India is not facing a serious diplomatic challenge so far in sourcing oil from Russia despite the price cap imposed by the G7 and its allies on shipped Russian oil as the discount offered by Moscow is keeping prices per barrel below the cap.

But the government is trying to weigh its options in case of a rise in international oil prices, rise resulting in the price of Russian oil breaching the cap, or if the EU decides on imposing blanket secondary sanctions on countries purchasing shipped oil from the country, a source tracking the matter told businessline.

Affecting all

“The developed nations cannot block all options for us. Attempts to completely cut off Russia from oil trade while continuing to impose restrictions on Iran and Venezuela will make global oil prices shoot up and it will adversely affect us all,” the source said.

The G7 and EU countries, on December 5, imposed a $60 per barrel price cap on Russian oil in response to Moscow’s attack on Ukraine. The cap prohibits EU operators from providing insurance cover for crude shipped from Russia to third countries if it is sold below $60 per barrel. This is in addition to the EU’s own oil embargo banning the import of shipped crude from Russia.

India is buying Russian oil at around $53-56 per barrel against the price cap, so there is no problem at the moment, the source said.

The EU has been expressing its unhappiness with India’s increased purchase of Russian crude for some time and has been trying to convince it to put a check on it.

Increasing imports

From a market share of less than 1 per cent in India’s import basket in January 2022, before Russia attacked Ukraine, Moscow’s share of imports in October rose to 4.24 million tonnes, or nearly 1 million barrels per day, taking a 21 per cent share, according to an S&P report. It was comparable to that of Iraq and higher than Saudi Arabia’s around 15 per cent, it said.

So far, India has been holding its ground on the decision to buy Russian crude on the ground that its decision was based on what was most economical and in the best interest of its people.

“What happens in the future for India would depend on several factors such as the situation in Ukraine and the extent to which developed nations cut themselves off further from Russian oil and gas,” the source said.