The Russian oil corporation Rosneft announced on Wednesday that it had come to an agreement with the government-owned Indian Oil Corporation to “substantially increase oil supplies as well as diversify the grades to India.”
Russia has significantly elevated its profile as an oil supplier throughout much of Asia, particularly India, China, and Saudi Arabia, following the imposition of Western sanctions on its fossil fuel industry last year. The sanctions were intended to cut off profits to Moscow in response to leader Vladimir Putin launching a full-scale invasion of neighboring Ukraine, which Russia began to colonize a decade ago with little international response before February 2022. Instead, the sanctions have created a massive discounted oil market that countries such as India are exploiting for profit.
Russia became India’s top oil supplier in November, surpassing Saudi Arabia. As the purchases are not believed to violate Western price cap sanctions on Russian oil, neither Washington nor its European allies have exerted large amounts of pressure on India to cut its purchases.
Indian officials have responded to the minimal criticism the country has received to expanding financial ties to Russia in the face of the Ukraine invasion with marked apathy towards the conflict.
“There is no moral conflict,” Indian Petroleum and Natural Gas Minister Hardeep Singh Puri said in November. “We don’t buy from X or Y. We buy whatever is available. I don’t do the buying. It’s the oil companies who do the buying.”
India’s top negotiator for the upcoming G-20 summit, which India is hosting this year, urged Europe to “move on” from Ukraine to more important issues this month.
Rosneft’s announcement of a new agreement with the Indian Oil Company did not offer many details, other than specifying that its CEO, Igor Sechin, signed the deal while on a recent trip to India.
“During the trip, Rosneft Oil Company and Indian Oil Company signed a term agreement to substantially increase oil supplies as well as diversify the grades to India,” the company said in a statement, according to the Russian news agency Tass. “Igor Sechin, CEO of Rosneft Oil Company, and Shrikant Madhav Vaidya, Chairman of Indian Oil Corporation Ltd., signed the agreement, in the presence of India’s Minister of Petroleum and Natural Gas Hardeep S. Puri.”
“The parties also discussed ways of expanding cooperation between Rosneft Oil Company and Indian companies in the entire value chain of the energy sector, including possibilities of making payments in national currencies,” the statement added.
Russia and India are both members of the BRICS coalition – alongside Brazil, China, and South Africa – which is most prominently an economic alliance. BRICS members have invested years into finding a way to avoid the use of the U.S. dollar in international trade, isolating America to the benefit of the financial profiles of its members. BRICS leaders have noted on multiple occasions that the list of nations seeking to join them is growing, including countries such as Saudi Arabia, Argentina, and Iran, which would increase the group’s leverage to drop the U.S. dollar.
The Rosneft deal is the product of months of negotiations to expand the percentage of Rosneft’s product being shipped to India. In June, Bloomberg reported that Indian government officials were already “collectively working on finalizing and securing new six-month supply contracts for Russian crude to India,” citing anonymous sources.
“Details on volumes and pricing are still being negotiated with Indian banks set to fully finance all cargoes, said the people who asked not to be identified as discussions are confidential,” Bloomberg reported at the time. “Indian refiners will increasingly procure supplies directly from Russian companies such as Rosneft as top international traders like Glencore Plc wind up their dealings, they added.”
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Bloomberg named Indian Oil Corporation as one of several Indian oil companies in talks to expand trade with Rosneft.
India’s dramatic increase in Russian crude oil purchases has corresponded to a rise in India’s exports of refined oil products to the West, including the United States. As of February, reports indicated that India was shipping as much as 89,000 barrels of gasoline and diesel fuels to New York a day. The United States is currently believed to be the world’s top buyer of Indian refined oil products.
While not a major oil-producing country, India boasts significant refining capacity, making cheap Russian oil an attractive option to supply its refineries. In February, Indian Prime Minister Narendra Modi invited the world to invest in India’s refining industry, calling his country “the most opportune place for investment today.”
“India has the fourth-largest crude refining capacity in the world, and we are working on increasing refining capacity from 250 MMTPA to 450 MMPTA,” Modi said at the time. “The gas pipeline network will expand to 35,000 km in the next four-five years from 22,000 km presently. No-go area for oil and gas exploration has been reduced by 10 lakh square kilometers.”
Oil is one of several sectors that have led to a boom in Russian-Indian trade. In a separate announcement, Rosneft noted on Wednesday that trade generally between Russia and India rose dramatically in 2022 to a $38.4 billion trade volume. Russia is now one of India’s top five trade partners. Sechin, the Rosneft CEO, noted that the governments of India and Russia had sought to increase trade volume to $30 billion by 2025, beating their goal by two years. Russian business leaders predicted on Wednesday that bilateral trade volume could increase to as high as $50 billion by the end of 2023.
“Just a few years ago, we dreamed of a trade turnover of $25 [billion] with India, because at that time it was less than $10 [billion],” Chairman of the Board of the Business Council for Cooperation with India Sergey Cheremin said, according to Tass.
Indian officials have rejected Western criticism of its expansion of trade with Russia.
“We ended the financial year 2022, the purchases of Russian oil were not two percent, it was 0.2 percent,” Indian Oil Minister Hardeep Singh Puri said in November. “Moreover, we still buy a quarter of what Europe buys in one afternoon. So let’s be very clear about what the perspective is.”
Indian External Affairs Minister S. Jaishankar has repeatedly accused Europe and America of insufficiently defending Indian interests and of hypocrisy regarding Russian industry sanctions.
“If it is a matter of principle why didn’t Europe cut on the first day [of the Russian full-scale invasion of Ukraine]?” he asked in January. “Why didn’t on 25th February, a complete cut off of energy imports from Russia? You can’t say it’s my principle but by the way, I will do it by my timing.”
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