Rama Krishna Sangem
After thinking a lot, India has decided to go ahead buying Russian oil. This is a bold move as it defies US President Donald Trump’s threat to impose secondary sanctions on India, if it continues to buy cheaper oil from Russia. There was confusion as reports came by that India is rethinking on its choice of Russian oil to please Trump.
Bur, finally, two of India’s major public sector oil companies have placed orders with the Russian firms to lift oil in September, of course at discounted prices. We need to see, how Trump will react to this and how will it impact India-US trade ties.
India’s state-run refiners Indian Oil (IOC.NS), opens new tab and Bharat Petroleum (BPCL.NS), opens new tab have bought Russian oil for September and October delivery, resuming purchases after discounts widened, two company officials aware of the matter said on August 20, Wednesday. The resumption in Russian oil imports by Indian state refiners could reduce supplies for top buyer China which had stepped up purchases during their absence.
Purchases halted in July
The refiners halted purchases in July due to narrower discounts and after India was criticised by Washington for its purchases of Russian oil. President Donald Trump also threatened an additional 25% levy on Indian goods, effective August 27, to penalize New Delhi for its continued buying of the oil. Trump thought that this pause as reversal of India’s stand on Russian oil and welcomed it as a good move.
Discounts for Russian flagship Urals crude have widened to about $3 per barrel, making the oil attractive for Indian refiners, while China has stepped up purchases, the officials said.
In addition to Urals, IOC has also bought other Russian crude oil grades including Varandey and Siberian Light, they said.
Indian companies do not comment on their crude imports.On Monday, IOC, the country’s top refiner, told analysts that it would continue to buy Russian oil depending on economics.In recent weeks, Chinese refineries bought 15 cargoes of Russian oil for October and November delivery, according to two analysts and one trader.
There are some economists in India who recommend that we can stop buying Russian oil, though it is cheaper by a few US dollars for barrel, but should gain by lesser tariffs from Trump so that our exports will earn many times more in revenues. But, Modi government is viewing buying oil as not just a trade activity, but as a matter of maintaining our sovereignty – to have freedom in choosing Russian oil imports.
We should not forget that India has been able to maintain oil prices stable, only because of cheaper Russian oil in the last three years.
