Curious as it might sound, another announcement from the US by President Trump is, “India would stop purchase of Russian crude,” in response to the 25 per cent additional tariff hike he imposed on goods the US imports from India. The Modi administration is yet to deny or confirm such a decision. Russian supply to India constitutes one-third of the crude processed by refineries in this country to produce diesel and petrol. Overall, the Russian supplies at discounted rates helped India majorly, helping it make huge economic gains while also stabilising the fuel prices that kept motorists happy. The stabilization of fuel prices also had its impressive impact on the markets, where inflationary trends could be checked in recent years.
This, in turn, helped the Modi government breathe easy even as it has not been able to perform well on multiple fronts and goofed up on some others. Compared to the gains India made from its unprincipled oil deal, the retaliatory action from Trump in the form of a total 50 per cent tariff imposition on Indian goods reaching the American soil did less harm in monetary terms. However, its lethal impact is on the diplomatic front. India failed to carry forward the good relations that it could build with the US in the last over three decades since the time of Narasimha Rao- Manmohan Singh combine. India is the world’s third largest crude oil importer, with nearly 90 percent of its requirements met from imports. Much of India’s requirement was traditionally being met from the Gulf-Middle East. This scenario changed with Russia’s war on Ukraine since 2022, which led to US sanctions on Russian sale of its fuel to other countries. However, the sanctions did not cover crude oil sales. The Modi-led Indian government saw an opportunity in this by entering into a covert deal with Russia to purchase crude oil, refine it, use and sell a part of the refined fuel to EU etc. Notably, India has over 20 refineries, the largest being at Jamnagar, run by the Ambanis.
India shipped crude oil from Russia through multiple strategies – in rupee trade; now in Chinese yuan following hurdles in rupee trade; and via payment in dirham through some business interests in the UAE, thereby circumventing the dollar-specific hurdles. Purchases from Russia, which were less than two per cent in 2020, rose to 40 per cent in 2023. The discount that Russia offered for its crude oil sale to India was initially of the order of $20 per barrel, which later got reduced to less than 4 per barrel. Still, this has been a huge gain for India. Russia emerged as India’s main fuel supplier. If India stops importing Russian crude, the annual additional burden on India, vis-à-vis purchases from other countries, could be of the order of $3.5billion annually. Yet, India cannot afford to keep antagonising the US; nor can it alternatively rely on China, a snake in the grass.
