Russia Sanctions: India Profiting From Russian Oil Trade by Exporting Refined Petroleum

[Riaz Haq]

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so. As Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in an interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi Foreign Minister AK Abdul Momen told journalists: “You are seeing that they (western nations) keep bossing us and you (journalists) also encourage them. Every day, they come up with new issues. We used to call them development partners. They do not pay for the development but keep giving advice.” “We do not want to get into any problem. We want peace in the world,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra is openly funding the war in Ukraine by buying weapons and oil from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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[Riaz Haq]

Russian Oil Producers Stay One Step Ahead of Sanctions
Shippers and refiners hide origin of Russian oil, and some is getting into the U.S.

https://www.wsj.com/articles/russian-oil-producers-stay-one-step-ah...

Indian refined oil-product exports, beefed up by cheap Russian supplies, have grown sharply since the beginning of the war. Daily shipments to Europe have risen by a third and by 43% to the U.S. on a quarterly basis.

“If Indian refineries on the west coast have been importing lots of Russian crude then yes, probably there will be some Russian crude that has gone into the making of these products,” said Koen Wessels, an oil-products analyst at consulting firm Energy Aspects.

This comes at a time when gasoline and diesel prices have hit records in the U.S. due to high crude prices, weighing on consumers at a time when inflation was recently at a four-decade high. Extra supply from abroad may be less scrutinized, analysts said.

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Europe just targeted Russian crude with its toughest sanctions yet, but shippers and refiners are getting the oil to market by obscuring its origins. Some fuels believed to be partially made from Russian crude landed in New York and New Jersey last month.

The cargoes were brought through the Suez Canal and across the Atlantic from Indian refineries, which have been big buyers of Russian oil, according to shipping records, Refinitiv data and analysis by Helsinki-based think tank Centre for Research on Energy and Clean Air.

In the wake of the invasion of Ukraine and sanctions from the U.S. and the European Union, traders are working to obscure the origins of Russian oil to keep it flowing. The oil is being concealed in blended refined products such as gasoline, diesel and chemicals.

Oil is also being transferred between ships at sea, a page out of the playbook used to buy and sell sanctioned Iranian and Venezuelan oil. The transfers are happening in the Mediterranean, off the coast of West Africa and the Black Sea, with oil then heading toward China, India and Western Europe, according to shipping companies.

A refinery owned by Indian energy giant Reliance Industries Ltd. bought seven times more Russian crude in May, compared with prewar levels, making up a fifth of its total intake, according to Kpler.

Reliance chartered an oil tanker to carry a cargo of alkylate, a gasoline component, departing from the nearby Sikka port on April 21 without a planned destination. Three days later, it updated its records with a U.S. port and sailed over, discharging its cargo on May 22 in New York.

“What likely happened was Reliance took on a discounted cargo of Russian crude, refined it and then sold the product on the short-term market where it found a U.S. buyer,” said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air. The organization is tracking Russian fossil fuel exports and their role in funding the Ukraine war. “It does look like there’s a trade where Russian crude is refined in India and then some of it is sold to the U.S.”

Reliance didn’t respond to a request for comment. Its joint chief financial officer, Srikanth Venkatachari, said in a May 6 briefing that the company has minimized feedstock cost by sourcing “arbitrage barrels.”

[Riaz Haq]

Handle the India-U.S. Relationship With Care
The world’s largest democracy often sees things very differently than America.

By Walter Russell Mead

https://www.wsj.com/articles/india-handle-with-care-modi-china-russ...


Superficially, the U.S.-India relationship looks like a success. With both countries focused on China, business ties steadily deepening, and U.S.-Pakistan relations in a deep freeze, many of the old obstacles to the relationship have disappeared.

But an intense week of meetings in Bangalore and Delhi with politicians, think tankers, religious leaders and journalists made clear that while Americans and Indians share strategic and economic interests, and we both value democracy, we remain divided by important differences in values and perceptions. Unless managed carefully, these differences could derail U.S.-India cooperation at a critical time.

Americans and Indians often see the same problem in very different ways. India, for example, does not see Russia’s attack on Ukraine as a threat to world order. While Americans have been disturbed by India’s continued willingness to buy oil from Russia, Indians resent the West’s attempt to rally global support for what many here see as a largely Western problem in Ukraine. Pointing out that Europeans scarcely noticed China’s attacks on Indian frontier posts in 2020, Foreign Minister Subrahmanyam Jaishankar told a conference in Bratislava, Slovakia, last week that “Europe has to grow out of the mindset that Europe’s problems are the world’s problems.”

