Title: Bolstering India's Shift Towards Diversifying Oil Sources Beyond Russia
Following Russia's invasion of Ukraine in 2022, India found itself as a prominent purchaser of the rapidly and widely sanctioned Russian oil by the West. However, this scenario could shift due to a new wave of U.S. sanctions on Russian oil and India's quest for alternatives.
Such a transition may not be straightforward or immediate. Currently, around 40% of India's global oil purchases stem from Russia, a significant leap from the 10% in 2021, the year before the Ukraine conflict.
A surge in the flow of Russian oil to India became noticeable during the second half of 2022. This surge occurred when the U.S. and its allies imposed a price cap of approximately $60 per barrel on Russian crude cargoes. The objective was to limit both the oil's volume on the global market and the earnings from its sale.
However, India led the pack of countries benefiting from Russia's predicament. A monthly oil trading partnership between Delhi and Moscow, worth nearly $3 billion or 1.85 to 1.95 million barrels daily, took shape. A significant portion of the oil was transported via dark or 'shadow' tankers, made up of vessels with unclear ownership structures, which made it difficult to enforce Western sanctions.
In 2022, data from the Centre for Research on Energy and Clean Air (CREA) revealed that 81% of the total value of Russian seaborne crude oil was transported by 'shadow' tankers, with tankers owned or insured in Western countries accounting for only 19%.
Fast forward to January 2023, the U.S. announced more sanctions to target tankers carrying Russian oil and maritime insurance providers based in the country. The U.S. Treasury also sanctioned Russian oil and gas exploration and production firms Gazprom Neft and Surgutneftegas, along with networks that trade Russian oil and 183 vessels likely involved in transporting such cargoes.
Nearly 40% of the affected vessels have previously transported Russian oil to India, according to industry research from Lloyds List Intelligence and Kpler.
This development has provoked India's energy policymakers to search for alternative sources. India's annual oil consumption surpassed 5 million barrels daily in 2024, with nearly 90% of the volume imported.
Prime Minister Narendra Modi's administration has purportedly reached out to exporting nations in the Middle East that India already enjoys good relations with and sources oil from, including the United Arab Emirates, Saudi Arabia, Kuwait, and Oman.
Prior to the U.S.'s latest announcement, India had already started diversifying its supply pool due to the decreasing discount on Russian oil and anticipation of further U.S. action. The Organization of the Petroleum Exporting Countries' (OPEC) share of India's annual oil imports increased for the first time in nine years to nearly 51.5% in 2024, up from 49.6% in 2023. However, Russia's share remained steady at around 36%.
India may divulge its next move in February at the 2025 India Energy Week, providing clarity on its position as the world's second-largest crude importer and a leading energy demand center. Last year, India's Minister of Petroleum and Natural Gas Hardeep Singh Puri announced expanding the country's pool of crude suppliers from 27 to 39 nations for secure supply.
The U.S. remains a significant energy trading partner for India, with a steady increase in oil supply from Brazil and Guyana. However, the future volume and method of Russian oil reaching India in 2025 remain uncertain.
- Amidst the U.S.'s latest sanctions on tankers carrying Russian oil and insurance providers, India is actively seeking alternative sources to fulfill its increasing oil demand, leading to outreach towards Middle Eastern oil exporters like the UAE, Saudi Arabia, Kuwait, and Oman.
- Following the U.S.'s announcement of sanctions on Russian oil exploration and production firms and potential oil tankers, it's been revealed that nearly 40% of the affected vessels had previously transported Russian oil to India, raising concerns about India's reliance on Russian oil products.
- Hardeep Singh Puri, India's Minister of Petroleum and Natural Gas, had previously announced expanding India's pool of crude suppliers to secure supply from 27 to 39 nations in response to decreasing discounts on Russian oil and anticipated U.S. action.
- India's current heavy reliance on Russian oil products, with around 40% of global oil purchases stemming from Russian sources, is under threat due to the U.S.'s enhanced sanctions on Russian oil and the growing shadow fleet that facilitates the transportation of Russian crude.
- Russia, despite facing wide-ranging sanctions for its involvement in the Ukraine conflict, maintained a significant presence in India's oil imports, with around 36% share in India's annual oil imports in 2024, signifying challenges in reducing India's dependence on Russian oil products, especially as India continues to be a prominent purchaser of these sanctioned oil products.