INDIA HELPING WEST MEET IT’S ENERGY DEMAND

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Context

• The European Union’s (EU) foreign and security policy chief said the EU should crack down on India reselling Russian oil into Europe as refined fuel.

The numbers

Import from Russia

• Since Russian invasion of Ukraine, India has emerged as one of the biggest buyers of Russian oil.
• India’s imports of Russian oil rose tenfold last year.
  • In 2021 Russian oil accounted for just 2% of India’s annual crude imports. That figure now stands at almost 20%.

Export to the west

• The access to cheap crude oil has allowed the country’s refiners to register massive profitsand export record-level refined petroleum products to Europe and the USA.
  • Indian refiners exported an average of around 284,000 barrels per day (bpd) of refined petroleum products to Europe in the December-April period, up from about 170,000 bpd in the year-ago period.

India’s defence

• India has defended its purchase of oil by saying that given its huge reliance on energy imports and with millions living in poverty, it isn’t in a position to pay higher prices.
• Further, Russian crude, if substantially transformed in a third country, is not treated as Russian anymore.

Sanctions against Russian oil

• Soon after the Russian invasion of Ukraine, the West started to curtail their dependency on Moscow’s energy imports in a bid to squeeze its economy.

Germany

• It suspended the launch of the new Nord Stream natural gas pipeline.

Canada and the US

• they banned the import of Russian crude oil.

Group of seven (G7)

• They enforced a “price cap” on Russian crude.
• They believed the price cap imposition would cripple Moscow’s economy and severely impact its ability to fund its battle against Ukraine.
• However, Russia responded by increasing its oil exports to India and China.

How India is helping the West meet its energy demand?

• As the sanctions imposed on the import of Russian oil aren’t applicable to India, the amount of fuel from Moscow entering the country has reached a record high.
• This has allowed India to not only easily meet its own energy demands but also that of other countries.
• A Bloomberg report noted that India is importing more and more oil from Moscow and refining it into fuel, which is being supplied to Europe and the US.
  • India’s diesel exports to the Europe rose 12-16% to 1,50,000-1,67,000 bpd in the last fiscal year.
  • India boosted its vacuum gas oil (VGO) shipments to the US.

India’s Energy Imports

• India’s energy imports are estimated to grow 43.6 per cent in FY2023 over the previous year.
• Energy imports include coal, coke, crude oil, LNG, and LPG.
• India’s energy import bill for FY23 is estimated to be $260 billion.
• High growth in energy-related imports is mainly due to the challenging external environment.

• Currently, four factors are leading to a surge in the price of oil, coal, and other energy sources. These are:
  • the disruption of oil supply chains due to the US sanctions on Russia post the Russian invasion of Ukraine,
  • the weakening of the US-Saudi Arabia 1970s deal that led to the dollar becoming the world’s reserve currency and leading to the sale of oil and currencies other than the dollar,
  • high inflation in developed countries, including the US, Canada, Germany, and the UK, and
  • the US effort to create alternate supply chains excluding China.

Petroleum crude and products

• The estimated values of petroleum imports for FY 2023 are $210 billion.
• Crude imports grew by 53 per cent over the last fiscal.
• The top suppliers are Iraq ($36billion), Saudi Arabia ($31billion), Russia ($21billion), UAE ($17billion), the US ($11.9billion).
• Imports from Russia zoomed by 850 per cent over last year.
• India paid prices ranging from $90-92 per barrel for imports from Iraq, Russia, and the US.
• In comparison, it paid the price ranging from $101-103 per barrel for imports from Saudi Arabia and UAE.
• India used its refining capacity to process part of the imported crude oil and exported products worth $96 billion.
• The key exports were diesel ($45 billion), petrol ($15 billion), and ATF ($16 billion).

Coke, coal

• Disruption in oil trade due to sanctions on Russia and the weakening of the US-Saudi Arabia 1970 oil deal put pressure on governments to secure long-term coal supplies.
• India’s estimated coke and coal imports for FY2023 are $51 billion.
• India imports both coking coal and thermal coal.
• While coking coal is used as raw material for making steel, thermal coal is used to generate electricity.
• The coking coal imports may exceed $20.4 billion, an 87 per cent increase over last year.
• India imports about 60 per cent of coking coal from Australia ($11.8 billion). We also bought coking coal from the US ($2.7 billion) and Singapore ($2.1 billion).
• Steam coal imports in FY 2023 are estimated to exceed $23.2 billion, a 105 per cent increase over last year. India imports about 59 per cent of steam coal from Indonesia ($13.6 billion).

Reducing imports

• India must reenergize the exploration of local oil fields and enhance production through coal mines.
• Enhanced domestic production will substantially cut the energy import bill and improve the current account.
  • India, in the 1980s, met 85 per cent of its crude oil needs mainly from ONGC’s Bombay High offshore oil field, but now we import 85 per cent of our needs.
• There’s not enough scope for reducing the import of coking coal as India does not have high-quality reserves. But, the import of thermal coal can be managed.

https://indianexpress.com/article/explained/how-india-is-helping-west-meet-its-energy-demand-by-importing-russian-oil-8615009/