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 deal, if it goes through, will signal India keeping its doors open to trade with Russia, an old ally. A discount on Russian crude will also help lower the cost for India, although the amount being discussed currently is not very large.
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.
On Monday, oil minister Hardeep Puri told the Rajya Sabha that India was looking into a Russian offer of discounted oil made by his counterpart during their telecon last week.
The payment mechanism is, however, unclear at the moment as the government is yet to work it out. It has been considering a rupee-rouble arrangement and routed through Indian banks that do not have business in the West and Russian banks with branches in India. A final decision on the issue is expected over the next few days with other options also on the table, sources told TOI.
India depends on imports to meet 85% of its oil need. At 3.6 million tonne, Russian crude accounted for 2% of 176 million tonnes imported by India between April 2021 and January 2022.
This is because of the difficulty in shipping. Urals and Sokol are the two main crudes exported by Russia. Urals is shipped from the Black Sea port of Novorossiysk. This is a long and windy route involving multiple trans-shipments, making shipping costs prohibitive. The Ukraine conflict has jacked up the insurance and war risk premiums.