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| Selling Russian oil to Europe increased India's exports, but who benefited |
The European Union almost imposed a ban on Russian crude until December last year after Russia intervened in Ukraine.
Two months later, these restrictions were imposed on its refined oil products. Before the embargo, Europe used to buy 30% of its total oil imports from Russia. It was believed that the ban on Russian oil imports could lead to supply shortages across Europe, including the European Union.
For Europe, it was even more worrisome because most countries here already face high inflation rates.
However, surprisingly, despite this ban, the supply of Russian oil to Europe continues. Russian oil is now reaching the European market via India.
Because Russian crude oil does not reach Europe directly, there is a problem of production in front of the oil refineries there. However, India's private sector refineries did not miss the golden opportunity to fill this gap by supplying it to Europe.
According to the data, the exports of refined petroleum products from India to EU countries have been increasing for five consecutive months till January this year. This month, the quantity has reached 19 lakh tonnes.
EU is the top importer of petroleum products from India
This is the largest number of monthly figures for exports of petroleum products from India in FY 2022-23. From April 2022 to January 2023, the amount of refined petroleum exported from India to Europe has increased to 1.16 million tons.
This makes the EU the top 20 importers of refined petroleum products from India.
Meanwhile, 15 percent of India's refined petroleum product exports were made to the European market alone. Later it increased to 22 percent.
India's exports of refined petroleum products to the market have steadily increased and are now on track to become the largest supplier here, following the EU ban on Russian petroleum products, according to a Bloomberg report.
Even after sanctions imposed by the US and Europe, India continues to buy large quantities of crude oil from Russia at subsidized rates.
Before the Russia-Ukraine war that started in February last year, the share of Russian oil in India's imports was only one percent, but a year later, in February 2023, this share increased to 35 percent.
In March this year, Russian Deputy Prime Minister Alexander Novak said that in the last year, Russia has increased its oil sales to India by 22%.
India is the third largest buyer of oil after China and the US, but when Russia made its oil cheaper after the US and European sanctions, it was a good opportunity for India to increase its oil reserves.
Private oil refineries here are now taking advantage of increased oil supplies from Russia and are eyeing Europe as their best market.
The benefit to refining companies
India is among the largest oil refining countries in the world. Due to increased supply by Indian refining companies, the oil crisis in the European market was not as severe as some had predicted.
India tops the list of crude oil importers, but the refining capacity of India's refineries far exceeds its domestic demand.
This is why surplus oil is increasingly being exported to the European market.
Due to this, Indian refining company Reliance and Russian energy group Rosneft's stake company Naira are getting good profits.
Although the European Union has imposed an embargo on Russian oil, it is buying a lot of oil through India.
It is also interesting to note that European countries expressed displeasure over India's move to buy cheap crude oil from Russia.
When German Foreign Minister Angelina Berbock, who visited India in December 2022, complained to India about buying oil from Russia, Indian Foreign Minister S. Jaishankar said that in the last nine months, India has bought one-sixth of what the European Union has bought. Usually buys from Russia.
However, now European countries do not seem to have any problem importing oil from India.
Is India emerging as a reliable supplier?
Anuj Gupta, vice president of commodities at IIFL Securities, says that India's demand for its crude oil is huge and usually does not have more than a month's worth of oil reserves.
"In such a case, if Indian refining companies are increasing the export of petroleum products using the excess supply, it is a very good thing for them," he says.
Gupta says that after the ban on Russian oil, there has been an increase in imports in the countries of the European Union due to the oil crisis.
"Earlier, European countries did not buy much-refined products from India, but given the current crisis, they have started giving importance to Indian products."
"This bodes well for India's economic potential," says Gupta. Due to this, India has emerged as a reliable supplier. India is poised to emerge as a strong link in the 'supply chain' that the US and European countries can rely on.
Analysts say that although some Western countries were angry with India for buying more oil from Russia, they actually had no problem with the situation.
Experts say that it would be a welcome thing for the US and many Western countries to maintain the global supply of oil to India's refining companies.
By this, the refined petroleum products from here can come to the Western market, and the supply situation is better.
According to experts, it is in the interest of both Europe and America. Especially for Europe because given rising inflation, if the price of oil increases there, it can prove dangerous for them.
The US and Europe believe that the increase in exports by Indian refining companies is a good sign to protect global oil supplies from disruption.
Cheap Russian oil has reduced refining costs for Indian refining companies and increased profit margins.
Anuj Gupta says that this will benefit India. This will further strengthen the already strong Indian refining industry.
"This will enable India to become an intermediate market in the future and more countries will buy refining petrochemical products from India."
Does India need to increase its refining capacity?
Initially, there was no consensus among EU countries regarding the ban on Russian oil. It was a hasty decision, even France and countries outside the G7 agreed that it was a hasty decision.
Energy expert Arvind Mishra says that the biggest crisis Europe is facing right now is rising energy prices. In Europe, the price of electricity has increased by 35%. Although Russia's oil is embargoed today, Europe will have to rely on Russian energy.
In this situation, this oil is not coming directly from Russia but through India. Energy security is a subject on which no straight line can be taken.
India has saved 35 thousand crore rupees by buying cheap oil from Russia. On the other hand, it has also emerged as a major supplier of petroleum products.
Arvind Mishra says that the war has created such a situation that India, which used to import commodities, is now exporting them.
India is fast becoming a major hub for the supply of 'value-added' petrol products.
However, experts believe that India will be able to take advantage of this situation only when it strengthens its refining capacity by increasing it further.