India Is Expected To Only Slowly Reduce Its Import Of Russian Oil
The US might be disappointed, but India’s oil imports have always been driven by market conditions, and neither American nor Venezuelan oil is likely to replace Russian oil at scale anytime soon.
The most scandalous part of the Indo-US trade deal was Trump’s claim that “[Modi] agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela.” Modi confirmed that a deal had indeed been reached, but he didn’t confirm the details, while his Trade Minister only reaffirmed India’s long-standing policy that it’ll continue diversifying its suppliers. Its large-scale import of Russian oil was always driven by market conditions, however, never ideology.
The basis for the US’ now-rescinded punitive tariffs of 25%, which was that these purchases fuel Russia’s war machine, was therefore misleading since that was never India’s intent. Nevertheless, the US obviously wants India to reduce India’s import of Russian oil in order to deprive the Kremlin of foreign budgetary revenue that helps stabilize the ruble and fund the special operation, ergo Trump’s claim. That’s easier said than done, assuming of course that India agreed to this demand, for several reasons.
Bloomberg reported that “Daily flows were still around 1.2 million barrels in January, according to data from Kpler. Top executives from India’s state and private refiners previously said that they expect these volumes to drop below 1 million barrels a day — a level that was seen as achievable for India and acceptable to the US.” Accordingly, while the potentially reduced 200,000 barrels of oil a day from Russia could hypothetically be replaced by the US and/or Venezuela, they’d struggle to replace the whole total.
The Wall Street Journal reported that “It takes longer to ferry oil from the U.S. to India than from Russia to India. Currently, transit time from the U.S. Gulf Coast to India is 54 days. From Russia, it is 36 days, according to Vortexa. Buying from the U.S. is also more expensive. Refineries in India would need to pay an extra $7 a barrel…Refineries in India are more used to refining heavy, sour crudes, which are the type of oil in Russia and in Venezuela, but not the light, sweet type in the U.S.”
DW correspondingly reported that “deliveries (from Venezuela) could be impacted by lingering sanctions as well as similar logistical hurdles and increased costs from moving oil from the other side of the world. With Venezuela’s oil output still hovering around 900,000 bpd — a fraction of the 3 to 4 million barrels it produced in the early 2000s — it will take years, stable politics and huge investments to ramp up supplies to satisfy India’s demand” keeping in mind that consumption is expected to continue growing.
The most likely scenario is therefore that India gradually replaces some of its Russian oil imports with Venezuelan ones, but the Venezuelan Ambassador to China told his hosts that the oil price will now be dictated by market conditions and Trump welcomed Chinese investment in the Venezuelan oil industry. India will thus have to compete with China for Venezuelan oil, and the price might soon become higher than Russia’s oil, so Venezuelan oil imports might not replace Russian ones as quickly as the US expects.
The result is that India’s import of Russian oil will likely only slowly decline, the trend of which was confirmed by its Oil Minister in late January (arguably in response to the US’ now-rescinded punitive 25% tariffs), which will prevent any shocks to both the Indian and Russian economies. The US might be disappointed, but just like with India’s import of Russian oil, its import of others’ is also driven by market conditions, not ideology, and business is business no matter how it makes either of them feel.
India might "slowly" decouple however, depending on how long the war drags on, it might be "death by slow bleed" for Russia. Not to mention, BRICS is over.
«India’s oil imports have always been driven by market conditions»
As in the previous comments the $61.6 billions RF trade surplus with India is similar to the COMECON arrangements of the USSR: the RSFSR sent valuable oil, gas, materials, manufactures to Ukraine, Cuba, the stans, Poland, Bulgaria, etc. and Cuba etc. paid in "barter" with sugarcane and low value commodities and shoddy products; pretty much only the DDR, Czechslovakia and Hungary paid for their very-low-price imports from the RSFSR with stuff of some usefulness.
Apart from the plan of Chubais and Gaidar etc. to destroy the USSR to pinochetize Russia many russian politicians and economists wanted to get rid of the COMECON countries and most stans because they thought they exploited the RSFSR with the excuse of one-way-only "socialist solidarity".
One of the funniest outcomes of the clever imposition by the CIA+USAID+NED+etc. of largely expatriate-dual-citizens elites on ex-soviet and COMECON states is that they have lost all the huge subsidies the RSFSR gave them and are paying top dollars to the USA and their arab vassals instead.
Once I had a comical discussion with a typical polish blogger:
* He pointed out Poland had physically destroyed the soviet pipelines from the RF and instead built a very expensive LNG terminal for imports of LNG by ship from the USA at several time the price per BTU.
* He claimed that this was worth it as it made Poland far more independent because it could no longer be blackmailed with a cut of supplies from the RF.
* I pointed out that Poland would have been more independent if it had both RF pipelines and USA LNG terminal, as the USA could cut LNG supplies by simply rerouting the LNG ships to other customers which was much cheaper than shutting down a pipeline supply, and any such action would destroy the polish economy.
* He paused for a while and then wrote that he had never thought about that. :-)
I was therefore very amused to read recently that the native polish political class seems to have realized the problem and are trying to fix it:
https://www.zerohedge.com/energy/polish-president-pushes-aggressive-move-nuclear-bypassing-lng-amidst-geopolitical-turmoils
«One source close to President Nawrocki also told Business Insider that he hopes to avoid natural gas altogether. “The president’s goal is for us not to make a hasty transition by replacing coal with gas, but to immediately switch from coal to nuclear power. For the head of state, stability is paramount, as it is not just an economic issue but also a component of national security.” Wojciech Dąbrowski, former president of the Polish Energy Group under PiS, pointed to the risks of gas reliance. “Some point to gas, but it’s a fuel highly susceptible to various geopolitical turmoils. This must not be forgotten, as we don’t have sufficient gas resources of our own and must import about 80 percent of it. Therefore, gas can only be a useful supplement.”»
Hahahahaha! "gas, but it’s a fuel highly susceptible to various geopolitical turmoils". Too funny to read after their spending a fortune to become totally dependent on USA LNG sales. If polish voters and the other eastern europeans had any common sense they would have tarred and feathered the expatriate-dual-citizen politicians "sponsored" by the CIA+USAID+NED+etc. and chosen instead to be a fully neutral buffer between NATO and the RF like Austria or Finland under Kekkonen or to be partially vassals of the RF (which is much weaker as a suzerain than the USA) and get benefits from both sides.
But again the USA governments "deep state" is rich, powerful, run by very clever and patient and ruthless operatives, and offers a very good deal to the upper-middle-class and the upper-class of vassals (entirely at the expense of the lower-middle-class, the working-class and the under-class) and it is difficult to avoid vassalization to it.