India Purchases Russian Oil at Discount Despite US Pressure

India has bought at least 13 million oil barrels from Russia since Feb. 24, compared with nearly 16 million barrels in all of 2021, given the huge discounts offered by Moscow since the Ukraine crisis.

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India is the world's third largest consumer of oil and imports over 80 percent of it from other countries. Last year, the majority of India's oil supplies came from the Middle East, the United States, and Nigeria. In 2021, Russia only accounted for around two percent of India's imports.

Moscow has been seeking new markets for its oil exports by offering discounts. Indian companies took advantage of the opportunity to increase imports from Russia and placed orders. However, in the wake of the sanctions on Russian banks, these companies are facing a challenge of how to finance these discounted purchases.

New Delhi and Moscow have been looking to establish a rupee-rouble trade system and discussions between financial officials from the two countries are ongoing. Other options for all possible payment mechanisms are also being explored.

The issue came up for discussion during Russian Foreign Minister Sergei Lavrov's recent visit to New Delhi. His visit came just after British Foreign Secretary Liz Truss's visit and U.S. Deputy National Security Advisor Daleep Singh's visit to India, both trying to convince India against doing business with Russia.

INDIA'S DEFIANCE

"I would put my energy security first. If the fuel is available at a discount, why shouldn't I buy it?" Indian Finance Minister Nirmala Sitharaman said, adding that "we have received quite a number of barrels. I would think about 3-4 days of supply, and this will continue. India's overall interest is what is kept in mind,"

Sitharaman said of the contentious issue of oil purchases from Russia. Moscow is offering more oil to New Delhi at a discount of as much as US$35 a barrel on prices before the conflict. Meanwhile, crude in the market hovers above US$100 a barrel.

Sitharaman also said that it would be better to have a Unified Payments Interface-like platform that can interact with another system, just like SWIFT. Indian Foreign Minister Subrahmanyam Jaishankar also defends New Delhi's position saying that while India's crude purchases from Russia are insignificant, the major buyers of Russian oil and gas are from Europe.

"When the oil prices go up, I think it is natural for the countries to go out into the market and look for what are good deals for their people," he said in his remarks during a conversation with his British counterpart Truss, who was on a day-long visit to India as part of a wider diplomatic push on the Ukraine issue.

Analysts say buying crude at a discount can help India keep a check on prices in its domestic market to some extent. Fuel retailers have started passing on high prices to consumers, putting pressure on the government to slash fuel duties.

U.S. CARROT & STICK

Washington has been trying to bring New Delhi into its fold. The White House, unwilling to see India increasing its oil purchases from Russia in defiance of sanctions, said that it was ready to support New Delhi in diversifying its energy imports.

"We do not think India should accelerate or increase imports of Russian energy and other commodities even as, obviously, those decisions are made by individual countries," White House press secretary Jen Psaki said.

On Wednesday, Biden's top economic adviser said the administration has warned India against aligning itself with Russia, and that U.S. officials have been "disappointed" with some of New Delhi's reactions on the Ukraine issue.

"Our message to the Indian government is that the costs and consequences for them of moving into a more explicit strategic alignment with Russia will be significant and long-term," White House national economic council director Brian Deese said.