Crude oil imports from Russia rose eight times between February and May as private refiners followed their state-owned rivals in switching supplies. Refining exports are going through a purple patch as crude oil remains elevated and Indian refiners are eager to sign long-term crude contracts for Russian crude oil. The latest round of sanctions could deliver a further windfall for refined petroleum exports to Europe.
A rising trade deficit with Russia requires financing arrangements that bypass the Western blockade on international bank transfers. Vostro accounts being discussed by bankers will become even more critical in circumventing a ban on insuring Russian shipments of crude. Russia has displaced Saudi Arabia as the largest and second-largest supplier of crude oil to China and India, respectively.
The bulk of Russian crude that Europe intends to ban will end up in these two Asian economies, with a tilt in favour of China, which shares a land border. India has to work harder on its supply arrangements because of the restrictions on shipping that could affect inbound cargoes of crude and outbound tankers of petrol, diesel and kerosene, which constitute one of its biggest items of export.
These arrangements are in reaction to Europe’s resolve to reduce its dependence on Russian energy. Oil is fungible, and without the geopolitical constraint, Indian import and export of fossil fuels would gravitate towards the scenario that existed pre-Ukraine war. New Delhi is justified in making the best out of a bad situation. But it should not lose sight of the larger goal of transitioning to sustainable energy sources.