The world is moving towards an oil-free future. Naturally, those countries whose bread and butter are dependent on oil trade would try to sell it to more and more countries. But, it is highly unlikely that the Gulf nations will do it. They won’t dump India for the European market.
Gulf’s oil won’t be diverted
According to a report by The Economic Times, chances that the Gulf is looking at the European market with the hopes of more revenues are getting slimmer. One simple reason for this is that they have been supplying oil to India for decades and would not want to sever this bond just for Europeans. The increasing share of Russian Ural crude in India’s oil import basket is another reason they won’t be rushing towards Europe.
An executive at India’s state-run refiner said, “Our term deals are unlikely to be hit. Gulf suppliers may not offer optional volume this time. But I don’t think they are going to reduce the firm quantity in any significant way. They might want to meet the new European demand but not at the cost of souring a decades-old relationship with India, which is the world’s third-largest consumer and importer of crude,…”
Complicated geopolitics around oil
Ever since the skirmish kicked off in Eastern Europe earlier this year, western countries’ hypocritical stand on Russia was not allowing them any kind of respite. As soon as Russian forces entered Ukraine, the sanctions regime kicked off. However, it did not include products for which Europe and USA are dependent on Russia. Being the world’s largest economy, the US could manage to buy oil from other producers, but the problem for Europe was grim.
Depending on the year, Russian oil accounts for anywhere between 25 to 30 per cent of European oil consumption. The situation is worse with gas. More than 40 per cent of European gas needs are met through Russia. They even have a dedicated pipeline named Nord Stream for this purpose. Initially, they did look for alternate arrangements, but were not too successful.
Russia has an alternative but Europe doesn’t
The reduced oil revenue of Russia was in fact overcompensated by India and China. However, western countries kept pushing their narrative and asked India to stop buying Russian oil. India did not buzz and in fact took the collaboration to the next level. Obviously, no one will be ready to accept Europe’s lecture when they themselves are dependent on Russia.
The moral pressure finally worked and European countries announced that by the end of December this year, they will reduce their dependence on Russian oil. By 5th of December, they won’t be buying Russian crude coming towards them through sea-route. Similarly, by the beginning of February next year, they will stop importing petroleum products from Russia.
India is more reliable
But, the problem for them is that they do not seem to have an alternate market to buy oil. The Middle East is their biggest hope. However, Middle Eastern countries are well aware of their shenanigans. They know that European policies are more opportunistic and henceforth more volatile when it comes to oil or any product for that matter.
While they know that India has increased its oil imports from Russia for the time being, decades old relations are giving them a hope that supplies will regain momentum in future. They are in fact eager to stay in the Indian oil market. Iraq has started to offer discounts on the lines of Russian suppliers to India and other countries will soon fall in line.
The decline of Europe
Europe’s decline is also one reason why oil suppliers are less likely to go there. In the wake of draught, their consumption capacity will take a hit. The market vacated due to their ill-thought ban on Russia won’t be attractive anymore after a few years. On the other hand, India’s economy is rising. Even if India’s domestic needs are met by Russia, it will buy oil for exporting.
This gives another big hope to the Gulf. They won’t be leaving Sone ki chidiya, otherwise they will lose big.
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