Cheap Russian Crude Bought By India To Protect Its Own Interests

India is eager to take more Russian crude at bargain prices as buyers from the U.S. to Europe shun its oil after the invasion of Ukraine.

Russia’s Urals crude is being snapped up by Indian oil refiners after collapsing to a steep discount, even after Shell Plc was hit with heavy criticism following its purchase of the grade not long after the war started. Hindustan Petroleum Corp. recently bought 2 million barrels of the grade for delivery in June, and other processors are also seeking cargoes, according to people familiar.

India and Russia have a long-standing relationship that spans sectors such as defense and security, and oil purchases by Asia’s second-biggest importer adds to the Kremlin’s coffers as it tackles financial sanctions. India is considering workarounds including rupee payments benchmarked to the U.S. dollar for buying the crude, government officials said recently.

Oil Minister Hardeep Singh Puri told lawmakers last week that the nation is keeping all options open to see how much Russian crude it can import. Oil from Russia accounted for 2% of overall purchases from overseas in 2021 — or about 33 million barrels — according to Indian government data. The Middle East was the biggest supplier to India, making up more than 60% of imports.

Mangalore Refinery and Petrochemicals Ltd. and Bharat Petroleum Corp. are looking to buy Urals crude for delivery in May and June, the people familiar with the plans said. Indian Oil Corp. also has a deal with Rosneft PJSC for the supply of as much as two million tonnes, or 14.7 million barrels, in 2022. The agreement was signed prior to the war.

The marketing of Russian crude has gone underground after tenders attracted no bids. Most buyers are self-sanctioning and some western and Asian banks have stopped issuing letter of credits for Russian shipments. This makes financing new purchases difficult, although such restrictions don’t apply to cargoes taken via prepayment deals with international trading houses. 

It remains to be seen just how much Urals — which mostly loads at Baltic Sea ports — will flow to Asia. Russian crude from its eastern ports of Kozmino and De-Kastri are more likely to find willing buyers in north Asia.