The Russia-Ukraine war, which sent the world spiralling into an energy crisis, has strengthened the trade relationship between India and the US, particularly in the oil and gas sector, said a study by KPMG India and AMCHAM India earlier this month.

The US became the largest trade partner for India, with bilateral trade reaching $191 billion in FY23. Both nations are expected to collaborate intensively in sectors like defence, technology, clean energy and space, the report noted.

It points out that the Russia-Ukraine crisis and subsequent sanctions on import of Russian oil by the US strengthened the trade partnership between the two nations.

Petroleum products

“The US, historically a prominent buyer of Russian virgin gas oil, is now purchasing it from two Indian conglomerates. Consequently, the US has emerged as the biggest purchaser of refined oil products from India (as of December 2022),” it added.

For instance, the Commerce Ministry data shows that the US imported $2.3 billion worth of refined petroleum products from India in FY20, which fell to $1.15 billion during the Covid-impacted FY21. However, it again rose to $5.10 billion in FY22 and further to $6.04 billion in FY23.

In FY20, the US was the second top export destination for petroleum products from India, but its ranking declined to the fifth spot in FY21. However, the US tally rose to the fourth spot in FY22 and then to the third place in FY23.

Crude oil

Triggered by the Organization of the Petroleum Exporting Countries (OPEC)+ announcement on cutting the output of crude oil, India is looking to diversify its crude sources and is majorly focusing on limiting its reliance on Middle Eastern crude, the KPMG India and AMCHAM India study said.

“This state of affairs has largely benefited the import of crude from the US, which off-late has witnessed an uptick. Consequently, in the fourth quarter of FY22, the US became the fifth largest oil supplier to India,” it added.

India began importing crude oil from the US in the second half of the 2017 calendar year.

As per Commerce Ministry data, India imported $4.9 billion worth of crude oil from the US in FY20 making it India’s fourth top supplier. In FY21 and FY22 as well the US was the fourth top crude oil supplier with cargoes worth $5.40 billion and $11.32 billion, respectively. However, the US slipped to the fifth spot in FY23 with crude exports of $10.18 billion.

Russia’s Crude

Similarly, S&P Global Commodity Insights in a January 2023 report said even as the Russia-Ukraine war offered an opportunity to Indian refiners to bring in plentiful volumes of crude at discounted rates from Russia, it has not led to a fall in market share of the US, as India looks to bolster its energy ties with Washington.

Prior to the Russia-Ukraine conflict, more than 60 per cent of the Indian crude basket was made up of Middle Eastern crude, with the remainder made up of North American (around 14 per cent), West African (around 12 per cent) and Latin American (around 5 per cent). Russia accounted for about 2 per cent.

The share of US crude in the Indian crude basket increased from 5–6 per cent in April 2022 to around 10 per cent in November 2022. In the last quarter of 2022, the US displaced Kuwait to become the fifth-largest oil supplier to India.