More generally, Indians bristle when they sense Americans and Europeans getting together to write global rules. The more that American Wilsonians talk about a values-based international order, the more that Indians worry about Western arrogance. Many Indians want a strong Russia and, within limits, a strong China precisely to help guard against the kind of world order President Biden and many of his advisers want to build.

This is more than the postcolonial suspicion of Western intentions that India has long shared with many other non-Western countries. The Hindu nationalist movement that has replaced the long-ruling Congress Party with a new political system built around the Bharatiya Janata Party and its charismatic leader, Narendra Modi, has brought a new dynamism to Indian foreign policy. This new nationalist India wants to increase and develop Indian power, not submerge Indian sovereignty in Western-designed international institutions.

The domestic agenda of the Hindu nationalist movement can also cause problems for the U.S.-India relationship. For Hindu nationalists, the rule of the Muslim Mughal emperors, some of whom destroyed ancient Hindu temples and built mosques on their ruins, was as much a disaster as British colonialism for Indian civilization. It is not enough to send the British packing; the liberation of India means placing Hindu civilization back at the center of Indian cultural and political life. Many BJP supporters want the Indian government to defend India’s Hindu civilization and culture from Islam, Christianity and Western secular liberalism.

[Riaz Haq]

Handle the India-U.S. Relationship With Care
The world’s largest democracy often sees things very differently than America.

By Walter Russell Mead

https://www.wsj.com/articles/india-handle-with-care-modi-china-russ...

This form of Hindu nationalism leads to controversial policy initiatives. Tough restrictions on the ability of foreign organizations to fund civil-society groups in India threaten to disrupt the activities of American charities ranging from the Ford Foundation to the Catholic Church. Anti-conversion laws put obstacles in the path of both Christian and Muslim missionary efforts, and Hindu women wishing to marry out of the faith sometimes face severe social and governmental pressures. Communal violence, a problem in India since the days of the British raj, has risen in recent years. Indian Muslims often express fears for their personal security.

American human-rights groups have responded to these developments with increasing concern, and last week Secretary of State Antony Blinken named India as a country “where religious freedom and the rights of religious minorities are under threat.” Such statements do more to trigger anticolonial and anti-Western sentiments than to relieve minority communities. Hindu nationalism is, among other things, a demand that Indian civilization be accepted as the moral and spiritual equal of the West. America has its racial problems and mass shootings, Indians say. What gives Americans the right to tell India how to live?

These conflicts aren’t going away and will likely get worse over time. Hindu nationalism is here to stay. So are India’s communal tensions, and so too for that matter is the belief of many Americans that they have a solemn duty to tell people in other countries and cultures how to live—and to impose sanctions on those unhappy occasions when they fail to take our advice. If bilateral relations are to prosper, Indians and Americans need to find better ways to manage these chronic issues.

India and the U.S. are raucously democratic societies, and their foreign policies cannot ignore public opinion. Managing this critical relationship is never going to be easy. Building deeper ties between the two societies will help; so too will quiet, low-key conversations aimed at preventing blowups before they occur. Both sides need this relationship; we both need to focus on making it work.

[Riaz Haq]

China and India buy more Russian oil, blunting Western sanctions
Both countries take advantage of discounts as buyers disappear


https://asia.nikkei.com/Business/Energy/China-and-India-buy-more-Ru...

TOKYO -- China and India have increased Russian oil purchases as prices decline due to Western import bans, the latest data shows, creating a loophole that allows Moscow to secure export revenue.

China imported 800,000 barrels of Russian petroleum daily by sea last month, according to data from Refinitiv, a figure that does not include oil delivered via pipelines. The volume has soared by more than 40% from January.

The number indicates that China is deliberately going after cheap Russian crude. India's marine imports of Russia's oil also spiked from zero in January to nearly 700,000 barrels a day in May.

China and India have expanded imports because "Western sanctions have reduced the number of buyers, meaning Russian crude oil can be purchased cheaply," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., the state-backed energy explorer known as JOGMEC.

