The Russian crude export has been affected due to sanctions imposed on the country by various NATO allies. The development comes from the backdrop of the Russia-Ukraine war. To continue with the export, Russia is exploring the possibility of a crude oil export deal with India.
Minister of Petroleum and Natural Gas, Hardeep Singh Puri in Rajya Sabha informed the house that talks are going on with Russian counterpart to import Russian crude oil at a discounted price.
As predicted by the TFI, Russia is offering oil and other commodities at a heavy discount. The payment arrangement is expected to be in a Rupee-Rouble form and Russia will take care of shipping and insurance for delivering the crude oil to India.
Possibility of Sanction on India
White House Press Secretary, in a question related to India buying Russian crude oil, said that it is not a violation of US sanctions, but the deal could place New Delhi on the ‘wrong side of history’. Further, the sanctions on India means many NATO allies will also be attracting sanctions by buying Russian Crude oil.
Moreover, to avoid the US sanctions, the currencies used will be Rupee and Rouble. Additionally, extra care has been taken by choosing a bank which does not have business in US to implement the deal.
India’s dependency on oil import
India imports 80% of its crude oil consumption and 2-3% of that comes from Russia. The annual import bill, according to the Economic Survey 2021-22, is USD 73.3 billion. Due to this India’s merchandise trade deficit has reached annually USD 142.4 billion.
The 40% increase in crude oil prices in the international market is certainly going to affect the import budget. Further, the other discounted commodities like fertilizer (offered by Russia and Belarus) will bring great relief to India’s budget. In budget 2022-23, Government allocated about INR 1.2 lakh crore for fertilizer subsidy. If India gets fertilizers at a discounted rate, the constraints on the budget may ease.
With growing uncertainty in the oil and gas market due to the war, prices are going up at rapid pace. Additionally, after being badly hit by Covid, India’s economic recovery could be derailed by uncertainty. The prices of food commodities are also rising in the international market. The discount offered by Russia for its crude is expected to bring some relief in India.