Is India taking advantage of sanctions imposed on Russian oil?

India, a South Asian country the West sees as a bulwark against China, has been taking advantage of US-led sanctions on Russia and extracting discounted oil deals from Moscow. 

Russia is trying to cultivate new markets for its oil exports to avert the Western sanctions over the Ukraine attacks.

Much to New Delhi's relief, the US government's response to India's oil trade with Russia was meek. Washington said the trade did not violate its sanctions but it did put India on the “wrong side of history.”

"But also think about where you want to stand when history books are written at this moment in time,” White House Press Secretary Jen Psaki said.

India is the world’s third-largest oil consumer after the US and China. It meets 80 percent of its oil needs through imports, which are expected to surpass $100 billion in the current fiscal year ending on March 31. 

India buys most of its petroleum from the Middle East, but the United States has emerged as the fourth-biggest source and this year supplies will rise substantially, a government official briefed on the matter told Reuters.

Iraq supplies 23 percent of India's oil, followed by Saudi Arabia at 18 percent and the United Arab Emirates at 11 percent.

The US share of the Indian market will rise to eight percent this year, said the official, who spoke on the condition of anonymity in light of the government's strict media policy.

Nigeria, Kuwait, Oman and Mexico are other oil suppliers of India.

When it comes to Russia, its share of Indian oil imports was just two percent in 2021 which equalled 12 million barrels.

In the first two months of 2022, New Delhi did not import any oil from Moscow.

But contracts for March and April have already reached the six million barrels mark, which is about half of the entire volume of the last year, according to Matt Smith, an oil analyst at Kpler. 

Indian Oil Corp., the country's top refiner, recently ordered three million barrels of Russian oil through a tender, while Hindustan Petroleum Corp has booked two million barrels for May loading.

India enjoys competing offers for oil sales including from Moscow, especially when global prices have jumped, another government official said, defending the decision to buy from Russia.

What is an advantageous deal for India? 

Since the eruption of the conflict between Russia and Ukraine, Moscow has lost some customers for its Ural crude oil and its price has decreased.

"While we don't know the exact price that India is paying, the Urals discount to Brent crude [the global benchmark] in the last week has widened to about $30 per barrel," Matt Smith told BBC.

The prices of these two types of oil are normally similar, but since March, the Urals’ price has continued to drop so the difference between them has widened.

For that reason, "India and China are likely to purchase at least some of this [Russian] crude at a significant discount," he added.

However, Indian refiner companies are trying to find a solution for money transfer because of sanctions on Russian banks.

The trade in both directions is affected by the sanctions.

India has been in talks with the Russian authorities about how to buy oil. It is also evaluating issues related to insurance, freight and payment.

New Delhi is exploring the option of paying for Russian imports in rupees but a formal mechanism is yet to be formulated, government and banking sources said.