Following similar action by the U.S., the European Union agreed to ban imports of Russian oil last week, immediately halting imports on two-thirds of the petroleum. The bloc plans to end roughly 90% of purchases by year's end. More companies in Western economies are shying away from procuring Russian oil as well.

As a result, Russia's Urals crude, mostly bound for the European market, currently trades around $90 a barrel. In contrast, the Brent crude international benchmark sells about $35 higher.

Russia's ESPO crude -- mostly exported to Asia -- costs around $94 per barrel, roughly $20 below Dubai crude, which serves as Asia's benchmark. The prices differed by just a few dollars at the start of the year.

But the price of Urals crude has gained roughly 30% since a year earlier. The rise in international oil prices is one factor, and the growing imports by China and India buttress Russian oil prices amid the sanctions.

Russia's revenue from oil exports between January and April has climbed 50% on the year, the International Energy Agency said.

Russian coal benefits from a similar dynamic. Despite Western import bans, the price hovered around $148 a ton in late May, according to data from Argus Media, based on assessments at Baltic ports.

Though the value is well below the roughly $330 a ton for ICE Rotterdam coal futures in that period, Russian coal is still double the price from a year earlier. India, China and a few other importers have helped propped up the product.

For liquefied natural gas, Asian prices are in the mid-$20 range per 1 million British thermal units, but China-bound Russian LNG is "being traded at a significant discount," said Toshiyuki Makabe, managing director of commodities sales at Goldman Sachs.

Beijing's purchases of Russian LNG during May were in line with year-earlier volume, due largely to China's COVID lockdowns, but imports could rise again this summer on air conditioning demand. There are reports of Indian buyers purchasing Russian LNG on the spot market.

Meanwhile, pipeline deliveries of Russian gas to Europe have diminished only by a limited extent apart from halted supplies to Poland. These LNG sales do not appear subject to the types of discounts seen in Asia.

The U.S. and Europe are urging China and India to refrain from buying Russian oil and coal. But cheap Russian supplies present an enormous economic advantage given the soaring global energy prices.

India's Ministry of Petroleum and Natural Gas said last month that "energy purchases from Russia remain miniscule in comparison to India's total consumption." Pulling back from Russian imports "will lead to further volatility and instability, jacking up international prices," the ministry warned.

[Riaz Haq]

Richard Walker
@rbsw

THREAD
INDIA’S DILEMMA: New 3-part series

The world needs to think about India

Delhi is under severe geopolitical pressure:
- Reliant on Russia
- Threatened by China
- Wary of the West

Now Russia’s war on Ukraine is forcing Delhi to face up to some massive choices

1/

https://twitter.com/rbsw/status/1535277477337219074?s=20&t=Kn_-...

--------------

INDIA’S DILEMMA
Part 1: Russia Goes Rogue

India is under huge pressure to break with Russia over its war on Ukraine.

Russia is a key supplier of arms and defence tech. But as the war pushes it closer to China, there are growing calls for a rethink.

https://youtu.be/9ASkO-f0wFM

-------------------------

INDIA’S DILEMMA
Part 2: The China Threat

The Chinese threat to India is totally under-reported
- World’s largest territorial dispute
- China claims an entire Indian state
- 2020 clashes killed 20, still unresolved
- India fears being surrounded

3/

-----------

INDIA’S DILEMMA
Part 2: The China Threat

Watch part 2 in full ->

https://youtu.be/Iz_JdQSrzBg

4/

---------------

INDIA’S DILEMMA
Part 3: The Call of the West

West wants India to join democratic pushback against authoritarians

India needs friends

Why not get together?
- India sees West as lecturing & hypocritical
- Demands access to defence tech
- West has deep concerns over Modi govt

5/

--------------

INDIA’S DILEMMA
Part 3: The Call of the West

Watch Part 3 in full ->

https://youtu.be/OshZy7fhJKo

6/

[Riaz Haq]

Stephen Stapczynski
@SStapczynski
Europe's campaign to quit Russian fuel plunges Pakistan into darkness ����⚡

EU's energy policy is designed to punish Moscow for the war in Ukraine. But it's also wreaking havoc thousands of miles away as Pakistan grapples with a gas shortage

https://twitter.com/SStapczynski/status/1536533469807132672?s=20&am...

