India-Russia Relation / How much did India earn by buying oil from Russia, this report revealed

India-Russia Relation: In the last few years, India has strengthened its position in the global oil market by buying crude oil from Russia at cheap prices. Due to the economic sanctions imposed on Russia by Western countries after the Russia-Ukraine war, Russia started giving huge discounts on its oil, which India took full advantage of. However, a recent research report by brokerage firm CLSA has challenged the notion that India is saving billions of dollars from this deal. Let's take a deeper look at this topic.

Start of oil import from Russia

Strict economic sanctions were imposed on Russia after the Russia-Ukraine war began in February 2022. These sanctions forced Russia to look for new buyers for its crude oil. Russia gave a huge discount on the prices of its oil in the global market, taking advantage of which India emerged as its largest buyer. In the financial year 2024-25, India imported 36% of its total oil imports, i.e. about 18 lakh barrels per day, from Russia. This figure was less than 1% before the war. This change helped ensure affordable oil supply to India, but is it really as beneficial as it was told?

CLSA report: The reality of profit

CLSA has claimed in its report released on Thursday that the benefits to India from importing cheap oil from Russia have been exaggerated in the media. Earlier it was estimated that India is saving $ 10 to $ 25 billion annually from this deal, but CLSA says that the actual net profit is only $ 2.5 billion annually. This is just 0.06% of India's GDP, which is relatively very low.

The report said that even if the price of Russian oil comes down to $ 60 per barrel, the actual benefit to India is reduced significantly due to additional expenses like insurance, shipping, and risk premium. According to CLSA, the average discount on Russian oil in 2023-24 was $ 8.5 per barrel, which has now come down to $ 3 to $ 5 per barrel. In recent months, this discount has further narrowed to $1.5 per barrel.

Limitations and risks of discounts

The CLSA report also emphasizes that the risks and costs associated with buying Russian oil are often overlooked. Shipping costs are high in importing oil from Russia, as many Western shipping companies are avoiding business with Russia. In addition, insurance and risk premiums for Russian oil also increase the cost. All these factors together significantly reduce the benefit of discounts to India.

Impact on global oil supply

CLSA has also warned that if India stops buying Russian oil, it could have a profound impact on global oil supply. Russia is a major oil exporter in the world, and the withdrawal of a big buyer like India could push global oil prices to $90 to $100 per barrel. This could increase energy costs not only in India but all over the world, which could affect inflation and economic stability.