India allows refiners to buy Russian crude oil despite Ukraine invasion

India’s state-run refiners are buying oil
from Russia without violating the sanction clause. The development came at a time
when there are very few takers for Russian oil in the wake of the war in
Ukraine.

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The state-run refiners Indian Oil,
Hindustan Petroleum and MRPL, the refining subsidiary of exploring giant ONGC,
are among those Indian companies buying six million barrels of Russia’s Urals
grade from European trading houses.

According to the Times of India, Bharat
Petroleum will also start lifting barrels from Russia.

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India imports 85% of its oil but Russia has
never been a major source for refiners largely due to high cost of shipping
that involves transhipments. Russian crude accounted for a meagre 2% of India’s
oil imports between April 2021 and January this year.

However, there is something more than the
demand that is driving these tenders. “There is no way that almost all major
government refiners would have floated tenders for Russian crude without
sounding out the government in the current situation,” a person in the know
said.

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At this moment, there is no sanction on
importing Russian energy. European countries continue to buy them. Reluctance
of banks in handling payments and issues with shipping insurance are turning
away many buyers.

At the same time, the government is not
directly involved in the dealings, the companies are. The deals are with global
trading houses, who are taking care of shipping and insurance. So payments can
be made through usual channels, doing away with the need for Rupee-Rouble
trading. The US has already said these oil purchases do not violate the
sanctions.

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Allowing crude to flow in from Russia,
where state-run energy companies have invested $15 billion, thus, signals New
Delhi leaving its options open on energy security and also satisfy Moscow by
keeping trade going.

There were several indications of the deal.
“I myself have had a conversation with the appropriate levels of the Russian
Federation. There are discussions (on buying oil) currently underway,” oil
minister Hardeep Puri had last week told Parliament, adding issues such as
availability, payment and insurance were being looked into.

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Next came Russian deputy prime minister
Alexander Novak’s “detailed” discussion Puri on deepening bilateral energy
ties. “Russia’s oil and petroleum product exports to India have approached $1
billion and there are clear opportunities to increase this figure,” a Russian
readout of the meeting had said.