Russia Offers India ‘Discounted’ Oil In Bid To Shore Up Sanctions-Hit Economy
Biden’s spox Jen Psaki worries: Buying cheap Russian oil could put India on the “wrong side of the history.”
As Russia faces mounting U.S. and Western sanctions over its invasion of Ukraine, India appears to be stepping up to bail out its Cold War ally.
New Delhi plans to purchase Russian crude oil and other commodities at ‘discounted rates,’ a move that could help Moscow shield its economy from the effect of international sanctions, news reports say.
“India may take up a Russian offer to buy crude oil and other commodities at a discount,” Reuters reported this week. On Wednesday, the Indian newspaper Times of India confirmed that New Delhi was close to “clinching” a colossal oil deal with Moscow.
What does President Joe Biden plan to do about a significant economy rendering his much-publicized sanctions useless? Nothing actually.
The Biden White House appears cool with Indians buying cheap Russian oil but worries that the lucrative deal could put New Delhi on the “wrong side of the history.”
“I don’t believe this would be violating that, but also think about where you want to stand,” White House press secretary Jen Psaki blurted out on Tuesday. “When the history books are written at this moment in time, support for Russia – the Russian leadership – is support for an invasion that obviously is having a devastating impact.”
India is the world’s third-largest oil consumer, after the U.S. and China. Currently, India gets only 2 percent of its oil supplies from Russia. But this may be about to change.
New Delhi-based newspaper The Times of India reported the Russian-Indian deal in the pipeline:
India is close to clinching a deal with Russia for buying 3.5 million barrels of its crude at “deep discounts”, people aware of the development told [The Times of India].
The broad contours of the deal indicate Russia will take care of shipping and insurance for delivering the crude to India. This will overcome a major hurdle for Indian refiners in buying Russian crude. (…)
The quantity, which is close to a day’s consumption of 4.5 million barrels by India, will be delivered over a few months, sources said without identifying the type of crude to be imported or ports of loading.
India Plans Setting Up “Alternative Payment System” To Bypass Biden’s Russia Sanctions
President Biden’s efforts to put an early end to the Russian offensive in Ukraine by placing ‘crippling’ sanctions won’t help if major economies like China and India decide to bypass them.
According to Indian media reports, New Delhi is establishing an alternative payments system to bust U.S. sanctions. This financial mechanism could shield Indian banks and corporations from secondary U.S. sanctions trading with Russia.
Indian newspaper The Hindustan Times reported the details of the payment mechanism:
India is stepping closer to setting up an alternative payments system to maintain its trade with Russia, identifying a potential bank, as a top panel examining the issue recommended prioritising edible oil and fertiliser imports as well as payments owed to India, an official aware of the development has said.
The top interministerial panel has been tasked with scrutinizing the impact of a barrage of economic sanctions imposed by the West on Russia on India’s economy. It is led by economic affairs secretary Ajay Seth and includes the ministries of food and consumer affairs, fertilizers, commerce, external affairs and petroleum.
China has already declared that it won’t recognize any of the U.S. sanctions imposed in the wake of the Ukrainian invasion. “China won’t join such sanctions” and “will continue to maintain normal economic, trade and financial exchanges with” Russia, the top Chinese banking regulator announced last Wednesday.
It is also worth noting that President Biden has also lost his credibility in this matter. On Tuesday, the White House gave “written guarantees” allowing Russia to use the nuclear deal framework to trade with Iran — thereby bypassing the U.S. and international sanctions.
Oil, Defense: India’s Fatal Dependence on Russia
India is already heavily reliant on Russia for its military procurement. According to estimates, 60 percent of Indian military equipment is of Russian origin, making New Delhi dependent on Moscow for spare parts and upgrades.
On Monday, Reuters reported the extent of India’s dependence on Russian military supplies:
Indian officials said they could not suddenly replace Russia with other suppliers, particularly in the defence sector.
India’s dependence on Russia for its military hardware still runs as high as 60%, despite a significant reduction over the last decade.
U.S. officials have declined to say if India would be sanctioned should Russia send S-400 missile systems as part of a $5.5 billion deal signed in 2018 for five of them.
Initial supplies of the system started late last year despite a U.S. law aimed at deterring countries from buying Russian military hardware.
India’s growing dependence on Russia for oil and energy calls into question India’s place as a key U.S. ally in the Indo-Pacific. In 2017, the Trump administration revived the Quad strategic alliance. India is part of this U.S.-led four-nation coalition seen as a counterweight to China’s growing military clout in the region.
“India firmly on Putin’s side despite international pressure”
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Comments
Can you say BRICS? We are so screwed. I hope everyobody’s PDS is worth the pain that is about to come.
“,India appears to be stepping up to bail out its Cold War ally.”
India was anon-aligned nation during the Cold War.
Non-aligned on paper, yes. But see India’s voting record at the UN during the cold war, and it’s military cooperation with the soviet union
Also see who the Indians bought the majority of their military aircraft, tanks, armored vehicles, artillery, SAMs, and ships/submarines from.
Also see where the Indians send their college graduates to get jobs. And the rest stay home and answer the phone.
However, india is not a friend to China but India will do what India will do to get discounted oil. Hell, I don’t even blame them….it’s a boon for their economy.
Unless Biden tries to strong arm them into refusing (which he won’t do…see Iran deal), they are going to make out like bandits.
Bingo Vijeta.
Any notion that India was not a Soviet ally is nonsense.
