How India Profits from Its Neutrality in the Ukraine War

How India Profits from Its Neutrality in the Ukraine War

As economic relations continue to be rewired in the post-war world. India’s acquisition places it strategically positioned between Russia and the Western coalition supporting the Ukraine War. The United States, Europe, and other countries imposed sweeping sanctions on Moscow. Western countries are also capping the price Russia can charge for oil to preserve global supplies while hurting Russia. This cheap crude is opening up new markets, including India, according to the International Energy Agency, which currently buys nearly 2 million barrels daily, about 45% of its imports. It is known as Cheap Russian crude oil is not only boosting India’s economy. But also giving India lucrative business opportunities by refining that crude oil. And export the product to other regions that suddenly need new energy supplies.

This includes the European Union, which has banned direct oil purchases from Russia. Indian Prime Minister Narendra Modi has taken a neutral position regarding the Ukraine conflict. The country’s balancing act will be steady this week as Mr Modi makes his first state visit to the US.

Leaders will meet  Thursday to discuss new partnerships in defence, clean energy and space, strengthening what the Biden administration calls “one of our most important relationships.

” The talks are expected to focus on reducing ties between India and Russia, including defence and energy cooperation.

In just over a year, India stopped buying Russian crude oil and now buys about half of its seaborne exports. Russia’s oil export destination is by sea. Russia is the third largest oil-producing country in the world. Some oil is exported through pipelines and cannot be redirected without significant investment. However, rerouting tankers carrying oil across the ocean to China and India is often more feasible. Together, they bought nearly 80% of Russia’s seaborne crude oil exports in May. China and India are now buying a lot of Russian oil. That Moscow is selling more oil than before the invasion of Ukraine. At the same time, lower prices also reduced the Russian government’s income from oil trading. The reasons for the decline in oil prices are complex. Experts are debating whether it is due to Western price caps or a slowdown in global demand.

In any case, India found a way to take advantage of the situation. Before the Russian invasion, India’s oil imports mainly came from the Middle East. Shipping prices vary depending on global market conditions. Once the fighting began,  Russian crude oil arrived in large quantities—in many cases, according to a New York Times analysis of shipping and market data from two commodity research firms, Kpler and Argus Media, at a much lower cost. 4,444 According to a Times analysis, there were 357 deliveries in the nearly nine months between Russia’s invasion of Ukraine and the imposition of price caps.

The average price per barrel from Russia was $78. The pace of shipments has accelerated since the price cap was set at $60. The average price of Russian crude oil has fallen to $51 per barrel, saving buyers billions of dollars. Graph showing individual oil tanker shipments from Russia and the Middle East to India. The X-axis represents the time, and the Y-axis represents the price. Most of the crude oil entering India from Russia arrives at a port near Jamnagar in Gujarat and is sent to nearby refineries.

The Jamnagar refinery, owned by Reliance Industries, is the world’s largest and can process more than 1.2 million daily barrels. Mukesh Ambani, India’s most powerful businessman, runs Reliance and serves as a strategic partner of the Modi government. His second largest refinery in India is less than 16 miles away. Nayara Energy owns the Vadinar complex, with half belonging to the Russian state oil company Rosneft. A Russian investment group holds the remaining half of the shares.   As trade in the region expands, Russian companies, and by extension Moscow, benefit to some extent. These sites process some products for domestic use.

However, the growing share is becoming concentrated in global markets such as Europe and the United States, starting with Southeast Asia and Africa. India sells all these products at market prices, generating business income and replenishing the country’s foreign exchange reserves in dollars and euros. The Energy and Clean Air Research Center, a Finland-based research group, highlighted the role of certain “laundromat” countries that buy Russian oil, refine it into other products, and resell it to domestic buyers. The report was bring out in April.

Europe, America and other countries have stopped purchasing directly from Russia. The countries mentioned in the report primarily include India, China, Turkey, the United Arab Emirates, and Singapore. The Sikka port, which serves the Jamnagar refinery, is said to be the world’s largest import point for Russian crude oil by sea and the largest single point for oil exports to countries that have imposed caps. From December to February, the refinery exported nearly $3 billion of refined products to countries that complied with price caps.

Where are India’s maritime oil products going?

How India Profits from Its Neutrality in the Ukraine War

Ahead of India hosting its first 20-nation summit in September, its diplomats are discussing concerns from the European Union, the United States, China and Russia. I have worked hard to find a balance. However, the Modi government’s top priority appears to be increasing India’s self-sufficiency, which recently overtook China to become the world’s most populous country. In practice, this means pursuing your interests without considering your partner’s dissatisfaction. In December, India’s External Affairs Minister S. Parliament questioned Jaishankar about India’s decision to purchase Russian crude oil.

“Prudent policy is to go where you can get the best deal in the interest of the Indian people,” he said. “If you insist that our position is in the best interest of the people of India, I will plead guilty. Moreover, Tracking platforms Theia and Leviaton AI.——- This data allowed The Times to map the routes taken by ships leaving Russia between January and May 2021 and 2023. The Times calculated when a ship would dock at a particular port by comparing route data to known port locations listed in the Wor Index. We filtered the data to display only vessels that departed Russian waters and directly headed to Indian ports. The Times analyzed oil shipment data from Kpler. Also, a company that tracks global trade to find out how much Russian crude is flowing into India.  

The Times used each shipment’s departure date to compare the types of crude entering India. With corresponding price data from commodity research firm Argus Media. Based on prices set at ports of departure, an Indian crude oil buyer could have saved him $14.7 billion from $5.8  billion.

Whereas departure price data does not include transportation and insurance costs buyers must pay to get the crude oil to its final destination. Therefore, the overall savings may not have been that large. For example, Russia’s Urals crude averaged $50 per barrel when delivered to Russian ports, compared to $65 per barrel when delivered to West Indies ports in May.

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