How India Transformed Russian Crude Into Fuel for the West

SINGAPORE — India is playing an increasingly vital role in global oil markets, purchasing more…

The New American

SINGAPORE — India is playing an increasingly vital role in global oil markets, purchasing more and more cheap Russian oil and refining it into fuel for Europe and the United States.

However, New Delhi has faced little public backlash as it is fulfilling the West’s dual aims of restricting Moscow’s energy revenue and eschewing an oil supply shock.

Europe’s increased sanctions on Russia will remove a large volume of diesel from the market and see more consumers, especially in Europe, rely on Asia to fill the supply gap.

Thus, India is most likely going to emerge as an even stronger player on the global oil stage.

“US Treasury officials have two main goals: keep the market well supplied, and deprive Russia of oil revenue,” said Ben Cahill, a senior fellow with the Center for Strategic and International Studies, a Washington think tank. “They are aware that Indian and Chinese refiners can earn bigger margins by buying discounted Russian crude and exporting products at market prices. They’re fine with that.”

India shipped about 89,000 barrels of petrol and diesel daily to New York in January, the most in nearly four years, based on data intelligence company Kpler. Daily low-sulfur diesel flows to Europe were at 172,000 barrels in January, the most since October 2022.

Hence, cheap Russian oil would be even more attractive to India, which depends on imports to meet 85 percent of its crude needs. The nation’s refiners, such as state-run processors that are in charge of meeting domestic demand, escalated exports in 2022 in order to benefit from higher international prices.

“India is a net exporter of refined products and much of this will be going to the West to help ease current tightness,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep. “It’s pretty clear that a growing share of the feedstock used for this product originates from Russia.”

According to EU guidelines, India is likely conducting transactions within the rules. When Russian crude is processed into fuels in a country outside the bloc, such as India, the refined products can be transported into the EU as they are not regarded as Russian in origin.

Although the Group of Seven (G-7) nations hope to deprive Moscow of as much revenue as possible, they have a stake in ensuring that Russia’s oil and refined products still flow to prevent a global supply crunch, said Serena Huang, lead Asia analyst at Vortexa.

A major aspect of the mechanism to cut revenues from the Kremlin and retain some oil on the market has been a price cap on Russian crude, a move that was spearheaded by the United States. While India has not publicly declared whether the nation does or does not abide by the limit, sanctions have caused oil from the OPEC+ (Organization of the Petroleum Exporting Countries) producer to plummet below the cap of US$60 a barrel.

A U.S. National Security Council spokesman revealed that a price cap had been put in place that countries — including India — could capitalize on to maintain the stability of energy markets while curbing the Kremlin’s revenue.

“India’s willingness to buy more Russian crude at a steeper discount is a feature, not a bug, in the plan of Western nations to impose economic pain on Putin without imposing it on themselves,” said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University and a former advisor in the leftist Obama administration…

How India Transformed Russian Crude Into Fuel for the West – The New American