India spent 2.5 bn euros on Russian oil in Oct ahead of sanctions: Report

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India, the second biggest buyer of Russian oil, spent as much as 2.5 billion euros on purchases of crude oil from Moscow in October ahead of new sanctions being slapped on Russian entities, a European think tank said.

India's spend in October was unchanged from 2.5 billion euro spent on buying Russian oil in September.

India remained the second-largest buyer of Russian fossil fuels in October behind China, according to the Centre for Research on Energy and Clean Air (CREA).

On October 22, US imposed sanctions on Rosneft and Lukoil, two of the largest oil producers in Russia, to cut off Kremlin's resources for funding Ukraine war. The sanctions have resulted in companies like Reliance Industries, HPCL-Mittal Energy Ltd and Mangalore Refinery and Petrochemicals Ltd halting imports for now.

Russia shipped 60 million barrels of crude oil in October, with Rosneft and Lukoil together accounting for 45 million barrels.

"India remained the second-largest buyer of Russian fossil fuels, importing a total of EUR 3.1 billion. Crude oil dominated India's purchases at 81 per cent (EUR 2.5 billion), followed by coal at 11 per cent (EUR 351 million) and oil products at 7 per cent (EUR 222 million)," CREA said in its monthly tracking report.

Traditionally reliant on Middle Eastern oil, India significantly increased its imports from Russia following the February 2022 Ukraine invasion. Western sanctions and reduced European demand made Russian oil available at steep discounts. As a result, India's Russian crude imports surged from under 1 per cent to nearly 40 per cent of its total crude oil imports in a short span.

In September, India had spent a total of EUR 3.6 billion - EUR 2.5 billion on crude oil, EUR 452 million on coal and EUR 344 million on oil products.

According to CREA, India's Russian crude imports in October recorded a 11 per cent month-on-month increase. While private refiners' imports constituted over two-thirds of India's total imports, state-owned refineries almost doubled their Russian volumes month-on-month in October.

"In a keen development, the Rosneft-owned Vadinar refinery (in Gujarat) - now sanctioned by the EU and the UK - increased its production to 90 per cent in October. After the EU sanctions in July, the refinery has been importing crude solely from Russia. In October, their imports from Russia recorded a 32 per cent month-on-month increase to their highest volumes since the full-scale invasion," it said.

Exports from the refinery have dropped significantly (47 per cent compared to the same month last year) to the lowest levels since May 2023, it said.

"While there was an 8 per cent month-on-month reduction in sanctioning countries' imports from the six Indian and Turkish refineries using Russian crude in October, the decrease was led chiefly by the EU and UK, who recorded monthly reductions of 9 per cent and 73 per cent. By contrast, Australia's imports in October saw a 140 per cent increase to EUR 93 million and US imports also recorded a 17 per cent increase to EUR 126.6 million. Both of these are yet to announce a ban on oil products made from Russian crude," CREA said.

When Russia invaded Ukraine in February 2022, it triggered a series of sanctions from the United States, the European Union, and other Western nations, aimed at crippling Russia's economy. One of the main sanctions was on Russian oil exports, which significantly impacted Russia's ability to sell oil to European markets.

As a result, Russia began offering crude oil at heavily discounted prices in an attempt to find new buyers for its oil. India, with its large energy needs and an economy sensitive to oil price fluctuations, found this offer too attractive to ignore.

The price discount on Russian oil, sometimes as much as USD 18-20 per barrel lower than the market price of other oil, allowed India to procure oil at a much cheaper rate. In October, the discount on Russia's Urals crude narrowed by 4 per cent month-on-month, averaging USD 4.92 per barrel below Brent.