India and China have emerged as main buyers for Russian crude oil after European Union put a ban on import of Russian oil. As per International Energy Agency (IEA) report, 80 percent of Russian oil has been imported by China and India. European Union has blamed India for importing Russian crude but India has replied strongly to European Union on the issue. India has its growing energy needs and the sourcing crude is more important for Indian government instead of participating in US and EU sanctions on Russia. Since Russian invasion in Ukraine, European Union has reduced its reliance on Russian energy products.

Russian oil is sold at a discount in the international market. There were even reports that some crude traders are mixing Russian Crude with other origin crude oils and exporting them to European Union. India has clearly indicated that it would continue buying Russian oil because it is available at a discount. India even signed up an agreement with Russia to pay for the oil imports in Indian currency. This step was applauded heavily in India media as it would save on forex costs. However, Russia recently complained that it can’t use Indian currency to pay for its bills and was looking for better trade balance.

India currently imports 45 percent of its crude from Russia and China imports 20 percent, as per IEA report for May 2023. Before Ukraine war, 34 percent of Russian crude was sold in the Asian markets and as per May 2023 data, 90 percent of Russian crude is sold in Aia.

The IEA report said, “Heavily discounted Russian crude oil has found new buyers primarily in Asia. India has increased purchases from almost nothing to close to 2 million barrels per day, while China has raised liftings by 500,000 barrels per day to 2.2 million barrels per day.”

According to official statistics, the value of India's imports from Russia witnessed a significant surge, increasing fourfold from $866.40 million the previous year to $3.97 billion in April. Similarly, the quantity of crude oil imported from Russia in April escalated to 7.94 million tonnes, marking over seven times the amount of 1.11 million tonnes sourced the year before.

The International Energy Agency (IEA) has predicted a steady growth in India's GDP, with an increase of 4.8% expected in 2023, further rising to 6.3% in 2024. This growth trajectory is projected to strengthen even more to reach 7% between 2025 and 2028.

Discounted Russian Crude

The compelling discounts offered on Russian crude oil contribute to its appeal. The primary export grade of Russian crude, Urals, was on an average $26 per barrel cheaper than Dated Brent during the first three weeks of May. This represents a significant increase from the $3.70 per barrel discount observed in January 2022.

Furthermore, India's Russian oil imports in May surpassed the previous month's record by 14%, setting a new high for Russian crude influx into the country.

Russia was exporting 3.87 million barrels per day in May as per IEA report. This is the highest level of export for Russian crude since it invaded Ukraine in February 2022. As the price of Russian crude is lower compared to WTI or Brent Crude, Russia has to export more oil in order to improve its revenue. Crude prices have remained low during the last couple of months and in the recent OPEC+ meeting, no crude exporter wanted to reduce production expect for Saudi Arabia.