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By Brendan Cole
Senior Reporter
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India wants to boost its oil purchases from Saudi Arabia in a move that might hurt the wartime economy of Russia, which has been selling discounted energy products to New Delhi.
Russian President Vladimir Putin's full-scale invasion of Ukraine in February 2022 spurred the West to impose sanctions aimed at isolating Moscow from the global financial system and cut off its revenues to wage its military aggression.
In turn, Moscow named "friendly" and "unfriendly" countries, offering the former discounts in its exports such as oil. India has been a prime beneficiary of the policy as co-operation with Russia increased, and it became the second-largest buyer of its discounted oil, behind China.
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However, this reliance on Russia for cheap energy might change after sources at Indian Oil Corp (IOC) and Bharat Petroleum Corp said they each want an additional 1 million barrels of oil from state-owned Saudi Aramco next month, Reuters reported. When contacted by Newsweek ,a spokesperson for Saudi Aramco said that the state-owned company "declines to comment."
It follows the kingdom slashing the official selling price (OSP) of its key export grade for February to the lowest in 27 months. "It is no secret India has placed its national interest over international sanctions against Moscow," James Hill, CEO of MCF Energy, told Newsweek. "India's focus is to deliver energy to the public at the lowest prices possible."
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Indian purchases of Russian crude have fallen to an 11-month low as the price tag on the discounted oil rises and China increases its demand for oil. Hill said this reduction in Indian imports is mostly due to the increase in the price of Russian crude, as well as Saudi Arabia's price cuts.
Sources at the Indian refineries told Reuters that the country is looking to Saudi oil partly because of problems with payments for Russian light sweet crude Sokol.
Indian state refiners pay for Russian oil in United Arab Emirates (UAE) dirhams, but IOC's payments for Sokol oil face problems because Sakhalin-1 LLC has been unable to open an account with a bank in the UAE.
Other issues beset oil trade with Russia. Washington has sanctioned ships and vessel operators for the sale of Russian oil at above the $60-per barrel cap set by the G7, although Moscow has enacted sanctions-busting "ghost" ships.
Almost 5 million barrels of Russia's Sokol grade crude have not reached India, with one shipment stalled for more than a month.
Also, billions of dollars in Russian oil revenues are stuck in Indian banks and cannot be transferred or converted because of Reserve Bank of India restrictions, thwarting Putin's strategy to bypass the U.S. dollar in international trade.
"Saudi's OSP cuts will definitely make Saudi crude more attractive now, but it ultimately depends on how they compare against other rival grades," said Serena Huang, head of APAC Analysis for Vortexa, which gives energy-market analysis.
"India's imports of Russian Sokol crude have recently been stymied by sanctions and payment issues, but Russian Urals remain viable," Huang told Newsweek.
Hardeep Singh Puri, India's minister of Petroleum and Natural Gas, said this month that Russian oil imports had declined due to unattractive pricing and not because of payment problems.
"Although Urals' discounts to Brent have narrowed over the course of last year, as long as they remain more attractively priced than the Middle Eastern grade, we could still expect healthy demand from the Indian refiners," Huang said.
Update 1/15/24, 9:01 a.m. ET: This article was updated with a response from Saudi Aramco.
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