[Global Times special correspondent in Pakistan Cheng Shijie Global Times reporter Chen Zishuai]Editor's note:"Dissatisfied with India's purchase of crude oil from Russia, the United States began to impose a 50% tariff on goods imported from India." The New York Times reported on the 27th that a large part of such a high tax rate is a punishment for India's purchase of Russian oil. India has almost consistently purchased Russian oil in the past few years, and traditionally Indian oil suppliers such as Iraq and Saudi Arabia have been pushed aside. Although the United States put pressure on India with high tariffs to stop buying, India is firm on this issue and refuses to give in. As the US 50% tariff on India comes into effect, it is reported that India is quietly planning to cut Russian oil imports, but it will not cut off relations with Russia. So, why is India "inseparable" from Russian oil? Under the heavy pressure, what measures will its domestic oil importers and refiners take?
What does buying and selling Russian oil bring to India
According to the British Financial Times, Russia’s crude oil shipment to India is currently around 1 million barrels per day, below the level of 2 million barrels per day earlier this year.After the outbreak of the Russian-Ukrainian conflict, India, which had been reliant on the Middle East oil, increased its effort to buy crude oil from Russia, imports increased from 2% before the conflict to more than 30% today.The New York Times’ analysis of shipping data in 2023 found that dozens of Russian tankers arrived at Indian refineries every month.
Why is India buying so much oil from Russia?The New York Times analyzes that, on the one hand, the price is cheap.The price of Russian oil India acquires is much lower than the global market price.According to the statistics of the US Treasury Department, in 2022-2023 the global price of oil will be around $75 to $90 per barrel, while India acquires Russian oil at $50 to $60 per barrel.
On the other hand, because India is more than 85% dependent on oil imports, it is a typical poor oil country. According to U.S. Energy Information Agency data, India can identify oil reserves of about 5.9 billion barrels, accounting for only 0.3% of global oil exploration reserves. In 2024, India's domestic crude oil output is 29.4 million tons, down 18% compared to 2017 and declined for seven consecutive years. Compared with limited oil output, India's demand for oil is very high. The International Energy Agency predicts that India will become the main source of global oil demand growth, and by 2035, India's oil demand will grow by 2 million barrels per day. Sharp Global predicts that in the next 10 years, India's oil consumption will increase by 4% to 5% per year. Moody predicts that India'
The low cost of crude oil has also made India's oil refining industry a lot of profits in the short term. According to the Indian "Mint" report, the data of the Indian Ministry of Commerce and Industry shows that in 2023, the value of Indian oil exports will increase to 84.96 billion US dollars, and the market share will increase from 6.5% in 2018 to 12.6%. The Jamnagar refinery on the west coast of India is one of the largest refineries in the world. The plant is operated by India's Reliance Group. The surge in Russian oil imports has boosted the profits of Reliance Group, and its share price has also soared.
On the Russian side, according to a report released by the Center for Strategic and International Issues Research (CSIS) of the U.S. think tank, crude oil exports to India accounted for 38% of the total Russian oil exports, which increased the total Russian oil exports since the Russian-Ukrainian conflict. Russia is also using India as a third-party platform to invest in refinery industry. The report said that the 49.1% shareholding of Russian enterprises, Indonesia Naira Energy, became the first Indian enterprise to acquire Russian crude oil after the Russian-Ukrainian conflict, and rapidly developed into India’s second largest private oil refinery.
Europe and the United States have their own "calculations"
Before the United States raised objections to India's purchase of Russian oil, many European countries adopted a laissez-faire or even supportive attitude towards India's import of Russian oil. The Times of India reported that the reason why these European countries did so was that they were worried that a complete ban on Russian oil would lead to a reduction in global oil supply and a significant increase in prices, especially in European countries. Therefore, India's purchase of Russian oil essentially helped Europe resolve the inflation crisis.
In fact, Europe and the United States are also continuing to buy India’s finished oil products. According to the Indian Express, in the fiscal year 2023-2024, India Trust Group alone exported almost $20 billion worth of finished oil to Europe, and the group also exported $6.3 billion in finished oil to the United States. There are experts analyzing that if India rapidly reduces Russian oil trade and shifts through international market procurement, it will lead to a dramatic rise in global crude and finished oil market prices and increase inflation.
India's New Delhi TV said in a press release that Trump's approach was not even based on U.S. interests, but only on the interests of himself and his servants. India sold finished oil to the world at a low cost, hurting the interests of some U.S. oil companies, which were Trump's sponsors.
