India's Russian Oil Imports Decline Amid Trade Deal Uncertainty
Overview of India's Russian Oil Situation
The spotlight is back on India's stance regarding Russian oil as the uncertainty surrounding US President Donald Trump's tariff policies complicates the anticipated trade agreement between India and the United States. A Bloomberg report indicates that Indian refiners have significantly cut back on new purchases of Russian crude following a recent ruling by the US Supreme Court that invalidated most of Trump's tariffs, making them unenforceable. The proposed interim trade agreement was intended to lower tariffs on Indian exports in exchange for a reduction in Russian oil imports.
Currently, refiners are in a holding pattern, anticipating more definitive guidance regarding the tariff situation. Initially, India and the US had settled on an 18% tariff on Indian goods as part of the trade deal, but with the Supreme Court's decision, the future remains uncertain. Following the ruling, Trump announced a 10% tariff under a different statute, adding to the confusion. Amid this turmoil, processors are refraining from securing new Russian shipments as they await clarity from the government, as reported by sources familiar with the situation. Recent months have already seen a decline in purchases due to ongoing US pressure.
The Supreme Court's ruling has disrupted global trade dynamics, and refiners believe it may alleviate some of the pressure on India regarding its Russian oil imports. Nevertheless, the US government has urged its allies to adhere to existing trade agreements, which include a commitment from India to lower tariffs on its goods from 50% to 18%.
Decline in Russian Oil Imports
Russian Oil Imports Fall
Since the onset of the Ukraine conflict in 2022, India has emerged as one of Russia's largest oil purchasers, capitalizing on substantial discounts as Western nations distanced themselves from Moscow's energy exports. At its peak, India was importing approximately 2 million barrels of oil daily. However, these figures are now on the decline.
This month, Indian refiners are projected to import around 1.2 million barrels per day of Russian crude, marking the lowest level since November 2022, according to Kpler Ltd. The firm anticipates that imports may further decrease in March, falling to between 800,000 and 1 million barrels per day. FGE NexantECA predicts that total imports could diminish by as much as 600,000 barrels per day in March and April. India's reduced demand has left numerous Russian shipments without immediate buyers, with some barrels currently adrift in tankers while others are redirected to China and Singapore. The discounts on Russia's Urals crude have widened to $15–$20 per barrel below Dated Brent, compared to over $10 at the beginning of February.
Transition to Middle Eastern Oil
Shift to Middle East Oil
Several refiners, including Indian Oil Corporation and Bharat Petroleum Corporation Limited, have recently procured crude from the Middle East or have issued tenders for supplies in April and May. This indicates a potential shift in strategy as companies brace for reduced Russian oil inflows.
However, this transition also heightens India's vulnerability to supply risks from the Middle East. The increased US military presence in the region has sparked concerns about potential conflicts with Iran. Simultaneously, millions of barrels of Russian oil stored offshore could provide Indian refiners with a quick and cost-effective option, pending government approval. As of now, India's oil ministry has not responded to requests for comments via email. Refiners seem to be waiting for clear policy directives from New Delhi before making significant decisions regarding Russian crude.