After rushing on Russian oil thanks to slashed prices due to the war in Ukraine, India is reducing its demand as the crude exported by Moscow becomes more expensive, in a context of increased competition with China.
The sanctions imposed by Western countries following the invasion of Ukraine in February 2021, intended to dry up an important source of foreign currency for Russia, pushed it to agree to significant rebates to sell its production .
A boon for India, a long-time ally of Moscow, which has increased its purchases tenfold, becoming its second customer behind China, and making Russia its first supplier.
From averaging less than 200,000 barrels per day before the war, India’s imports of Russian crude peaked at 2.15 million in May 2023, accounting for more than 40% of its consumption.
But they have since begun a sharp decline, falling to 1.45 million last month, their lowest level since January 2022, according to the Kpler analysis institute.
In question, a rapprochement of Russian oil prices with market prices, in particular due to increased competition between India and China for purchases of this crude.
“The two countries covet the same barrels,” summarizes Viktor Katona, analyst at Kpler, for AFP.
End of “rebates”
At the end of December, Russian Deputy Prime Minister in charge of Energy, Alexander Novak, confirmed that Moscow had almost completely redirected its oil exports to China and India, for nearly 9 trillion rubles (around 129 billion $CAD) in 2023.
The previous month, Russia had decided, in concert with the other OPEC+ countries (the Organization of the Petroleum Exporting Countries and its allies), including Saudi Arabia, to accentuate its reduction in oil production in order to stimulate prices.
As early as the spring, the Russian Minister of Finance, Anton Siluanov, had accused “all these rebates” granted by Moscow of taking half of the revenue.
India has traditionally had good relations with Russia, its top arms supplier, and has not criticized the invasion of Ukraine.
But in terms of energy, the government is only moved by “a single consideration”, far from any political or geostrategic concerns, recalls the Indian Minister of Oil, Hardeep Singh Puri: “that the Indian consumer pays the highest price down “.
In this context, “if they (the Russians) no longer offer us discounts, why should we buy them from them? », he asked himself in early January in front of journalists.
The third largest consumer and importer of oil in the world, India saved US$3.6 billion (CA$4.8 billion) in the first ten months after the start of the war in Ukraine thanks to oil sold off by Moscow. , according to figures presented to the Indian Parliament.
Tanker Waltz
But with the rise in Russian crude prices, the bonanza ended.
According to the financial agency Bloomberg, Indian refineries paid an average of $85.90 per barrel of Russian crude in November, slightly more than for a barrel from Iraq, its second largest supplier.
A price much higher than the ceiling of 60 dollars that the West had tried to impose to limit Russian revenues.
There is a “decline in the effectiveness of this ceiling”, admits Jeffrey Sonnenfeld, professor at Yale University and promoter of the system.
But the sanctions nonetheless continue to weigh on Moscow’s profits, particularly by increasing the prices of transport and insurance, he assures AFP.
Like other countries continuing to trade with Russia, India avoids paying in dollars so as not to expose itself to retaliation from the United States.
In December, state-owned Indian Oil Corporation agreed to buy Russian crude in dirhams from the United Arab Emirates. But the transaction failed because the supplier was unable to open an account in this currency, a government source told AFP.
The Vortexa Institute claimed that the tanker that was going to deliver the cargo turned around in the open sea, apparently heading towards China.
According to Kpler, over the past two months, as many as ten tankers in total heading to India have ultimately diverted or stopped.
However, material payment problems have nothing to do with the fall in Indian imports of Russian crude, assures Mr. Puri: “It depends solely on the purchase price”.