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Europe's campaign to quit Russian fuel is designed to punish Moscow for its invasion of Ukraine. It's also wreaking havoc thousands of miles away from the conflict, plunging Pakistan into darkness, undermining one regime and threatening the stability of the country's new leadership.
A decade ago, the world's fifth-most populous country took specific steps to insulate itself from the kinds of violent price spikes that are roiling the market today. It made a massive investment in liquified natural gas and signed long-term contracts with suppliers in Italy and Qatar. Now some of those suppliers have defaulted, though they continue to sell into the more lucrative European market, leaving Pakistan in exactly the position it tried so hard to avoid.

In order to avoid blackouts during the Eid holiday last month, the government paid nearly $100 million to procure a single LNG shipment from the spot market, a record for the cash-strapped nation. In the fiscal year ending July, the country's costs for LNG could top $5 billion, twice what they were a year ago. Even so, the government can't cushion the blow for its citizens: The International Monetary Fund is in talks to bail out the nation with a key condition that it cuts fuel and electricity subsidies.

Now parts of Pakistan are experiencing planned blackouts of more than 12 hours, limiting the effectiveness of air conditioning to offer relief during the ongoing heatwave. The previous prime minister continues to draw large crowds to rallies and protests, amplifying citizens' anger about inflation that's rising at 13.8%. Prime-time talk show hosts regularly discuss how Pakistan will get the fuel it needs, and how much it will have to pay.

Last week, the government announced a new raft of energy-saving measures. Civil servants were released from regular Saturday shifts, and the budget for security personnel was slashed 50%.

"I am acutely aware of the hardships people are facing," Prime Minister Shehbaz Sharif said in a tweet in April ahead of the Eid holiday. He ordered his government to resume purchasing expensive overseas natural gas shipments that same week. And earlier this month he warned that they don't have enough money to continue buying gas from overseas.

The supply crunch will go beyond blackouts. The government has redirected existing natural gas supplies to power plants, short-changing fertilizer makers that depend on the fuel as a feedstock. That move could threaten the next harvest, leading to even higher food costs next year. Cellphone towers are using backup generators to sustain service through the blackouts, but they too are running out of fuel.

There's little reprieve on the horizon. The cost of LNG has surged by more than 1,000% in the last two years, first on post-pandemic demand, then on the Russia invasion of Ukraine. Russia is Europe's biggest supplier of natural gas, and the threat of supply disruptions sent spot rates to a record in March.



https://www.ndtv.com/world-news/pakistans-12-hour-blackouts-linked-...

[Riaz Haq]

Meanwhile, Europe has been demanding more and more LNG. So far this year, Europe's LNG imports are up 50% from the same period last year and aren't showing any sign of slowing down. Policymakers in the European Union drafted a plan to significantly increase LNG deliveries as an alternative to Russian gas as they break ties with President Vladimir Putin's regime over the war in Ukraine. Countries like Germany and the Netherlands are fast-tracking the construction of floating import terminals, with the first ones slated to start within the next six months.

https://www.ndtv.com/world-news/pakistans-12-hour-blackouts-linked-...

"Europe is sucking LNG" from the world, said Steve Hill, executive vice president at Shell Plc, the world's top trader of the fuel. "But that means less LNG will go to developing markets."

Not long ago, Pakistan represented the future for the LNG industry. By the mid-2010s, demand for the fuel, gas cooled to 162 degrees Celsius so it can be shipped around the world via tanker, had plateaued in developed markets. But technological advancements had brought down the costs and construction times for import terminals, and new gas fields cut the prices of the fuel itself.

At the new, lower prices, poorer countries could finally consider the fuel. Suppliers set their sights on these new markets, and when Pakistan issued a tender for long-term LNG supplies, more than a dozen companies bid for its business.

In 2017, Pakistan selected Italy's Eni SpA and trading house Gunvor Group Ltd to supply the country with LNG into the next decade. At the time, the terms were considered good, and the prices were lower than a similar contract signed with Qatar the previous year.

Now, though, the two suppliers have canceled more than a dozen shipments scheduled for delivery from October 2021 through June 2022, coinciding with the surge in European gas prices.

Such defaults are almost unheard of in the LNG industry, said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis. Traders and industry insiders interviewed by Bloomberg couldn't remember the last time so many cargoes were scrapped without being directly related to a major outage at an export facility.

