Thread by @raghavwadhwa

🛢️ Russia Gives Cheap Oil. The U.S. Gives Pressure. What Should India Choose?

🛢️India imports 36% oil from Russia, but if India reduces Russian oil due to global pressure, what happens to:

✅ Our FX reserves?
✅ Import bill & inflation?
✅ Rupee stability?
✅ U.S. vs Russia pricing power?

Let’s break it down in detail… 👇

India is the world’s 3rd largest oil consumer and 2nd largest importer of crude. Because domestic production covers only 15% of its needs, India is heavily dependent on global suppliers.

1️⃣ HOW MUCH CRUDE OIL DOES INDIA IMPORT?
🔹FY 2024-25 average: ~4.9 million barrels per day (mbpd)
🔹Year-on-year growth: +5%
Crude Oil forms ~25% of India’s total import bill

2️⃣ COUNTRY-WISE BREAKDOWN OF INDIA’S CRUDE IMPORTS

📌Russia has been the 1 supplier for 3 consecutive years

3️⃣ WHY DID INDIA SHIFT TOWARD RUSSIA?

✅After the Russia-Ukraine war, Western countries banned or capped Russian oil.

Russia suddenly needed new buyers → India became the perfect customer.

🔹Typical Brent price: $85–90 per barrel
🔹Russian Urals price: $70–78 per barrel

🔹India saved $7–10 per barrel at peak times.
🔹Even with higher shipping, net savings = $2–5 per barrel. Annual savings ≈ $2–3 billion.

📌This alone made Russia the cheapest large-scale supplier in the world.

✅Flexible Payment Methods Saved India’s Dollars

Due to sanctions, Russia accepted:
🔹Indian Rupees
🔹UAE Dirhams
🔹Chinese Yuan
🔹Barter/credit terms

✅ Perfect Crude Quality for Indian Refineries
Russian Urals crude = medium sour, similar to the Middle East grade.
Indian refineries are already designed to handle this type.

Benefits:
🔹No new infrastructure needed
🔹High refinery efficiency
🔹Higher refining margins (profit per barrel)

📌In some cases, Russian crude actually gave better refinery profits than Gulf crude.

✅Geo-Political Neutrality = FREEDOM TO BUY
India maintained a neutral stance in the Russia-Ukraine conflict.

Unlike the West, India did NOT sanction Russia.
Russia did not threaten India.

India did not face retaliation from anyone.
So India had:
🔹 No legal barrier
🔹No security concern
🔹Full diplomatic support from Moscow

✅Reducing Dependence on OPEC Monopoly
Earlier, OPEC supplied 80–85% of India’s crude.

This was dangerous because OPEC:
❌ Cuts production to increase global prices
❌ Controls supply
❌ Dictates terms

By buying from Russia:
✅ OPEC share fell below 50% (first time in history)
✅ India increased competition among suppliers
✅ Negotiated better terms from Gulf countries

✅Buy Cheap ➡️ Refine ➡️ Export High

India is one of the world’s largest refiners and fuel exporters.

Here’s the smart hack India used:
1️⃣ Buy discounted Russian crude
2️⃣ Refine it into petrol, diesel, and jet fuel
3️⃣ Export to Europe at full international price!

📌Europe bans Russian crude…

But Europe buys Indian petroleum products made from Russian crude! India became a refining & arbitrage powerhouse.

3⃣ U.S. vs RUSSIA: WHO IS BETTER FOR INDIA?

4️⃣ WHAT IF INDIA REDUCES IMPORTS FROM RUSSIA?
🔹The import bill increases sharply because Russian crude is the cheapest in India’s basket.
🔹India will pay $2–5 more per barrel from alternative suppliers like Saudi Arabia, Iraq, US.
🔹Higher crude cost directly worsens India’s trade deficit and current account deficit.

🔹The rupee comes under pressure due to higher dollar outflow for oil payments.
🔹Fuel prices in India may rise, or the government may cut taxes; both have economic costs.
🔹Inflation increases across the economy (transport, manufacturing).
🔹Refinery profit margins fall because Russian crude gives higher refining spreads.

🔹India’s fuel export profits shrink, especially exports to Europe.
🔹OPEC regains dominance over India and can raise prices more easily.
🔹Dependency on the Middle East increases, reducing energy security.
🔹Shifting to U.S. oil improves relations but increases economic burden.

5⃣WILL INDIA COMPLETELY STOP BUYING RUSSIAN OIL?
Highly unlikely.

India has clearly stated:
👉 “We will buy from wherever we get the best price.”
What India will do:
✅ Reduce dependence gradually, not abruptly
✅ Increase buying from the US, Iraq, Saudi Arabia, UAE, and Africa.

✅ Negotiate long-term contracts at stable prices ✅ Build Strategic Petroleum Reserves (SPR)
✅ Accelerate renewable energy & ethanol blending

⚡️Disclaimer: The above data should not be considered as a Buy or Sell recommendation. The analysis has been done for educational and learning purpose only.

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