Despite G7 cap on Russian oil, India will continue to get uninterrupted crude supply at existing discount

New Delhi: Russia has assured India that for now it will continue to receive the existing discounts on crude oil imports. This assurance comes at a time when the Group of Seven (G7) price cap of $60 on Russian crude oil enters into effect on 5 December.

A report by Business Standard quoted a senior official saying, “We have been assured by our Russian partners of uninterrupted crude supplies at the existing rates for the time being. There were a lot of reports of changes in (India’s) buying patterns after the global price cap took hold. But Indian refiners will continue benefiting from favourable purchase agreements.”

The official further said that both the Indian and Russian governments are discussing the price of crude supplies and likely fallouts of the price cap.

Notably, buyers, including India and China, who heavily depend on Russian crude oil were for long demanding a deep discount in Moscow’s flagship crude grade, Urals.

For the unversed, Iraq, which has been the largest historical oil supplier of India had offered a range of crudes on a average cost of $9 per barrel less than Russian oil. Therefore, India’s dependency shifted heavily in favour of Iraq, but soon Moscow began offering more discounts.

Apart from the price point, the government is in favour of having a stable supply of crude from outside the West Asian region.

The report quoted another official saying that even though oil imports from Iraq have remained pivotal, “considering global complications and Iraq’s volatile internal situation, India needs to create alternative mechanisms”.

Spurt in import of Russian crude oil

India imports around 85 per cent of its fuel requirement. According to a data by the commerce department, before the Ukraine conflict in February, India’s total import of Russian crude was mere 0.2 per cent, which rose to a record 24.8 per cent in April-September period.

During the same period, India purchased 19.5 per cent from the United Arab Emirates (UAE) and 7.16 per cent from Iraq.

Russia biggest oil supplier to India

Russia continued to be India’s largest oil supplier for the second month in a row in November with the country supplying 909,400 barrels per day (bpd) of crude during the month.

Also Read: Russia biggest oil supplier to India second month in a row in November, surpasses Iraq, Saudi Arabia

In October, Russia supplied over 902,740 bpd of oil, which was the highest among all exporters to India.

Why price cap on Russian oil has been introduced?

The European Union, on 5 December, implemented its plan which was originally floated in May, to impose the price cap of $60 per barrel on Russian crude oil shipments. The move aims to “prevent Russia from profiting from it war of aggression against Ukraine”.

Essentially the price cap has been put in place to prevent firms in G7 nations and Australia from extending shipping, insurance, brokering and other services to Russian crude oil shipments that are sold at any value above the designated per-barrel price of $60 for now.

The cap will apply to shipments that are “loaded” onto vessels on and after 5 December and not apply to shipments in transit.

But how did Russia react?

Russia, world’s second biggest producer of crude oil, opposed the move and threatened to halt production. Russian Foreign Minister Sergei Lavrov said, “We will negotiate with our partners directly.”

Russian President Vladimir Putin said he would not sell oil under a price cap and would retaliate against nations that implement the measure.

Notably, Russia has already rerouted much of its oil supply to India, China and other Asian nations at discounted prices because Western customers have avoided it even before the EU embargo.

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