Russia Takes the Lead as India’s Biggest Oil Supplier

Despite the ongoing crisis between Ukraine and Russia and Western economic sanctions, Russia’s oil commerce with India and China continues to expand. According to recent reports, India and China purchased the most of Russian oil in April, with prices breaching the West’s price cap of $60 per barrel.

According to Reuters, in the first half of April, Urals Oil, a Russian oil brand, used to export their shipments largely to Indian and Chinese ports. India accounted for more than 70% of seaborne Urals Oil supplies, while China accounted for almost 20%. This is noteworthy because both countries have strong bilateral links with Russia and have not committed to adhering to the West’s price cap.

Oil price cap: An ineffective Western strategy?

In order to reduce Russia’s oil income, the Group of Seven (G7) nations and Australia agreed in December 2022 to a $60 per barrel price cap on Russian seaborne crude oil. On the other hand, opponents of the price cap claim that it is too mild and would not push Moscow to change its behaviour in Ukraine. Despite pressure from several European Union countries, including Poland, to lower the price restriction and put further pressure on Moscow, a G7 source told Reuters that the price cap would remain intact for the time being.

“We recognise that as economies change, the discounts Russia receives relative to global market prices will fluctuate.” However, Russia’s oil prices remain much lower than those of other oil producers, reflecting the consequences of the global sanctions regime,” the official said anonymously. In early April, Urals Oil’s daily price exceeded the price cap due to lower freight costs and reduced discounts against worldwide benchmarks. This turn of events may have encouraged India and China to keep purchasing Russian oil at prices higher than the price cap.

Although subjected to a wave of economic sanctions since its siege of Ukraine in February 2022, Russia has maintained trading ties with India and China. The sanctions are intended to isolate Moscow from the global economic and trade systems, but India and China’s persistent interest in Russian oil suggest that the sanctions have had little influence on Russia’s oil exports.

Oil cap and sanctions may not stop Russia in Ukraine

The West is committed to the price restriction, but recent price increases and India and China’s sustained demand for Russian oil signal that the price cap may not successfully change what Moscow is doing in Ukraine.

Following China and India, Turkey and Bulgaria are among the nations with the highest purchases of Russian crude. China was already a large customer of Russian crude oil prior to Vladimir Putin’s attack against Ukraine, acquiring 25% of its total crude in 2021. According to Kpler data, this proportion has since risen to 36%. India, the world’s third-largest oil importer, formerly relied on Russia for about 1% of its total amount. Following the conflict, India now buys 51% of its oil from Russia.