Russia is a major exporter of oil and natural gas. Russia is losing out on oil exports due to its invasion of Ukraine. The West has, in particular, imposed sweeping sanctions against the Russian economy. Even though Moscow’s energy sector has been spared due to Europe’s high dependence on Russian gas, the largest country’s exports are taking a momentary hit. There is uncertainty among oil buyers over the safety and stability of Russia’s energy sector. While this uncertainty will be done away with soon, India has some major gains to make under the prevailing circumstances.
India imported 43,400 BPD (barrels per day) oil from Russia in 2021, about 1% of overall its imports. According to the Economic Times, India accounts for about 0.2% of Russia’s natural gas exports. Meanwhile, India imported 1.8 million tonnes of thermal coal from Russia in 2021, down from 2.5 million tonnes in 2020. Separately, GAIL (India) Ltd has a 20-year deal with Gazprom, which is a Russian majority state-owned multinational energy corporation, to buy 2.5 million tonnes of LNG a year which started in 2018.
Time to Cut Down on OPEC
As data suggests, there is scope for a major improvement in India’s imports from Russia’s energy sector. Not only will that help a time-tested friend and strategic ally like Russia in its time of need, but it will also tremendously benefit India by being able to cut down on its oil imports from OPEC.
India, the world’s third-largest oil importer, is a major market for the Organisation of the Petroleum Exporting Countries (OPEC). OPEC is an international organisation of 14 oil-exporting countries led by Saudi Arabia which decides on the amount of oil production and the price of oil in international markets.
The 14 OPEC countries account for an estimated 44 per cent of global oil production and 73 per cent of the world’s “proven” oil reserves, which gives the organisation major leverage on global oil prices. The OPEC mafia manipulates market prices of oil according to its will by decreasing or increasing production.
Already, India has been consistently cutting down on its dependence on OPEC. India is reducing its oil import from Middle Eastern countries by focusing on North American and South American countries. Within the last eight years of the Modi government, the import from Middle Eastern countries reached 70 per cent from around 85 per cent.
Read more: India is all set to deal a nasty blow to the OPEC oil cartel
India’s crude imports rebounded 3.9% to 4.2 million BPD in 2021 but remained the lowest in more than a decade. However, India has been forced by the United States to give up on Venezuelan and Iranian oil. Yet, if recent events are anything to go by, India is in no mood to take marching orders from Washington any longer.
Time to Strengthen Oil Ties with Russia
The only way to counter OPEC’s mafia over the global oil markets is for India to increase Russia’s share of energy exports to India. Not only will this help India counteract the monopoly that Middle Eastern countries enjoy over India’s oil import bills but will also help Russia alleviate some of its economic woes.
Russia is an influential member of OPEC+.
OPEC+ is a loosely affiliated entity consisting of 13 OPEC members and 10 of the world’s major non-OPEC oil-exporting nations. That makes Russia a non-OPEC member.
India’s focus, however, should be on diversifying its sources. Currently, India depends just too much on Gulf nations for its oil imports. For its own benefit, it needs to source more of its energy needs from Russia.