Reliance Industries will import nearly 500,000 barrels of crude oil a day from Russia’s state-owned oil producer Rosneft for 10 years under a deal that the two sides have struck ahead of President Vladimir Putin’s visit to India early next year.
It is being touted as the biggest-ever energy deal between the two countries and is roughly worth $13 billion a year at current prices.
India is the third largest importer of crude oil in the world. It became the largest importer of Russian crude after the US, other G7 nations and the European Union imposed sanctions against Russian oil exports in response to the 2022 invasion of Ukraine.
The 10-year agreement accounts for 0.5 per cent of overall global crude supply.
Supplies from Rosneft will start in January and are set to continue for 10 years with an option to extend the deal by another 10 years.
The shipments will be supplied to Reliance’s refining complex at Jamnagar in Gujarat, which is the biggest in the world. Reports indicate that Reliance and Rosneft will review pricing and volumes every year under the deal to factor in oil market dynamics.
Russian oil has become cheaper since the imposition of Western sanctions. Refiners like Reliance have been able to source Russian crude at prices that are $3 to $4 cheaper than rival grades from the Gulf.
In 2024, Reliance had a deal with Rosneft to purchase 3 million barrels of crude a month. Rosneft has also been selling crude to Reliance via intermediaries on a regular basis.
Reports say that the outgoing Biden administration is planning to impose harsher sanctions against Russia’s lucrative oil trade, just weeks before Donald Trump returns to the White House. The new measures are still being worked out. The fresh sanctions could target Russia’s shadow fleet of tankers which have shipped oil to its leading buyers.
In October 2024, India purchased $2.16 billion worth of crude from Russia, down from $2.59 billion the previous month. China led Russian crude exports at 47 per cent, followed by India at 37 per cent.
India imports about 85 per cent of its crude oil needs, driven by a rapidly growing economy and a robust refining sector. Before the Ukraine war, Russia’s share of India’s crude imports was negligible. By 2024, Russia’s share surged to 41 per cent, while imports from traditional suppliers like Iraq and Saudi Arabia declined.
A study by Icra estimated that discounted Russian oil saved India $13 billion across FY2023 and FY2024. These savings boosted profits primarily for private refiners like RIL rather than the broader economy.
Refining loophole
Indian refiners have been accused by the US and other Western nations of violating the spirit of the economic sanctions. But they have been unable to stop India. This is because of a so-called refining loophole.
A price cap of $60 per barrel was imposed on Russian oil in December 2022. Western shipping lines and the insurers were prohibited from carrying Russian seaborne crude if it was priced above that level. But countries like India and China bought Russian crude above that price and used a Russian “shadow fleet” to ship it to their refining products.
