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Current Affairs

Discounted Russian oil

Date: 19 March 2022 Tags: World Economy

Issue

The US Senate has said that India taking up Russia’s offer of discounted crude oil would not be a violation of American sanctions.

 

Background

The US has imposed stringent economic sanctions on Russia, including a ban on import of Russian oil and gas.

 

Details

Currently, India has bought 3 million barrels of Urals crude oil at the discounted price. Discount would be up to $20-$25 per barrel on dated Brent.

 

Offer by Russia

Apart from discounts offered, Russia will also cover cost involved in shipments and also insurance of the commodity till it reaches Indian coast.

 

Benefits

  • Diversifying oil import sources will help in reducing the financial burden on the government. It may cool off inflationary pressures.

  • The move will also ensure that bilateral relations with Russia remains strong as a result of India’s trade despite international pressure.

 

Reasons for discount

  • Discount is a way by Russian oil companies to hold onto customers and increase sales amid crippling business and trade.

  • It also wants to keep its relations with friendly nations intact by offering them discounts on imported oil.

 

Signal

  • The move by India to buy Russian oil is a signal that it wants to keep its key trading partner on board despite Western sanctions.

  • India is planning to make use of this opportunity to buy cheaper commodities such as fertilizer from Russia and Belarus.

 

Oil source

  • Russia is the third largest producer of crude oil and the second largest importer of the commodity.

  • Many countries in Europe are heavily dependent on Russia for their energy needs. India currently buys only 1.3 per cent of all its oil needs from Russia.

 

India’s oil suppliers

  • Currently, Iraq is the largest crude oil supplier for India, followed by United States and Nigeria.

  • Saudi Arabia slipped to the fourth position while United Arab Emirates went down to the fifth position of suppliers.