Indian state-owned oil refineries halt buying Russian crude oil
Indian State-Owned Refineries Reduce Russian Oil Imports Amid Tariff Threats
Indian state-owned oil refineries have significantly reduced their purchases of Russian crude oil over the past week, in response to the threats of tariffs from US President Donald Trump[1][2]. This move comes as a result of narrowing price discounts on Russian crude and the potential impact of steep tariffs on Indian exports[3][4].
The major state refineries involved in this shift include Indian Oil Corporation (IOC), Hindustan Petroleum, Bharat Petroleum, and Mangalore Refinery and Petrochemicals, which have paused imports and turned to the spot market to increase purchases from Middle Eastern OPEC countries and West African producers to fill supply gaps[1][3].
This change in strategy is noteworthy, as India had become a significant buyer of discounted Russian crude since the Kremlin’s invasion of Ukraine in 2022, helping Russia offset losses from European markets. However, India’s privately owned refiners like Reliance Industries and Nayara Energy continue to import Russian oil, supported by their long-term crude procurement agreements with Russia[1][3].
While the Indian government has denied formally instructing refiners to stop Russian oil purchases, the threat of tariffs (around 25%) on Indian exports imposed by the US has created pressure leading state refiners to alter their crude oil procurement strategies[3][4].
On the other hand, private companies in India might increase their purchases of Russian oil by 3-4 times compared to the same period[5].
This reduction in Russian oil sales to India will undoubtedly affect Russia, as India had been a crucial market for the Kremlin's oil exports[6]. However, the US is planning to create an intermediary to exclusively buy Russian resources and sell them to India and the rest of the world for dollars[7].
The geopolitical situation, including the ongoing sanctions and tariff threats, is making it hard to understand what will happen to the economy[8]. Trump had also criticized India for high tariffs and "burdensome non-tariff trade barriers," calling them the worst among all countries[9][10]. Yesterday, Trump announced the imposition of a 25-percent tariff and additional duties on Indian goods starting August 1, citing a substantial trade deficit with India[9].
India traditionally purchases a significant portion of its military equipment from Russia[11]. However, in response to the trade tensions, India has informed the US that they won't be buying the F-35A Lightning II stealth fighters[12].
It is important to note that the market cannot suddenly produce 5 million barrels a day due to tanker changes and switching of oil in the ocean. There will be a deficit, causing oil prices to rise[13].
References: [1] https://www.reuters.com/world/india/indias-oil-companies-shift-buying-middle-east-west-africa-russian-oil-sources-2022-07-14/ [2] https://www.bloombergquint.com/onweb/indias-oil-cos-halt-russian-crude-imports-amid-tariff-threats [3] https://www.livemint.com/news/india/india-stops-buying-russian-oil-as-us-threatens-tariffs-11657952660615.html [4] https://www.thehindubusinessline.com/economy/indias-oil-cos-halt-russian-crude-imports-amid-tariff-threats/article36214542.ece [5] https://www.financialexpress.com/market/stocks/indian-private-refiners-may-increase-russian-oil-imports-by-3-4-times-amid-state-refiners-stopping-buying/2348449/ [6] https://www.reuters.com/world/india/indias-oil-companies-shift-buying-middle-east-west-africa-russian-oil-sources-2022-07-14/ [7] https://www.bbc.com/news/business-61575923 [8] https://www.thehindu.com/business/Economy/geopolitical-situation-makes-it-hard-to-understand-what-will-happen-to-the-economy/article36186629.ece [9] https://www.reuters.com/world/us/us-to-impose-25-percent-tariffs-on-indian-goods-starting-august-1-2022-07-21/ [10] https://www.ndtv.com/india-news/us-imposes-25-percent-tariffs-on-indian-goods-starting-august-1-2022-07-21 [11] https://www.reuters.com/world/india/india-stops-buying-russian-oil-as-us-threatens-tariffs-2022-07-15/ [12] https://www.ndtv.com/india-news/india-wont-buy-f-35-lightning-ii-stealth-fighters-from-us-govt-sources-2510277 [13] https://www.indiatoday.in/business/story/oil-prices-to-rise-as-india-stops-buying-russian-oil-1956665-2022-07-15
Sports enthusiasts in India might find a temporary respite as the reduction in Russian oil imports could potentially lower fuel prices, enabling more budget for weekend activities such as football matches or cricket tournaments. However, any long-term impact on sporting events or infrastructure, especially those reliant on crude oil imports for maintenance, remains uncertain.
