As they say, value is subjective to every measure, one man’s trash is another man’s treasure. Those who fail to recognise the intrinsic value of a particular commodity tend to lose in the end. Russian oil is one such commodity. While the west is desperate, India is emerging as a winner of its new initiative to cap the price.
Russia offering discounted oil to India
According to a report by Business Standard, Russia is offering heavier discounts to India for its oil. Apparently, Russia does not want India to accept the oil price cap mechanism which the G7 countries are trying to impose. In the month of August, Russian oil cost $6 less per barrel. With the new offer, there is a high possibility that Russian Ural crude may cost less to the Indian government than that of Iraqi oil.
An official with the Ministry of External Affairs (MEA) said, “In principle, the ask in return is that India should not support the G7 (Group of Seven) proposal. A decision on this issue will be taken later following talks with all the partners. These “substantial discounts” will be steeper than those offered by Iraq in the past two months”
India on tightrope
The latest offer by Russia is a testament to how India has walked the tightrope between friendship with Russia and Western countries. India’s stand in the wake of war has been hotly debated and possibly the most discussed controversy on the geopolitical forums. The main reason behind this is that India has just refused to accept western liberal narrative with respect to the war.
As soon as the Biden administration got the news of the first bilateral fist-fight on Ukrainian soil, it strived towards blacklisting Russia as a whole. Taking advantage of it housing most of the multinational forums in its geography, the US imposed blanket sanctions on Russia. Putin’s country was out of the international financial system.
But Putin was prepared. Oil and Gas are two sources of revenues for Russia. It offered both of them discounted rates to the countries choosing either not to take an official stand on the issue or explicitly supported it.
Increased import of Russian oil
India decided to increase its import of Russian oil. Before March 2022, India imported about 85% of its oil requirement with the highest shares from Gulf countries. With 24% from Iraq, 18% from Saudi Arabia, and 11% from UAE, more than 50% of oil came from these three countries.
Russian oil which accounted for only 1 per cent of our crude imports is now fulfilling more than 20 percent of our import needs. Having already dethroned Saudi Arabia from second position, it was within touching distance of replacing Iraq as the top oil supplier to India. The icing on the cake is that India is purchasing oil at a much-discounted rate from Russia as well as Iraq.
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Competition bred competency
Yes, after Saudi Arabia was replaced by Russia, Iraq also got scared of losing the Indian market. To save itself, it resorted to offering its oil to India at $9 lower than the Russian price. At the price of $93 per barrel, Iraq supplied India 1.39 million barrels of oil per day. It was a significant increase of 26 per cent over its supply in May. With the increase in competition from Iraq, Russia also started to offer more lucrative deals to India.
Earlier, Russians only supplied Urals to India. However, as they are shutting down their gates for the European market, other blends like Eastern Siberia–Pacific Ocean (ESPO) blend and Caspian Pipeline Consortium (CPC) blend are also making their way into India. ESPO blend is in fact the flagship crude of the Russian state.
US tactics failed miserably
While the Indian oil sector was busy taking advantage of the free market, the countries where this concept is said to have taken shape were infuriating. Their leader America tried various measures to stop the circulation of Russian oil, but almost everyone failed. They first tried soft measures like strengthening India against China, renewed emphasis on QUAD and establishment of the Indo-Pacific Economic Framework among others.
When things did not turn out according to their plan, they also tried hard tactics like lecturing India on religious freedom, cornering our Foreign Minister on “funding of war” among others. When its initiatives failed, the USA chalked out a new plan. It told the countries, including India to keep buying Russian oil, but at a cheaper price. Meanwhile, Russia had said that it would stop exporting oil and other commodities to countries agreeing on the new plan by western countries.
India won’t agree to pierce cap
While Indian policymakers were discussing the strategy, the USA handed over $450 million of F-16 fleet sustainment programmes to Pakistan. India not only registered strong protest through it, but also punctured Biden’s IPEF by withdrawing from it. The message was clear, bilateral relations can’t go on seamlessly if the US engages with terrorist nation on friendly terms.
The death knell to IPEF was a signal that Indian policymakers have got apprehensive of oil cap strategy as well. Now Russia offering more discounts to India should make it crystal clear that India would not be going ahead with the west’s suicidal plan.
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