Lloyds has declared much of the black sea a war zone. That means that all indemnity policies are null and void. Even if a storm sinks a ship or it runs aground, they are not covered.
There is no boycott of Russian oil. There are just no ship owners and captains willing to take the risk. The cost of sending a tanker into a warzone is 50 TIMES the regular cost. So, the Russians must offer greatly discounted prices to offset the increase in transport costs.
India has always played whatever side seemed to offer India an advantage. From that stand point, this seems like a pretty good deal for them.
Discount?
I am inclined to think the mainstream media narrative that Russia is losing the war is just propaganda, but stories about discounted material offered to India tells me “Sanctions are working”. Nobody just throws their money away like this.
The break even point on Russian oil (Ural Oil) is about $45. Even at a discount and with Russia picking up the tab for insurance and delivery they still make money. Shell bought last week at a $28 dollar discount when Brent Oil was at $115. The Russians will make less under these terms but will still make a profit. In addition they are buying goodwill from India.
Longer term setting up an alternate settlement currency to the USD is a very smart strategic move by India and China. They were definitely paying attention when the West imposed sanctions and wondering why they should use USD as part of their foreign currency reserves if the West will in essence make those dollar reserves worthless at one stroke.
That is a likely much more accurate view than what I said, It makes sense that China and India won’t stand by as the West flexes power.
What currency will they be paying for the oil in? Rubles are in the toilet so Yuan?
It’s higher then it was in February
https://www.google.com/finance/quote/USD-RUB?window=1M
The Indian Rupee most likely as they already have a history of doing so when India purchases grain from Russia in past days of famine. President Johnson pushed the Indian govt pretty hard in the 1960’s during famine in India creating a good deal of ill will.
DJT was able to create a personal relationship with Modi and work off some of the lingering animosity because he treated India with respect. I suspect that the crew in the Biden admin is as arrogant and condescending in private negotiations as Psaki is in public. It always pays to be polite.
The U.S.-India trade dwarfs the Russia-India trade: roughly $115 billion U.S.-India vs. about $10 billion between Russia-India. Interestingly enough, China-India was $125 billion last year. India’s trade with Russia and with China has grown MUCH faster than India-U.S. trade, which peaked at $145 billion in 2019.
The Xiden administration has tried to continue Trump’s coziness with Modhi, but there are problems. One is that the Lyndon Johnson administration earned lasting bitterness with India for heavy-handedness, a major factor in India’s “non-aligned” declaration back then, and its weapons imports from Russia, which continue to this day. Trump’s efforts with Modhi were aimed at patching all that up, and were somewhat successful, the idea being to establish India as a counterweight to China.
Now Xiden wants to sanction India and China for trading with Russia. Keep this up, and who’ll be left?
There is another overriding problem – Biden is a weak, untrustworthy, gullible, inter-stellar class imbecile with a State Dept and Sec State who mirrors those qualities.
Did I mention how inherently and obviously dishonest he is?
Gold? Platinum? Palladium? Rhodium?
All Biden would have to do now is reverse all of his anti-fossil fuel actions, driving the price down, and watch Russia “twist slowly in the wind” with discounts to India that would probably put Russia’s net proceeds below the cost of production.
Biden has just proven he can’t even make a good showing at “let’s make a deal,” you expect him to play poker?
Rhetorical Question: Would India EVER think of doing something like this if Trump was president?
As for how would the currency transact? This would result in Russia, China, India and the other OPEC nations transacting in a new currency, likely Chinese. Remember that the Chinese could back such new currency transactions with its investment in trillions of American dollars which it holds.
FJB
Russia-India oil trade has been in dollars, but now they’re talking about having India pay in rupees. The issue will be the exchange rate. Normally, to bypass the dollar, India would buy rubles with its rupees and pay Russia in rubles, but given what’s just happened that won’t fly. So the question would be how to set the exchange rate.
Simple answer is no. At the onset of covid, India imposed export ban on hydroxychloroquine. It just took one phone call from Trump to scrap the ban.
Right again.
Clearly the answer is “No”.
The question would be the exchange rate. If Russia takes rupees for oil, they’ll want to be sure that those rupees are good for India’s exports to Russia (pharmaceuticals, machinery, coffee & spices, electronics, clothing, iron and steel, vehicles and parts) at stable prices.
By the way, the London Metals Exchange made headlines by halting sales gold from Russian refiners. My semi-retired neighbor is well-connected in the metals world, and tells me that there’s much less than meets the eye to this LME boycott.
For starters, it doesn’t affect the Russian gold already at the LME. Those contracts will still be honored. Only new supplies are affected. Secondly, he said that gold isn’t where it’s at, but rather other metals, the memorable one being palladium, which is used in EV batteries and American stealth aircraft, among other things. The “sanctions” do not apply to palladium and some other metals (I don’t recall the others.)
The nightmare scenario for the USD would be the establishment of a functional alternative for international trade. The Russians replaced roughly half the USD reserves they held with gold since 2014. If say China, India, Russia start the show to establish just the mechanics of a working alternative then some other Nations may fall in line. Especially given the importance of the Chinese investment to the countries China is already effectively bribing with it’s China Belt and Road initiative.
Is there anything the US could have done to support India enough so that they would not have sought a deal with Russia?
with Biden as pResident?
One phone call from any normal US president could fix this in one minute. India cannot afford to piss off it’s best mostly one way trade partner.
The biden maladministration doesn’t really care about punishing putin/russia. The whole thing is about something else.