Eni and Gunvor have said they had to cancel because they're facing their own shortages and don't have the LNG to send to Pakistan. Typically when exporters face those kinds of challenges, they replace the deliveries by buying a shipment on the spot market, but Eni and Gunvor haven't done that.

Gunvor declined to comment for this story. Eni's supplier didn't meet their obligation, and was therefore forced to default on shipments to Pakistan, the Italian company said in an emailed statement, also noting that it did not take advantage or benefit from the cancellations and applied all contractual provisions to manage such disruptions.

Suppliers are usually loathe to cancel. It damages the business relationship, and it's often very, very expensive. Developed markets typically demand "failure to deliver" penalties of up to 100%. According to Valery Chow, an analyst at Wood Mackenzie Ltd., "it's very rare for LNG suppliers to renege on long-term contracts beyond force majeure events."

Pakistan's contracts called for a more modest 30% penalty for cancellation, most likely in exchange for lower prices overall. At this point, prices in the European spot market are high enough to more than offset those penalties. An LNG shipment for May delivery to Pakistan via a long-term contract would cost $12 per million British thermal units, according to Bloomberg calculations. For comparison, a May delivery spot cargoes to Europe were being traded at over $30. Eni and Gunvor have continued to meet their commitments to clients there.

[Riaz Haq]

So now Pakistan is back to the drawing board, in a worse negotiating position than before. Prime Minister Imran Khan was ousted in April after a fallout with Pakistan's army over a range of issues, including his management of energy supplies and the larger economy.

https://www.ndtv.com/world-news/pakistans-12-hour-blackouts-linked-...


The new prime minister, Shehbaz Sharif, has ordered the state-owned importer to procure the fuel at any cost to halt the crippling blackouts. It's also trying to negotiate new long-term LNG purchase agreements, though the terms will certainly be worse than they were six years ago. The government "will go for the most favorable deal," the Ministry of Energy said in a statement to Bloomberg News.

The expense is creating its own knock-on effects. The country is now "at high risk of default," the Institute for Energy Economics and Financial Analysis said in a note published last month. Moody's Investors Service downgraded its outlook on Pakistan to negative from stable, citing financial concerns that includes a delay in an IMF bailout.

Pakistan's reliance on LNG and its suppliers' willingness to default has worsened the energy crisis in the country. And Pakistan isn't alone. Emerging nations around the world are struggling to meet the needs of their citizens within the constraints of their budgets.

It's also driven them to buy energy from Russia, dampening the effects of Europe's efforts to cut them off.

In the face of financial crisis and massive oil shortages, Sri Lanka has turned to Russia to procure fuel. Pakistan is also exploring long-term contracts with Russian LNG suppliers. India has already boosted purchases from Russia, a trend that may accelerate. In response to the blistering summer heat, the government has ordered power plants to buy fuel from overseas.

Pakistan's woes also bode poorly for other cash-strapped importers, including Bangladesh and Myanmar. The state-owned utility in Bangladesh recently procured the nation's most expensive LNG shipments from the spot market to keep the grids running and industries stocked, while Myanmar has halted imports for the last year due to the run-up in prices.

Europe's massive shift may prompt other countries, like India and Ghana, to rethink long-held plans to increase dependence on the super-chilled fuel. Governments would instead double down on dirtier-burning coal or oil, frustrating efforts to reach ambitious pollution-reduction targets this decade.

In a recent note, Fereidun Fesharaki, chairman of industry consultant FGE, sharply criticized European energy policies for creating "higher prices, economic scarcity and economic misery" around the world. "It is ok for Europe to decide what they want within their borders," he wrote. "But it is unfair and unreasonable to export the mess abroad, especially to the developing world."

[Riaz Haq]

India asked Washington not to bring up China’s border transgressions: Former US ambassador
Kenneth Juster made the statement on a Times Now show when asked why the United States had not made any statement about Beijing’s aggression.

https://scroll.in/latest/1018580/india-asked-washington-not-to-ment...


India and China have been locked in a border standoff since troops of both countries clashed in eastern Ladakh along the Line of Actual Control in June 2020. Twenty Indian soldiers were killed in the hand-to-hand combat. While China had acknowledged casualties early, it did not disclose details till February 2021, when it said four of its soldiers had died.

After several rounds of talks, India and China had last year disengaged from Pangong Tso Lake in February and from Gogra, eastern Ladakh, in August.

