What has Russia offered to India for crude oil?
No one knows when disaster becomes an opportunity. If Russia has tried to make disaster an opportunity during the ongoing war with Ukraine, then it can prove to be a profitable deal for India too. This is also a great offer from Russian President Vladimir Putin to India. Let me tell you what it is of the offer. In fact, due to the attack on Ukraine, America and European countries have imposed many sanctions on Russia, due to which the troubled Russian oil companies are offering India huge discounts on crude oil.
According to the media reports, the Russian oil companies
are offering India a discount of 25 to 27% on the price of crude oil. The
reason for this is the imposed restriction on many Russian banks, by the
international banking system, after which it became difficult for Russia to do
business with other countries. The Russian government is engaged in preparing a
new payment system to get out of this crisis.
If this happens, then only Russia's oil trade with India will be able to increase. Russia produces a large amount of crude oil from the largest state-owned oil company, Rosneft. When Russian President Vladimir Putin visited India in December last year, Rosneft and Indian Oil Corporation signed a contract to supply up to 20 million tones of oil to India through the Novorossiysk port by the end of 2022. Let us tell you that India is on the purchase of oil on MiG 21, but India is facing a problem due to increasing the oil price from countries like America and Russia, so maybe India moves, towards Russia’s offer to import oil.
Indicating huge discounts by Russian companies will be good for India. However, there is still no indication as to how the oil purchase will be paid for. India should be extremely cautious before starting trade with Russia in May. Buying oil from Russia during Russia's ongoing attack on Ukraine may anger many countries, as they can see also it in the form of financial aid to Russia. The war has raised crude oil prices from $90 a barrel to $115 a barrel, forcing India to pay more for oil purchases.
The Government of India and the Reserve Bank of India have explored alternative avenues to pay for their imports from Russia. Banks have suggested an option of activating the Rupee Rubble trading account to trade the currency of India and Russia for trading with Russia. However, India imports crude oil in small quantities from Russia. India buys 70% of its use from OPAC countries, which is not going to cause any direct damage to India's trade, but this war is going to have a lot of indirect impact on India.
India's trade with Russia, Ukraine, and Belarus is not much. These countries account for another 2.1% of India's total exports and total imports, but sanctions on Russia will have an impact on India as well. If the money prices of crude oil, coal, etc. increase, then it will affect India too and the prices will increase in the country.
Effect of Economic Sanctions on Russia:
For the past few months, there has been a conflict between
Russia and Ukraine, which has affected the global stock market rate. Ever since
Russia started investing in Ukraine, Western countries such as the European
Union, the UK, and the US have established several economic sanctions on
Russia.
Apple, Google Pay, MasterCard, Visa, and others have also limited their service in Russia. Apart from this, Russia is also a huge global Oil export company and plays a significant role in its economy. But a few days ago, the US announced that it is banning Russian oil and gas imports, and among so many economic sanctions, the US is actively affecting the Russian economy. The value of the Russian currency rubble has also fallen due to these reasons.
Can India import crude oil from Russia?
Due to all these geopolitical tensions, there may be a problem with crude oil supply, due to which oil prices have also increased sharply in the last few weeks and this is not good for India. This is because India imports 80% parts of its total oil requirement, and the fiscal deficit and inflation levels will rise in India due to the oil crisis, so Russia searching for new buyers to export the oils.
On the other hand, India wants to buy more at lower prices to reduce its rising energy bill. According to some reports, Russia is also offering India heavy discounts on crude oil and other commodities, so if India trades Russian discounts, then it can be beneficial for the Indian economy. But can India import crude oil from Russia? There are many factors involved; we are going to talk about this article. First Foremost, we should understand how much oil export is in the current between India and Russia.
If we talk about India's total oil needs which are 80%, out of that India imports only 2 - 3 % points from Russia. But with oil prices up 40% so far this year, the Indian government is looking at increasing this, if it can reduce its rising energy bill. Now you must be thinking that why India imports so much less oil than Russia. There are some reasons behind this.
Our
finance minister Nirmala Sitharaman also recently said that he has been given an
open offer by the Russian government, where they can give crude oil at a
discount price. But she said that we don’t know how it can be o effect because
a lot of factors will have to be weighed in, and we will have to get it
from some part to ship it and then whether it can come to India. The finance
minister also said that even if India imports from Russia at a discounted price
too, then all gains will be offset due to insurance costs.
Let's see if India can buy oil from Russia in the current situation. According to some reports, India is exploring the discounted crude offered by Russia and options to buy. As we told you earlier that the European Union, Britain, and the US have imposed a lot of economic sanctions on Russia, so because of that the Russian companies and banks are not able to do business in a major currency like dollars and euro.
In such a situation, according to some reports, an Indian government official also told that the Indian and the Russian government are trying to reduce the global trade mechanism through the Rupee-rubble trade mechanism. Payments for exports made by India through this arrangement will be made in Rupee in place of dollars or Euro. Exports made by Similarly Russia will be paid in rubbles.
Apart from this, RBI, according to new sources, is also consulting with UCO Bank to facilitate the payment. If this mechanism is set up, then more trade of oil can increase between India and Russia. India had already set up a similar mechanism with Iran. However, importing oil from Russia has many challenges such as the vale ability of shipping vessels, the high insurance premium of import from Russia, and besides refunds and balances, Indian companies will have to assess the refining capability and associated costs.
Conclusion:
Apart from this, this situation is very sensitive
geopolitically, which is another challenge. Any import by India from Russia. In
such a situation, until an official statement is released by the Indian
government, it is difficult to comment on whether India will do the oil import
at a discount from Russia or not, it was a small update. The reason is above
the Global Geopolitical Situation and what is the stand of India there. We hope
you like this blog and will help you to understand the current situation. Do
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