Hello, this is Hot Mic and I’m Nidhi Razdan.
Well over 40 days have passed since Russia invaded Ukraine. As the world continues to express outrage, India is at the epicenter of frenetic diplomatic activity and heightened pressure from the West, particularly over the issue of Russian oil imports. The US has openly expressed dissatisfaction with India’s stance, with Deputy NSA Daleep Singh warning of consequences for any country, including India, that conducts local currency transactions through Russia’s central bank or constructs a payment mechanism that violates US sanctions on Russia bypasses Well, the language used by the deputy US NSA was unusually undiplomatic, but it didn’t move India.
Finance Minister Nirmala Sitharaman said bluntly: “India has started buying cheaper Russian oil and will continue to do so. I would put my country’s national interests and energy security first,” she said. “If fuel is available at a discount, why shouldn’t I buy it?” Russia has offered India crude oil at a heavily discounted price of $35 a barrel. India has booked at least 16 million barrels of Russian oil since invading Ukraine on February 24, according to Reuters. And that’s close to the level of its total imports for 2021. 80 percent of India’s oil needs are imported, with only about one to two percent actually coming from Russia.
Most of our needs come from the Middle East, USA and Africa. As the debate rages on over oil and whether it amounts to condoning Russian action in Ukraine, the fact is several Western countries are doing the same. Indeed, there was a heated exchange last week between Foreign Secretary Jaishankar and visiting British Foreign Secretary Liz Truss, during which Jaishankar pointed out that Europe is buying more oil from Russia than before the war. He said Europe bought 15% more oil and gas from Russia in March than in the previous month. So who actually buys Russian oil in the world and who doesn’t?
Now the United States, Britain, Canada and Australia have imposed total import bans on oil from Russia. But the European Union is divided. The EU, made up of 27 member countries, relies on Russia for 40% of its gas imports and 30% of its crude oil imports. When the US and UK announced the ban, the EU had said it would cut Russian gas imports by two-thirds within a year, with the long-term goal of ending Russian energy imports by 2030.
Several EU states are ready to impose further sanctions on Russian oil companies such as Rosneft, Transneft and Gazprom Neft, but they will continue to buy oil from them. Germany is among those who are sticking to an outright ban. It has warned against hasty moves that could push its economy into recession. A significant portion of Germany’s energy needs, 55%, comes from Russia, and the country has said it can start gradually reducing its reliance on Russian oil imports, hopefully by the end of this year. Germany’s economy would therefore be devastated by a sudden ban on Russian gas and oil. Russian crude still accounts for 14% of intake at Germany’s largest refinery, MiRO.
However, they are now looking at alternatives and have secured a long-term partnership with Qatar to purchase LNG. The problem for Germany and some other countries is that they have become heavily dependent on Russian oil over the years. They haven’t really looked at alternative sources. Poland has announced it will take steps to reduce Russian oil imports by the end of this year. Meanwhile, neither the Dutch government nor the port of Rotterdam have banned Russian oil. About 30% of the oil passing through the port of Rotterdam comes from Russia.
China’s state-owned refiners like Sinopec have honored their existing Russian oil contracts, but they are avoiding new contracts, despite the steep discounts they are being offered, because they don’t want to be seen as overtly supporting Moscow. India’s main oil imports continue to come from the Middle East and the US. A major obstacle to making Russia India’s main supplier is how India can pay for that oil. Now there must be an alternative payment system because of the sanctions imposed on Russia. Russia wants India to introduce a rupee-ruble trade for all future purchases of goods. But how this is supposed to work is still unclear. But if India circumvents US sanctions on this, it may face sanctions against itself. Russia has also demanded payments in rubles from Western nations, which have refused, arguing that it would undermine the sanctions regime.
Germany has indeed urged consumers to save energy, amid growing fears that Russia may actually halt its oil supplies until paid for in rubles, with Germany’s energy minister warning that Russia will abruptly cut those supplies and the country’s gas storage tanks are filled to about 25% of their capacity. How long this would take is unknown, hence the appeal to people to make cuts.
All of this now proves that imposing energy sanctions on Russia was easier said than done for many western countries. And India only looks out for its own interests.