Last month, the US slapped new sanctions against Russia’s energy trade. The sanctions targeted Russian oil producers Gazprom Neft and Surgutneftegas as well as 183 vessels that have shipped Russian oil.
The sanctions were meant to slow down Russian energy exports and limit Moscow’s resources to fund its war in Ukraine.
India, which became the second-biggest buyer of Russian crude oil since Moscow invaded Ukraine in February 2022, has taken a cautious approach, lest it run foul to US sanctions.
“Our relationship with India is based on economic pragmatism. That will continue to be the basis of our cooperation in future. We believe energy trade shouldn’t be hindered by any politics. We don’t believe sanctions are an instrument which is legitimate and we will continue to work with our partners on a bilateral and multilateral basis,” Sorokin said on the sidelines of the India Energy Week here.
Pre-Ukraine war, Russian oil made up for less than 1 per cent of India’s total oil imports but this rose to almost 40 per cent in 2022. In recent weeks, this has tapered to 30-35 per cent.
The Russian minister said Moscow will continue to work with partner countries like India to meet their energy needs. “We have all the means to supply the energy to our clients and fulfil all our contractual obligations and we are continuing doing that in a legal and economically justified way.” Sorokin said while it is too early to assess the impact of the latest sanctions, “constructive relationships” will continue to be successful.
“You cannot judge the situation on the basis of a few weeks of data. More time is needed to assess these things, but we believe that constructive relationships will continue to be successful,” he said on oil flows from Russia to India over the past few weeks following the sanctions.
The rise in Russian share in Indian oil import was primarily because the Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow. These discounts have, however, fallen to USD 2-3 per barrel from USD 7-8 last year.
The latest US sanctions dried up supplies of Russian oil to Indian refiners post the wind down period. Indian refiners are looking elsewhere — mainly the Middle East — to replace volumes from Russia.
India was the third-highest buyer of Russian fossil fuels in January, importing Russian fossil fuels worth euro 3.8 billion. There was a 22 per cent month-on-month rise in India’s crude imports from Russia, which totalled EUR 3 billion. This coincided with a 13 per cent rise in import volumes.
“India’s imports of Russian crude are widely predicted to drop after OFAC sanctions on vessels, with many refineries already looking to diversify supply from the Middle East. State-owned banks have also blocked payments for Russian crude after the sanctions while state-owned refineries have pulled back on talks for a long-term deal for Russian crude,” Centre for Research on Energy and Clean Air (CREA) said.
On being asked about the trajectory Russia-India oil trade could take going forward, Sorokin said, “We have bilateral relationships with our partners and we believe that we will continue to supply whatever energy is required by the global market despite the pressure being exerted on us… We are working in the market conditions and we will continue to work in the market”.
The Russian minister added that Moscow has the requisite technology at its disposal to develop its resources and will continue to be a major global player in the energy sector.
“Sanctions are illegal and have taken a huge toll on the global economy. Sanctions have added an element of uncertainty in a sector like energy where projects have very long lead times. They have pretty much made international agreements void and have shown that no investments are safe…
“Tens of billions of dollars have been taken away from developing economies and they (sanctions) have also increased the cost of capital for everyone in this industry,” Sorokin said.