Concerns are becoming a reality that Europe’s sanctions against Russia will lose their effectiveness as India buys Russian oil in large quantities at discounted prices.
According to the Guardian on the 26th (local time), an oil refinery in Gujarat, northwest India, received 27 percent of the total oil imports from Russia last month. This is a sharp increase compared to only 5% in April.
India imported about 800,000 barrels of crude oil a day from Russia last month. Fitch Ratings, one of the top three global credit rating agencies, predicted that India’s oil imports from Russia will soon increase to 1 million barrels a day and 20 percent of India’s total imports.
Currently, Russia is exporting crude oil at about 30 percent cheaper than international oil prices to counter Western economic sanctions. As a result, Russia earned 20 billion dollars from oil exports last month, recovering to the level before the invasion of Ukraine.
The recovery of Russia’s oil exports is largely due to India and China. The Indian government is encouraging state-run oil companies to find ways to increase Russian oil imports and take advantage of price cuts. India’s state-run oil processing companies are also working to sign contracts to receive Russian crude for six months.
In addition, India is considering ways to avoid the Western sanctions on Russian oil imports. 80% of oil tankers carrying crude oil to India belong to the European Union, which will raise sanctions against Russia from December by banning insurance on ships that transport Russian oil. Therefore, the Indian government is reportedly discussing ways to provide insurance to tankers.
Earlier, President Putin said at the BRICS summit last week (five emerging economies, Brazil, Russia, India, China, and South Africa), “Russia’s oil exports to China and India are increasing remarkably.”
“Indian refiners are obviously exporting refined products after importing a significant amount of discounted Russian crude,” said Craig Howe, an analyst at Shore Capital. “It seems to be contrary to Western sanctions aimed at hindering Russia’s economy and war.”
Some pointed out that direct measures such as trade sanctions are needed for European sanctions to be effective.
Oleg Ustenko, chief economic adviser to Ukrainian President Volodymyr Zelensky, said Russia “should impose huge taxes on trade as well as on fossil fuel imports. Otherwise, the ongoing tragedy in Ukraine will continue.