Juster, who was the envoy to India between 2017 and 2021, had said in January 2021 that Washington closely coordinated with Delhi amid its standoff with Beijing, but left it to India to provide details of the cooperation.
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Former United States Ambassador to India Kenneth Juster has said that Delhi did not want Washington to mention China’s border aggression in its statements.

“The restraint in mentioning China in any US-India communication or any Quad communication comes from India which is very concerned about not poking China in the eye,” Juster said on a Times Now show.

The statement came in response to news anchor and Times Now Editor-in-Chief Rahul Shivshankar’s queries on whether the US had made any statements about Beijing’s aggression.

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During the TV show, defence analyst Derek Grossman claimed that Moscow was not a “friend” of India, saying that Russian President Vladimir Putin met his Chinese counterpart Xi Jinping at the Beijing Olympics. Grossman told the news anchor that Putin and Xi had then said that their friendship had “no limits”.

He claimed that India’s strategy to leverage Russia against China did not have any effects. “In fact, Russia-China relations have gotten only stronger.”

To this, Shivshankar said that before passing any judgement on India and Russia’s relationship, he must ask if US President Joe Biden had condemned China’s aggression at the borders along the Line of Actual Control or mentioned Beijing in a joint statement with Prime Minister Narendra Modi.

Grossman said: “To my understanding, the US has asked India if it wanted us to do something on the LAC but India said no – that it was something that India can handle on its own.”

Juster then backed Grossman’s contention.

[Riaz Haq]

In #Russia’s War On #Ukraine, #China and #India Emerge as Financiers. Their purchases of Russian crude are undermining the #West’s efforts to isolate the #Kremlin and upending the global #oil markets. #energy #gas #LNG #Modi #BJP https://www.nytimes.com/2022/06/24/business/russia-oil-china-india-...


“They’ve squeezed every other source of oil we have and then say, OK, guys, you must not go into the market and get the best deal for your people,” Mr. Jaishankar said. “I don’t think that’s a very fair approach.”


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As Russia tries to break the stranglehold of sanctions, China and India are emerging as Moscow’s pivotal financiers by purchasing large amounts of Russian crude, putting themselves in the middle of the messy war with Ukraine and a geopolitical standoff with the West.

It’s a complex calculation for China, India — and the global economy.

Buying cheap oil from Russia offers economic and political advantages. China can diversify its oil supplies for national security reasons, while India can make billions exporting refined products like gasoline and diesel.

But undercutting European and American efforts to isolate the Kremlin risks serious diplomatic fallout that neither country wants. China has avoided overtly supporting Russia’s war in public statements, and India has portrayed itself as neutral.

The two countries, with the demand from their enormous domestic markets and the supplies from their vast refineries, are also central in determining the direction of oil prices. Their purchases of Russian crude in recent months have helped ease the pressure.

Their ultimate appetite for Russian oil will either shake or support the global economy, another complicating factor in the West’s capacity to stay united through a war of attrition in Ukraine. So far, the West has remained steadfast in its commitment to Ukraine, but a long period of high fuel prices and potential shortages in Europe could become politically unpalatable.


“One of the consequences of this conflict is a fundamental realignment of the global energy system, trading relationships and geopolitical alignments, with China and India more closely aligned with Russia,” said Jason Bordoff, who is director of Columbia University’s Center on Global Energy Policy and was an adviser to President Barack Obama.

Russia’s biggest export, oil is the currency of war, funding the bullets and rockets deployed on the battlefield in Ukraine. The West is trying to cut off the financial spigot, in part by weaning Europe, Russia’s biggest market, off its energy dependence through sanctions.

Four months into the war, Russian crude oil exports are down only slightly, as sales to China and India have largely filled the gap left by Europe. India and China bought roughly 2.4 million barrels of Russian crude a day in May, half of Russia’s exports. At least some is being refined into diesel and other fuels, and exported around the world, including to countries that oppose the invasion.

China and India have been buying at a 30 percent discount to the global benchmark price, a boon to both economies in a world buffeted by rising inflation. Despite the discounts, Russia’s oil revenues are growing, since prices have climbed to more than $100 a barrel.

The shift is just beginning, and the amounts of oil involved are still relatively small. The real test of China’s and India’s willingness to buy Russian oil will come when sanctions take full effect.