India's Russian imports soar 400% as U.S. offers little resistance
China seen behind Washington's soft touch; New Delhi optimistic on rupee trade
NEW DELHI -- India appears to be pulling off a diplomatic high-wire act between Washington and Moscow as Commerce Ministry data shows imports from Russia have surged nearly 400% so far this fiscal year, fueled by purchases of discounted crude oil.
Russia was India's No. 4 "merchandise import source nation" in the first 10 months of the current fiscal year through March, after China, the United Arab Emirates and the U.S. The total value of Russian imports came to $37.31 billion, up from $7.71 billion in the same period of the previous year, according to the latest trade figures revealed on Wednesday. This translates to growth of 384%, with Russia accounting for a 6.2% share of the South Asian country's total imports during the period.
With the Russia-Ukraine conflict and subsequent Western-led sanctions on Moscow causing global disruptions, India has bought "a lot of crude, converted it into refined petroleum products and sold it," Commerce Secretary Sunil Barthwal said.
As a result, New Delhi's export of petroleum products also jumped significantly. From April 2022 to January 2023, these exports were worth $78.58 billion, up from $50.77 billion in the corresponding period of the previous financial year.
India's stance on the Ukraine war -- refusing to outright condemn Moscow while calling for dialogue and peace -- has set this year's Group of 20 host apart from many democracies. This includes India's Quad security partners: the U.S., Australia and Japan.
But Washington, despite its staunch opposition to Russia, has signaled that it is "comfortable with the approach" India is taking on Russian oil.
"I want to be clear we are not looking to sanction India, and our partnership with India is one of our most consequential relationships," Karen Donfried, the assistant secretary for European and Eurasian affairs, said during a teleconference with media on Feb. 8. Although she was speaking before the fresh trade figures came out, data released in January had shown a similar import surge.
Geoffrey Pyatt, assistant secretary for energy resources, added that Washington sees an opportunity for countries like India in the price cap of $60 a barrel that was imposed on Russian oil by the U.S.-led Group of Seven coalition. The cap is designed to squeeze Russia's ability to fund the war.
"Even though India is not a participant in the price cap coalition, India has effectively used its negotiating leverage, which it derives from the price cap and the fact that large portions of the global markets are no longer accessible to Russia, to drive down the price that it pays for Russian crude," Pyatt said. "That's a benefit to India, it's a benefit to the Indian economy, but it also helps to advance our two goals of stabilizing global markets and denying resources to the Kremlin."
Sanjay Kumar Pandey, a professor of Russian, Central Asian and East European studies at the New Delhi-based Jawaharlal Nehru University, explained why he thinks the U.S. has taken this ostensibly soft touch.
"They perhaps understand that if India jettisons Russia, then Russia would even further [grow closer] to China, and that is something which is not either in the interest of India or maybe even the U.S.," he said.
"They wouldn't like Russia to become a pillion rider of China," he said. Besides, he added, the U.S. has "understood the limits of their influence over India and India's own compulsions and limitations" in terms of procuring energy supplies.
India, along with China, has become a top buyer of bargain crude oil from Russia.
According to S&P Global Commodity Insights, Russian crude's share of the Indian crude supply in 2021 was around 2.2%. "From that level, Russia became India's top crude supplier in November 2022, with the country receiving around 1 million [barrels per day]," it said in a report last month, adding that New Delhi is aiming for an oil import policy that will bring robust inflows from both the U.S. and Russia.
Energy intelligence firm Vortexa said in a Jan. 19 report that Indian imports of Russian crude rose in December to a record 1.2 million barrels per day, while nearly 1.3 million barrels per day had been discharged in the first two weeks of January.
"Russia has done well in enticing Indian refiners to increase purchases of its crude as the EU pivots away," it said.
Before the Russia-Ukraine conflict, India -- which is the world's third-biggest oil consumer and imports over 80% of its requirements -- bought more than 60% of its crude from Middle Eastern countries. Lessening this dependence "suits India's national interest [and] economic interest," said JNU's Pandey.
Earlier in December, External Affairs Minister S. Jaishankar told Parliament that Indian refiners would go for the best deals wherever they find them. "I would like to clarify we do not ask our companies to buy Russian oil," he said. "We ask our companies to buy oil [that] is the best option that they can get. Now, it depends on what the market throws up."
Jaishankar added, "It is a sensible policy to go where we get the best deal in the interest of the Indian people, and that is exactly what we are trying to do."
Meanwhile, India continues to hope that its rupee trade mechanism -- an alternative to international payment systems that have been restricted due to Western sanctions on Russia -- will gain traction. Several of its state-run and private banks have opened special accounts to facilitate the mechanism.
Initially, Commerce Secretary Barthwal said, India was focusing on Russia "because they were facing sanctions, but now we have been having talks with several other countries" like Sri Lanka and Bangladesh. Some African countries have also shown interest.
"This is a new initiative, so there are teething troubles relating to the exchange rate mechanism, the repatriation of money," added Santosh Kumar Sarangi, director general of foreign trade. The mechanism has not fully taken off, though there are some isolated instances where it has started, he said.
Sarangi said they are constantly in touch with the Reserve Bank of India, commercial banks and exporters to ensure that the system "gradually picks up."
On reports that the rupee trade plan might have hit a rough patch owing to its widening trade deficit with Russia, Barthwal said, "The fact that Russian banks have opened the accounts [and] Indians banks have opened the accounts [to facilitate the mechanism] shows that there is a potential for rupee trade."
Progress, he said, will depend on how exactly exporters and importers take advantage of these facilities.