by R. Sasankan

"I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma. That key is Russian national interest."

-- Winston Churchill in a radio speech in 1939 to describe a situation involving Russia that was difficult to comprehend

If the Chinese are inscrutable, the Russians also have a long history of leaving everyone bewildered with their puzzling tactics. Global leaders despaired while trying to make sense of Stalin's moves during and after the Second World War. Vladimir Putin has proved that he is a worthy successor of Stalin in the way he masks his strategy as he makes aggressive and perilous gambits.

 The Ukraine war changed the contours of global trade and commerce perhaps for all time. For India, it threw up an opportunity to be able to tap into Russia's vast oil supplies, aided by the huge price discounts that Putin was ready to provide. The Modi government adopted a very adroit posture as the West started to slap sanctions against Russia and threatened to take similar action against nations that continued to do business with Russia: it chose to remain neutral in the conflict offering to act as a peace maker but at the same time asserting its sovereign right to protect its national interest by buying cheap crude oil from Russia.

The upshot of this strategy became evident very soon. In 2021, prior to the Russian invasion of Ukraine, India imported 4.2 million barrels per day (mmbd) of which 24% came from Iraq, 16% from Saudi Arabia, 10% from the United States, and 2% from Russia. In fact, Russia's share never exceeded 2 per cent before 2021. But after February 2022, the situation changed dramatically. By 2023, India accounted for 36% of Russian crude oil exports. In July 2024, Russian crude oil made up a record 44% of India's total oil imports. India, in fact, surpassed China and became the world's largest importer of Russian oil. This has started to tail off since then. In August this year, Russian oil accounted for only 36% of all crude imports though it rose to 38% in September.

But this is where some disturbing questions start to be asked. Why has Russian oil's share, of late, stagnated in the range of 36-38 per cent of India's oil imports? Is it because the price discount has started to shrink or is it due to Russia's inability to supply more oil as it begins to grease its war machine for a long-drawn battle? Or, could it be a deliberate policy of the Indian government to limit the share of Russian oil in the country's imports? I posed these questions to a few acknowledged energy experts. "The honest answer is that I do not know what the correct answer to your question is. However my gut feeling is that both elements are at play," said a top genuine energy expert.

I then turned to the latest statistics on oil trade and turned to BP Statistics which showed that India had imported 5.770 million barrels a day of oil in 2023. India's share in a global oil trade of 68.124 million barrels a day amounted to about 8.5% in 2023. Russian oil exports in 2023 totalled 6.736 million barrels a day -- about 9.88% of the global oil trade in 2023 relative to a share of 11.75% in 2021, that is just before the war in Ukraine. Total oil production in Russia has been almost stagnant at the pre-war level. Russia's production was 11,000 barrels a day in 2021, which rose to 11,202 barrels a day in 2022 and fell to 11,075 barrels a day in 2023. The war effort must also have raised domestic demand in Russia.

What the numbers reveal is that Russia's share of global oil trade has suffered marginally. But this is as much from sanctions as from the rise in local demand on account of the war on its extreme Western front. So, Russia really is not able to supply much more than what it is despatching to India.

At the same time, India's enthusiasm for Russian oil has also started to wear off a bit and one of the reasons for this is the shrinking price discount as well as the constraints on Russian oil supply. Opec+ has also been holding the price down. Moreover, the World Bank has predicted in its latest Commodity Markets Outlook that "global oil supply is expected to exceed demand by an average of 1.2 million barrels per day." It reckons that this will lead to a potential drop in oil prices below $60 per barrel.

I do not think there was any move from the Indian side to limit the quantity of Russian oil imports. Even with a reduced share of 36-38 per cent of India's total oil imports, Russia still remains the pre-eminent source of crude oil today.

But this begs another question: Is India becoming excessively dependent on Russian oil? And is it risky to hitch the country's energy security to a single supplier. This also flies in the face of petroleum minister Hardeep Puri's assertion that the country is diversifying its sources of supply.

The government's present policy of buying all the crude it possibly can from Russia - either due to hidden price discounts or political compulsions to help a friendly nation in an hour of crisis - cannot be a wise policy when it becomes dependent on Russia for 38-40 per cent of its crude oil requirement.