In an interview with India's Economic Times, Indian Foreign Minister Sujarsen said that what kind of oil to purchase is a commercial decision made independently by Indian companies, and the Indian government will not and cannot interfere. If the U.S. government does not agree to its own companies or European companies purchasing Indian refined oil products, it can make demands on their companies.
On the issue of Russian oil, the Indian people have a different opinion. According to the Indian "Fortune Life" magazine, before Trump raised the issue of Russian oil, most Indians were not aware of the huge benefits India has gained in purchasing Russian oil. The report pointed out that while India imports low-cost crude oil, domestic oil prices have not been reduced, and even in April, the Indian government also raised the fuel consumption tax.
The report estimates that 20 percent of India’s profits from Russian oil imports go to the revenue of the Indian central government, 15 percent to local government revenues, and the remaining 65 percent to private companies that own oil refineries.
According to Al Jazeera, Reliance Group imports more than 400,000 barrels of Russian oil every day, accounting for nearly a quarter of India's total Russian oil imports. Due to the close relationship between Mukesh Ambani, the leader of the company, and Indian Prime Minister Modi, some Indian public opinion criticized that the Indian people had to bear the high tariffs imposed by the United States, which was for Mukesh Ambani's actions. Pay the price.
Promote the diversification of oil imports
“In the short term, India can’t be separated from Russian oil,” Liu Xiaoping, a senior researcher at the Bank of China Research Institute, said in an interview with the Global Times on Thursday. Kpler, a company that tracks commodity and shipping data, also believes that despite the recent smaller purchases of Russian oil from Indian refineries, it is difficult for India to abandon Russian oil in the short term, partly because India’s refinery processing equipment is configured specifically for Russian oil.
Ajay Srivastava, founder of the Indian think tank Global Trade Research Initiative, believes that "Russia's low-priced oil plays a huge role in helping India control inflation and maintain macroeconomic stability." If India stops purchasing Russian oil, not only will it face higher costs, but it will also be difficult to fill its huge import demand in the short term.
The U.S. National Agency for Asian Research, a think tank focused on Asian policy studies, reports that after the U.S. issued an executive order to raise tariffs on India in August, several state-owned oil refineries in India announced the suspension of Russian oil imports, and private companies also reduced the share of Russian oil imports. In addition, Europe announced that it would conduct a production screening for finished oil imported from India from January 2026.
According to Reuters, in response to Western regulations and price restrictions on Russian maritime crude oil, Russia has built a “shadow fleet” since 2022, consisting mainly of tankers that have reached the expiry date but can still be used. It is estimated that by 2024, more than 72% of Russian oil imported by India will be shipped through the “shadow fleet”. The huge “shadow fleet” size makes Russian and Indian crude oil transactions easily hidden from Western regulation. Even if India claims to no longer import Russian oil, it is difficult for Western countries to effectively regulate this.
Sumit Litoria, chief analyst at Kpler in New Delhi, said that while business as usual was looking for the moment, Indian refiners were "cautiously exploring" alternatives to Russian crude. He added that the US, west Africa, Latin America and the Middle East were all likely to supply, adding that "it is too early to confirm the diversionary trend and we need to refer to the export data coming out next month".
Liao Shuping told the Global Times that a stable energy supply is necessary for India's development. In the long run, one is to increase domestic exploration and new energy supply to promote energy transformation, and the other is to continue to promote the diversification of energy imports.
In terms of domestic exploration, the Indian government has also stepped up its efforts. According to Sharp’s global data, India has not yet mass explored potential areas such as the Andaman Sea, the Mahanadi Basin and the Kerala-Concan Basin. In terms of energy transition, the Modi government has pledged to invest 200 billion rubles (approximately $2.3 billion) in the development of nuclear energy, while easing restrictions and attracting international nuclear suppliers to participate in the development of India.
Previously, in the face of U.S. pressure on imports of Russian oil, Indian Oil and Gas Minister Hadeep Singh Puri said that India will meet demand through imported diversified supply. Currently, the number of Indian crude oil importers has increased from 27 to 40.
According to reports, the Indian government plans to continue to consolidate energy relations with Middle Eastern energy partners by increasing political cooperation and signing medium- and long-term cooperation agreements, strengthening mutual investment and technological cooperation in the upper, middle and downstream energy industry chains.