Rattled by India’s outright rejection to reduce the imports of Russian crude oil, America is devising innovative ideas to stop India from buying cheap Russian Urals. As the rise of Russian Ural has dismantled the American dream to earn profits by artificially creating a scarcity of crude, the US with G-7 has initiated another mechanism to implement a price-capping on Russian oil exports. The double standards of the US reflect in its policies, as on one hand, the US proposes to cap Russian oil, and on the other, it’s begging for cheap Russian oil from India.
Oil: Russia to United States via India
A Finland-based research group, the Centre for Research on Energy and Clean Air (CREA), has revealed that despite heavy sanctions on Russian exports, the United States and Australia continue to receive Russian oil via refineries on the Indian subcontinent.
The energy research group has stated that since the Ukraine war, India’s imports of Russian crude oil have exponentially risen and many of those barrels were re-exported as refined products to countries including the United States and Australia.
Comparing the refining spending expenses, CREA stated that India’s purchases of Russian crude soared, the spending by Indian refiners on Russian oil also surged from negligible before February 2022 to over $ 10 billion now.
The reports also made an interesting revelation that despite the heavy sanctions on Russia, the European bloc remains the biggest buyer of Russian crude. With a whopping $ 124 billion, Europe topped the list of Russian crude buyers, followed by China at $ 51 billion and Turkey at $ 16 billion.
Why is the United States Buying Oil from India?
Reports suggest that in 2021, the United States imported about 8.47 million barrels per day of petroleum (oil) from 73 countries. Out of which crude oil imports were around 72% with 6.11 million barrels per day (bpd) and refined petroleum accounted for about 28%. It is also important to note that the United States exports around 12.1% of world’s refined petroleum worth $ 84.9 billion. Despite being the world’s top refined petroleum exporter, why is the United States buying oil from India?
The question has a multi-layered answer. After the heavy sanctions on Russia, the demand for Gulf crude skyrocketed in the regular market. Also, due to the sanctions on Russia, the Europeans were left with Gulf countries for importing crude oil. Already devoid of Venezuelan and Iranian Crude, crude oil prices were soaring. In this scenario, crude oil became costly and as true capitalists, Americans started searching for cheap oil and Indian oil refineries acted as the saviours of USA.
India is the world’s third largest refined petroleum exporting country. With USD 54 billion, India accounts for 7.7% of the world’s export volume. According to the data from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC), three-fourth of the total refined petroleum exports are Diesel and Petrol. As the world’s third-largest oil-consuming and importing nation, India has one of the best petroleum refineries. The companies leading the refinery of petroleum products are IOCL, Reliance, HPCL, BPCL, Nayara Energy and ONGC among others.
As domestic refiners export these petroleum products at globally sky-high prices, the cheap crude oil from Russia helped the domestic refiners to export them at highly remunerative prices. In this scenario, Indian refined petroleum became cheap and competitive in the international market. Having said that, the global market runs to buy refined oil from India and so does the United States of America.
In June 2022, Lauri Myllyvirta, an analyst at the Centre for Research on Energy and Clean Air (CREA), speaking about Reliance’s export of refined oil to the US said, “What likely happened was Reliance took on a discounted cargo of Russian crude, refined it and then sold the product on the short-term market where it found a U.S. buyer.” (sic)
But why not Gulf?
It is also important to note that UAE and Saudi Arabia also have a huge base of refined oil and they are also importing cheap Russian crude. Also, the United States has traditionally maintained very good relations with them. But, due to the recent overhaul in the relationship, America could not ask for their refined oil. In light of the killing of journalist Jamal Khashoggi, the Biden administration had imposed sanctions and visa bans on many Saudi Arabian officials. With the UAE, the relationship is in doldrums since the UAE’s decision to hold the $ 23 billion F-35 defence deal. Also, the relationship further deteriorated when FATF, a US-funded terror financing watchdog, put UAE on its grey list. In this critical geopolitical situation, the United States could not get much from the UAE as well as Saudi Arabia. Consequently, they are turning towards India.
America Betrayed Europe
This is a total double standard of the US which, on one hand, preaches to the world to stop importing Russian oil, and on the other, secretly buys the same refined oil from India. Conveniently shielding itself from the sanctions, America convinced Europe not only to sanction Russia but also cut its energy imports. This resulted in complete collapse of the economic system of Europe. The Covid lockdowns have already shattered the backbone of the European economy, and reducing energy imports from Russia has brought them to the brink of Civil War.
As a result of hefty sanctions, Russia has nearly shut down its gas supply to Europe, making it harder for western countries to sustain in the economic disaster. Due to Russia’s gas embargo; European countries are finding it difficult to identify alternative supplies of Russian gas. The recurring effect of rising energy prices is reflecting in the prices of essential commodities. Inflation is at an all-time high, unemployment is rising, the GDP rate is stagnated, and Europe’s economy is in shambles. Furthermore, hit by one of the biggest droughts in 500 years of Europe, the crisis is further going to multiply.
In a way, leaving Europe in crisis, the United States of America is enjoying cheap Russian oil via India. The same plan as EU was made for India. Americans were constantly pressuring India to cut off the cheap Russian Oil. But by rightly rejecting the proposal of the US, India followed the nation’s interest first policy and secured energy for its people. Moreover, India is also giving alms to the United States in the face of cheap refined oil.
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