The Indian government has asked state oil companies to scoop up huge volumes of cheap crude oil from Russia, according to industry executives, strengthening commercial ties with the country even as the West tightens sanctions on Moscow.
Western countries have sought to hamper Russia’s ability to use its vast oil and gas exports to fund the war in Ukraine. The emergence of India as a major buyer of Russian oil has the potential to take the sting out of the sanctions. Other nations, including China and Turkey, have also stepped up their purchases of Russian oil, though the country’s exports remain below prewar levels.
Indian oil executives say they have been strongly encouraged in recent weeks by government officials to find ways to continue purchases and take advantage of the price discount on Russian oil. State-owned Indian Oil Corp 530965, +2.67% is negotiating more supply contracts with Russian energy giant Rosneft Oil Co RU:ROSN , according to one executive.
An Indian government official said that the government wasn’t directing companies to buy Russian oil. He also said that Russian crude wasn’t under sanctions and that many countries continued to buy it.
India has increased imports of Russian oil by more than 25-fold since the start of the war, buying an average of 1 million barrels a day in June, compared with 30,000 in February, according to Kpler data. That is equal to more than a quarter of Europe’s imports of Russian crude and crude products, according to International Energy Agency data.
India’s decision is a commercial one: The price of Russian crude tumbled after the Ukraine invasion, with a popular grade known as Urals falling as low as $37 below the Brent benchmark. It edged up in recent days to a discount of just below $34 by Monday, signaling a recovery in demand, according to analysts. Getting oil at a discount has major macroeconomic benefits for India. Like much of the world, it is struggling to prevent rising fuel prices feeding into runaway inflation.
The Indian government has maintained a neutral position in the Russia-Ukraine conflict. The policy is reminiscent of India’s stance on Iran, where it continued to purchase crude from the sanctioned country due to an exemption granted by the U.S.
Indian companies are finding workarounds to keep Russian oil flowing, despite the latest round of sanctions from Europe. The European Union announced a ban on insurance for ships carrying Russian oil, which will come into effect in December. Discussions are also under way in India for a longer-term, state-backed solution on insurance, according to commodity traders and one of the oil executives familiar with the Indian government’s plans.
Rosneft has sweetened deals to attract buyers for its oil, letting traders pay for its crude months after delivery without a letter of credit from a bank, a sign of desperation to keep its oil revenues flowing.
An expanded version of this story appears on WSJ.com.