India purchases 30 million barrels of Russian oil following US waiver as global oil market faces supply pressure

India has secured 30 million barrels of Russian crude after a temporary US waiver, aiming to stabilize fuel supplies as global oil markets face disruptions due to rising geopolitical tensions.

India bought approximately 30 million barrels of Russian oil in the aftermath of the United States granting an exemption for buyers to purchase Russian oil following Russia’s invasion of Ukraine. Ongoing tensions in West Asia have disrupted flows of crude from the region and jeopardised key shipping routes that have contributed to market uncertainty.

Indian refiners immediately booked cargoes after receiving the waiver to protect India against fuel shortages from US officials, buying oil that had already been loaded onto ships and was waiting offshore as Western sanctions went into effect.

India bought 30 million barrels of oil from Russia

Indian refiners have purchased around 30 million barrels of Russian crude oil. Buyers from India scrambled to protect themselves against shortages after the United States granted a one-time exemption last week. Russia is India’s largest supplier of crude oil, providing discounted barrels to refiners. Imports from Russia have increased over the past few years.

Indian refiners had to buy the oil that was loaded onto tankers last month and stranded at sea due to US bans and the conflict.

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Why did the US give India a special exemption?

The US Department of the Treasury granted Indian refiners a one-month exemption to allow them to purchase Russian crude oil that was loaded onto ships prior to March 5.

The move came as uncertainty in the global energy markets surged over fears that the war in Ukraine will spread to oil-exporting countries in West Asia and cut off vital shipping lanes like the Strait of Hormuz.

A Treasury spokesperson said that the waiver was a temporary solution to ensure there are no interruptions in oil supplies and price spikes. It only applies to crude oil that was already loaded onto ships at the time of the ban.

Russia will not profit significantly from the exemption because it only applies to crude oil that was loaded before the war broke out. US officials added that the exemption would last for 30 days and would not bring significant profits to Russia.

Conflict in West Asia caused global energy crisis

Indian refiners continued to lift Russian oil despite US sanctions on Russia after the country invaded Ukraine. Indian officials said they would keep buying oil from Russia even after the United States imposed sanctions on Russia.

The energy crisis was sparked by rising geopolitical tensions in West Asia, which have knocked out major suppliers of crude from the market and threatened to close down vital shipping lanes used for the transportation of oil.

Suez Canal and Strait of Hormuz are critical chokepoints for the global oil market. About 20% of the world’s crude oil exports pass through the Strait of Hormuz, located between Iraq and Iran.

India imports about 85% of its crude oil requirements, and nearly 40% of its imports are routed through the Strait of Hormuz. Middle East tensions have raised fears of shortages and pushed up already high fuel prices. Industry experts stated that the oil purchased from Russia would last India about five days.

Also read: Oil and gas supply halted due to disturbance in Strait of Hormuz, many tankers left idling, ships getting diverted

Russia said it will continue to supply oil to India

India’s reliance on imported oil has grown over the years, with much of its crude oil coming from Russia. “India will continue to import oil from Russia,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

It’s a balancing act for India

India is in a tight spot as it relies on discounted oil from Russia, but it also wants to maintain healthy ties with the US and its western allies. US officials added that India had been balancing its energy security needs and support for Ukraine.

Russia has been supplying discounted oil to India for years. However, New Delhi had come under pressure from Western countries to cut down its imports from Russia.

How India’s energy security is affected

India typically imports about 85% of its crude oil requirements, and nearly 40% of those imports go through the Strait of Hormuz. Industry experts said the barrels purchased from Russia would help India meet its oil requirements for about five days.

Hence, Indian refiners were left with no option but to purchase the Russian barrels in order to maintain its energy security at higher levels.

India can now protect its strategic petroleum reserves for future use if the crisis continues for a longer period. Analysts added that India is looking to diversify its oil imports and has been reducing its reliance on the Middle East in recent years.

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