The EU is set to propose a phased ban on Russian oil imports, after already banning coal
The EU is set to propose a phased ban on Russian oil imports, after already banning coal AFP / Tobias SCHWARZ

As the West is trying to make it difficult for Russia to sell its oil, nations like India and China have increased their purchase from Russia sighting their increasing energy needs. India's demand for cheaper oil from Russia, which China is already doing, is more of an economic calculation than political opportunism.

While the global benchmark Brent is currently trading near $108 a barrel, India wants Russian cargoes at less than $70 a barrel on a delivered basis.

Although the EU is still the major buyer of oil from Russia, it claims to be preparing to reduce its dependency on Russian oil. In this scenario, the Asian superpower, which imports more than 85 percent of its oil, will be among the few remaining buyers of oil from Russia.

After the U.S.-led allies showed their backs to Russia and its commodities, New Delhi is risking hurdles, such as securing finance and insurance for purchases, and transportation troubles to procure oil from Russia.

In an attempt to isolate Russia, the U.S., EU and NATO have slapped sweeping sanctions on Russia and have removed the 11th largest economy from SWIFT, the Brussels-based global payment platform.

In its toughest measures yet, to teach Russia a lesson for its invasion of Ukraine, EU chief Ursula von der Leyen May 4 put forth a proposal before the European parliament to fully phase out dependency on Russian oil, crude and refined. Oil prices rose by more than 4 percent on the fresh announcement by the EU, which currently gets 40 percent of its oil from Moscow.

Besides the proposed import ban, the EU is putting pressure on insurers to make it difficult for Russia to ship its oil anywhere in the world. As part of it, the 27-member bloc is mulling banning European vessels and companies from providing services-including insurance.

This is going to hit Russia and its oil buyers, like India, hard as 95 percent of the world's oil tanker insurance is arranged through International Group of P&I Clubs, a London-based insurance firm, which is duty-bound to comply with the EU norms. The proposed move will force India to look for alternatives for risks, including oil spills and mishaps at sea that often run into multi-billion-dollar claims.

In fact, using insurance as a means, the U.S. and EU had successfully limited Iran's oil exports after the West Asian nation faced the U.S.-led sanctions.

In April-end, India's Oil and Natural Gas Corp faced troubles shipping 700,000 barrels of crude from Russia because insurance firms were sulking to back it up.

India defied western diktats after the Russian invasion of Ukraine and went for a shopping spree to purchase oil and even hinted at a rupee-ruble payment mechanism.

Russia is already offering India its oil at a discounted price. Quoting India's trade ministry data, Bloomberg said that India imported more than 40 million barrels of Russian crude since the invasion of Ukraine in late February, which is 20 percent more than for the whole of 2021.

India and China are the few Asian nations still buying oil from Russia. However, India's main sources of oil are the U.S. and the Gulf states.

China, Moscow's neighbor and the largest importer of the commodity in the world, has already hiked energy shipments from Russia and their energy trade jumped nearly 30 percent in the first three months of this year compared with a year earlier.

That increase "fully demonstrates the great resilience and internal dynamism of cooperation between the two countries," Chinese deputy foreign minister Le Yucheng said in a statement last month.

With the logistics like tanker availability, bank guarantees, and insurance for shipping oil from Russia's Black Sea and Baltic ports set to become too scarce, Russia will be left with little choice at its disposal and may opt for compensating for the lost barrels that are no longer set to go to the EU.

From 524 million tonnes in 2021, Russian oil output may also decline between 433.8 million and 475.3 million tonnes in 2022.

It is possible that Russia may go out of its way to please its remaining buyers, including India, the world's third-largest primary fuel consumer with around 5 million barrels daily, with more sops because it is desperate for money.

If Russia agrees to such a hefty discount to sell oil to India, New Delhi is expected to import as much as 15 million barrels this month, which would be equivalent to nearly 10 percent of its oil imports.

However, the cost will be still high for New Delhi which would be risking the ire of western nations.