India’s refiners are set to increase their imports of Russian crude oil in September, despite recent U.S. tariffs aimed at discouraging these purchases. According to traders, deepening discounts on Russian crude, driven by a reduction in Russia’s refining capacity due to Ukrainian drone strikes, are prompting this decision.
In recent weeks, major Indian state-owned refiners like IndianOil and BPCL temporarily halted spot purchases of Russian crude for October cargoes. This move followed the announcement of an additional 25% tariff on Indian imports of Russian oil by the U.S. administration, which is part of a broader 50% tariff that took effect on August 27, 2023.
Despite these trade restrictions, Indian refiners are expected to raise their crude oil imports from Russia by between 150,000 barrels per day (bpd) and 300,000 bpd in September, marking an increase of 10-20% compared to August levels. Sources involved in the deals confirmed this information to Reuters, highlighting that the volume of crude exported from Russia has surged recently as Ukrainian strikes have hampered refining operations within Russia.
With the U.S. targeting India as a key buyer of Russian crude, diplomatic relations have been under strain. Nevertheless, both nations have maintained discussions, emphasizing their strategic partnership. High-level meetings have occurred since the tariff announcement, reiterating their cooperation in the energy sector. This indicates India’s intent to continue benefiting from relatively inexpensive Russian oil.
According to Ivan Mathews, Head of APAC Analysis at energy flow analytics firm Vortexa, stronger demand in India during September and October will likely lead to increased crude oil arrivals. Mathews stated, “We expect refineries in India to continue processing Russian oil, as their feedstock procurement decisions are mainly economics-driven.”
As the global landscape shifts due to geopolitical tensions, India’s reliance on Russian crude appears steadfast, driven by economic considerations despite the surrounding political challenges. With the U.S. tightening its grip on trade, India’s approach to Russian oil underscores its commitment to securing favorable energy deals amidst changing international relations.
