Striking a conciliatory note on India’s imports of Russian oil, U.S. Treasury department officials visiting Delhi said on April 4 that the aim of U.S. sanctions and the oil “price cap” was not to limit the purchase of Russian ‘Ural’ oil, but to limit the revenues made by the “Kremlin”.
According to the officials, who are meeting their counterparts and oil company representatives in Delhi and Mumbai on their visit between April 2 and April 5, the U.S. measures thus far, including a “second phase” of sanctions against oil shipping companies, are having some impact. However, they brushed aside questions about the rising price of Ural oil, now nearing $80 per barrel, and the narrowing of Russian discounts to Indian refiners.
“Our purpose is to limit revenue to Russia but not dictate that no trade can be done in Russian oil,” said Anna Morris, Acting Assistant Secretary for Terrorist Financing at the U.S. Treasury Department. “Once Russian oil is refined, from a technical perspective, it is no longer Russian oil. If it is refined in a country and then exported, from a sanctions perspective it belongs to that country, it is not an import from Russia,” Ms. Morris added, responding to a specific question about whether India had been ”oil laundering” Russian energy for European markets, as alleged by a European think-tank CREA report. The Ministry of Petroleum had last year called the report “misleading” and a “deceptive effort to tarnish India’s image”.
No Indian firm sanctioned
The officials, Ms. Morris and the U.S. Assistant Secretary for Economic Policy Eric Van Nostrand, also made it clear that no Indian company had thus far been sanctioned by the U.S. for oil purchases from Russia. Since 2022, a Mumbai-based Indian company has been sanctioned over purchases of Iranian oil, while a Bengaluru-based high-tech company was put on a list of firms facing U.S. and E.U. sanctions for engaging in “dual use” technology trade with Russia.
When asked about the U.S. officials’ visit, and India’s stand on the price cap, the Ministry of External Affairs (MEA) said that all oil purchases were only mandated by India’s needs. “Anything to do with energy security and oil purchases on the international market are guided by India’s energy security requirements. This is essentially a commercial venture, and we are seeking to buy oil from wherever we receive the cheapest available supplies,” MEA spokesperson Randhir Jaiswal said in a press briefing on Thursday.
India’s “independent” policy
Since the war in Ukraine began in 2022, India and China have become the major purchasers of Russian oil. In January this year, Russian President Vladimir Putin had praised India for pursuing an “independent foreign policy” despite pressure from the west to curtail trade, energy, and defence ties with Moscow.
“The largest foreign investment in India has come from Russia. $23 billion was invested by our company Rosneft for the acquisition of an oil refinery, a network of gas stations, a port, and so on,” President Putin had said, referring to the installations at Vadinar in Gujarat.
Sanctions’ impact
Along with other G-7 countries, the U.S. had announced a “price cap” on Ural oil in December 2022, so that only those importing Russian oil at a rate below $60 per barrel could avail of shippers, insurers, and other ancillary services from companies that operate in G-7 countries. In effect, that has meant that Russian exporters have had to offer Ural oil at heavy discounts to buyers, the officials said.
In an article on the U.S. treasury website, Ms. Morris and Mr. Nostrand had also claimed success in the second phase of the price cap measures announced in October 2023, ensuring that Russian oil was offered at discounts ranging from $12 to $19 over the past year, and that export volumes “remained stable”. Other reports have pointed to Indian buyers facing problems over payments for oil in other currencies, and turning away tankers from companies like Russian shipper Sovcomflot, now under sanctions as well.
In Moscow, the Russian Foreign Ministry countered the claims, saying that Russian oil supplies to India remain at a “steadily high level”.
“No problems arise with determining means of payment for oil exported by Russia,” Maria Zakharova, the official spokeswoman for the Russian Foreign Ministry, said at a briefing on Wednesday. She added that payments in “national currencies” were being prioritised. “This makes it possible not to depend on the so-called ‘rules of the game’ imposed by the Westerners when making banking transactions,” Ms. Zakharova said, according to official media.
Decisions guided by our energy security requirements: MEA
Amid phase two of the price cap imposed on the purchase of Russian oil, the Ministry of External Affairs said that India’s decisions are guided by its energy security requirements and that is of prime consideration.
MEA spokesperson Randhir Jaiswal said that India purchases from the international market, wherever it is available at the “cheapest available rate”.
Addressing the weekly press briefing, Mr. Jaiswal said, “For us, anything to do with energy security, oil purchases, are buying in the international market. All these are guided by our energy security requirements, and it’s a commercial exercise that we do. It’s a commercial venture that we engage.”
“We buy oil from the international market, wherever it is available, at the cheapest available rate. We have to ensure our energy security and that’s of prime consideration,” he added.
