose by 80% in September, from 865,000 b/d in 2022 to 1.56 million b/d in 2023.
Russia’s Urals oil has traded below Brent crude since Russian President Vladimir Putin’s invasion of Ukraine, though the gap has narrowed over time. Prices for both blends have been rising since July production cuts from Russia and Saudi Arabia, respectively 300,000 b/d and 1 million b/d. In an OPEC+ meeting on October 4, the two nations affirmed that their reduced output would continue.
Why it matters: Because Russian oil is still a better deal, Indian Oil Corporation, a leading national refiner, estimated in June Russia would account for 30% of the company’s crude in 2023-2024 after accounting for just 0.1% in 2021-2022. Russia’s Sberbank and VTB announced in September they would improve their ability to convert rupees to rubles, which was a significant barrier for Russian exporters that couldn’t repatriate payments from Indian customers. In May, India’s daily average imports of Russian crude hit a high of 2.1 million barrels/day (of a total daily average of 4.7 million b/d), momentarily surpassing the total import volumes from Saudi Arabia, Iraq, UAE, the United States, and Kuwait, despite U.S. efforts to increase its exports to India and to counter Russia.
Russia’s September 24 temporary ban on diesel exports may impact India’s domestic consumption and exports of refined fuels, however. Diesel makes up 40% of India’s refined fuels consumption, but is also an export opportunity. Indeed, India may seek to fill the void left by Russia’s diesel ban internationally. In May, the EU raised concerns that India was reselling Russian oil as refined oil products; India had become Europe’s largest supplier. Such an outcome would undermine the EU’s embargo of Russian refined oil products.
India’s energy relationship with Russia is further highlighting the long-term difficulties in seeking to constrain Russia’s oil exports and revenue within a global energy system in which supply and demand are finely balanced. With broader geopolitical goals at stake in its engagement with India—especially in assembling a large balancing coalition to contend with China—the United States faces tough dilemmas in its relationship with India. So far, Washington has resolved these in India’s (and indirectly, in Russia’s) favor, through tolerance of India’s deepening economic relationship with Moscow. Notwithstanding regular efforts to persuade Indian officials to change course, U.S. officials appear likely to continue their approach.