 "Russian Oil")
Sourcing cheaper crude oil from sanction-hit Russia has opened new doors for boosting exports for India while it seems to have alienated traditional buyers of processed petroleum products from the country.
While countries like Singapore (-41.7 per cent), USA (-13.2 per cent), Australia (-58.8 per cent), South Korea (-23.9 per cent) and Malaysia (-52.8 per cent) have reduced their purchase of petroleum products from India in FY23, countries like the Netherlands (70.6 per cent), Israel (85 per cent), Brazil (114 per cent), South Africa (60.6 per cent) and Togo (32 per cent) have substantially increased their purchase of fuel products from India.
Since India is a key supplier of refined petroleum products, this has changed the pecking order of key export destinations. While the Netherlands became India’s third-largest export destination in FY23 from fifth position a year ago, Israel jumped 10 positions to 16th, while Brazil jumped five positions to 11th rank, South Africa by six positions to 17th rank, and Togo 11 positions to 23rd rank during the same period.
Biswajit Dhar, professor of economics at the Jawaharlal Nehru University said that while Russia is playing a major role in the churn in oil trade, Europeans have made a dash for cheaper petro products from India. “The Netherlands is a distribution centre for petro products to the EU because Rotterdam port is a storage centre and distributes fuel products to the rest of Europe. So what Europe is doing is bypassing the sanctions on Russia. We are also happily doing it as we want to strengthen our relationship with EU,” he added.
Similarly, since India imported rough diamonds worth $1.2 billion, 48 per cent higher than the previous year, many countries wary of sanctions by Western countries, reduced their purchase of polished diamonds from India. Countries like the USA (-28.7 per cent), UAE (-7.5 per cent), Belgium (-11.8 per cent), Thailand (-15 per cent), Israel (-21.5 per cent), Japan (-25.7 per cent) and Hong Kong (-28.3 per cent) reduced their import of polished diamond from India, while countries like Germany (490 per cent), Singapore (188 per cent) increased such imports manifold.
The G7 countries have not yet imposed a ban on the import of diamonds from Russia. However, they have agreed to restrict the use of diamonds mined, processed, or produced in Russia. This could include tracking the movement of diamonds through the borders and imposing sanctions on companies that continue to trade in Russian diamonds.
“Some exporters are also wary of exporting diamonds because they don’t want to play foul with Western countries,” Dhar said.
There has also been a change in the product mix of fuel exports by India in FY23. While diesel remains India’s most exported product, it saw a 1.8 per cent decline in exports in FY23 and so were the shipments of high-speed diesel, dipping 28 per cent during the year. However, exports of aviation turbine fuel shot up in FY23 by 57 per cent, becoming the second-highest exported product in FY23 from its sixth position in FY22. Export of petrol also declined two per cent in FY23, so was light naphtha dipping 7.5 per cent.
On the import side, while India has ramped up crude oil imports from Russia, with the share going up from just two per cent in value terms in FY22 to 19.1 per cent in FY23, it has simultaneously reduced crude oil imports from traditional suppliers such as Iraq (from 24.8 per cent to 20.7 per cent), Saudi Arabia (18.7 per cent to 17.9 per cent), USA (9.2 per cent to 6.3 per cent). To be sure, while in volume terms Russia is the biggest source of crude oil in FY23 at 21.6 per cent, closely followed by Iraq at 21.4, in value terms Iraq is shown to have a higher share because India gets cheaper crude from Russia.
Dhar said at present it suits us. “There could be an argument that we have dumped our traditional suppliers and suppose Russia goes through a turmoil, would it mean that we would not be getting enough crude oil supplies from these countries? But I think these are commercial considerations and India is a large consumer of crude oil, both for domestic and export purposes. For suppliers, it is always preferable to have large consumers. So India will always remain an attractive destination for our traditional suppliers of crude oil,” he added.
