How India is helping West meet its energy demand by importing Russian oil
Context- The European Union’s (EU) foreign and security policy chief Josep Borrell in an interview with Financial Times recently said the EU should crack down on India reselling Russian oil into Europe as refined fuel, including diesel.
(Credits- Times of India)
What is the issue?
- “If diesel or gasoline is entering Europe… coming from India and being produced with Russian oil, that is certainly a circumvention of sanctions, and member states have to take measures,” said European Union’s (EU) foreign and security policy chief Josep Borrell.
- Since Russia invaded Ukraine in February 2022, India has emerged as one of the biggest buyers of Russian oil. However, India hasn’t yet faced a significant blowback for getting Russian oil as the country is helping the West meet its energy demands. The access to cheap crude oil has allowed the country’s refiners to register massive profits and export record-level refined petroleum products to Europe and the USA.
- This has angered politicians such as Borrell, who are blaming Delhi for making a profit by using cheaply bought Russian oil and, in turn, helping Moscow’s economy stay afloat.
- Meanwhile, 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.
- Responding to Borrell’s latest remarks, External Affairs Minister S Jaishankar said: “My understanding of the Council regulations is that Russian crude, if substantially transformed in a third country, is not treated as Russian anymore.”
What are the sanctions against Russian oil products?
- Soon after the Russian invasion of Ukraine, the European and Western countries started to curtail their dependency on Moscow’s energy imports in a bid to squeeze its economy.
- For instance, Germany suspended the launch of the new Nord Stream natural gas pipeline and Canada and the US banned the import of Russian crude oil.
- With the war dragging on in the following months, these nations decided to impose stricter sanctions on Russia to further dent its finances.
- On December 5, 2022, the Group of Seven Nations – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – the European Union and Australia enforced a “price cap” on Russian crude.
- “The price cap prohibits Western shippers and insurers from getting involved in trade of Russian oil if it trades above $60 per barrel”.
- As most of the oil tankers taking Russian oil are European and more than 90 per cent of the global insurance for freighters by tonnage is made available by European companies, experts 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 is India 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, especially the Western nations, who have been facing an engergy crisis ever since the Russia-Ukraine war started.
- A Bloomberg report published in February 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 — notably, the Russian oil refined in India isn’t considered to be of Russian origin.
Conclusion- India’s decision to import crude is based on its own energy needs. India’s imports also help lower prices of crude in western nations, along with ensuring that international crude oil prices remain in reasonable range. However, deft diplomacy is required to assuage concerns of western countries.
Syllabus- GS-3; Energy and Economics
Source- Indian Express