- Russia has become top crude supplier, displacing the Saudis
- India says its oil purchase decisions are based on economics
According to Bloomberg article published on March 15, 2023, en route to New Delhi this month, US officials proclaimed themselves satisfied that India is buying Russian oil below G-7 price caps designed to undercut Moscow’s war in Ukraine without disrupting global energy flows.
Market experts — and even some of those involved in the energy trade — say it’s not so clear.
India’s consumption of Russian crude was minimal and sporadic before President Vladimir Putin’s forces attacked Ukraine, but it has soared since, becoming a key tool for Prime Minister Narendra Modi’s bid to fight energy inflation.
Yet the structure of India’s oil trade means that the final price it pays includes shipping, insurance and other costs upon arrival at its ports, without a detailed breakdown. That makes it hard to know how much it’s actually paying Russia, and whether it’s undercutting the goal of limiting Moscow’s revenue from crude sales.
Russia's Crude Shipments
“The reality is this market has become extremely opaque,” said Vandana Hari, founder of Vanda Insights in Singapore. “It is near-impossible to get middlemen costs.”
Uncertainty about how much India pays is part of the murkiness around Russian oil flows more generally, as the trade shifts from the Atlantic basin to Asia and from large traders to smaller entities. And it highlights the uphill struggle by Ukraine’s allies to enforce or even encourage compliance with the curbs imposed over the past year.
India’s oil ministry, Ministry of Commerce and Ministry of External Affairs did not respond to requests for comments.
Since Modi’s government never signed up to the G-7 cap, it doesn’t have an obligation to comply with it — so long as it is not using Western insurance or shipping services. And while people familiar with the matter say the government won’t break the sanctions — and has asked banks and traders to adhere to the rules — the challenge comes in monitoring or enforcing such vows.
For instance, to supply buyers in places such as India and China, which continue to rely on Russian crude, a “gray fleet” of tankers has emerged.
That’s helped push down the costs of crude transport overall, according to Viktor Katona, lead analyst at Kpler. But the rise of the gray fleet and other middlemen in the Russian oil trade makes dissecting price data even harder, and official figures are of little help.
Data from India’s Ministry of Commerce show that the nation’s average price for Russian crude in January was $79.80 a barrel, significantly higher than the $60 cap. That final price, which includes shipping, insurance and other expenses, would imply extraordinary logistics costs if the cap wasn’t breached during that month.
