India is trying to get deeper discounts on Russian oil to compensate for the risk of dealing with the OPEC+ producer as other buyers turn away, according to people with knowledge of the matter.
The South Asian nation is seeking Russian cargoes at less than $70 a barrel on a delivered basis to compensate for additional hurdles, such as securing financing for purchases, in high-level talks between the two countries, said the people, asking not to be identified as discussions are confidential. Global benchmark Brent is currently trading near $108 a barrel.
State-owned and private refiners in the world’s third-biggest oil importer have bought more than 40 million barrels of Russian crude since the invasion of Ukraine in late February, the people said. That’s 20% more than Russia-to-India flows for the whole of 2021, according to Bloomberg calculations based on trade ministry data.
India — which imports more than 85% of its oil — is among the few remaining buyers of Russian crude, a key source of revenue for Vladimir Putin’s regime. Evaporating European demand is putting severe pressure on Russia’s oil industry, with the government forecasting output could drop by as much as 17% this year.
Flows of Russian oil to India aren’t sanctioned, but tightening international restrictions in areas such as marine insurance and pressure on New Delhi from the U.S. are making the trade more difficult. Prime Minister Narendra Modi has so far resisted Western encouragement to scale back its relationship with Moscow because of the opportunity to get heavily discounted oil. India is also highly dependent on imports of Russian weapons.
India’s state refiners can take about 15 million barrels a month — around 10% of overall imports — if Russia agrees to the price demands and delivers the oil to India, the people said. Government-affiliated processors stand to benefit from any potential agreement, they said. Private refiners such as Reliance Industries Ltd. and Nayara Energy Ltd. typically buy their crude individually.
Energy purchases from Russia remain minuscule in comparison to India’s total consumption, according to an official statement by India’s press office. “India’s legitimate energy transactions cannot be politicised. Energy flows are yet to be sanctioned,” it said.
Moscow is looking at ways to keep supplies flowing to India — both from the west via the Baltic Sea and on routes from the Russian Far East that become more accessible during the summer, the people said.
The two countries have even been exploring re-routing some crude through Vladivostok in the Far East. While the sea trip from there to India would be quicker, there would likely be major costs and logistical hurdles in transporting the oil over land.