In 2021, India imported 214 million metric tons (235.9 million tons) of crude oil, making it the third-largest importer of the product. India heavily relies on imports by tanker from Russia and the Middle East, which contrasts with the United States, the second-largest importer of crude, which receives most of its imported oil by pipeline from neighboring Canada. (Related: OIL LAUNDERING: India imports Russian oil at a discounted price, refines it and sells to the West for massive profits.)
India needs a lot of crude oil imports, as its domestic crude and condensate production is only between 30 to 40 million metric tons per year (33 to 44 million tons). Meanwhile, India's domestic oil consumption last year was 202 million metric tons (222.7 million tons). It is expected to grow this year as the country has already consumed 182 million metric tons (200.6 million tons) of oil during the first 10 months of 2022.
Following the beginning of Russia's special military operation in Ukraine and the West's concerted attempt to isolate it from global markets, India became one of the beleaguered nation's largest buyers of crude, ignoring sanctions imposed on its exports by the U.S., the European Union (EU) and their allies.
On Dec. 5, the EU will impose a ban on seaborne imports of Russian crude oil. On the same day, both the EU and the United Kingdom will prohibit their companies from providing shipping, trade finance and insurance for tankers that carry Russian oil unless the shipments are priced below a cap.
The cap level has not yet been agreed upon, but it will be set by a coalition that includes the EU and the non-EU members in the Group of Seven – Canada, Japan, the U.K. and the U.S.
China and India, along with a few other nations, have stated that they will continue to purchase Russian oil. Given how the EU and G7 are retreating from buying Russian crude, these countries are expected to see bigger discounts, especially if they increase their purchases.
But China and India could see their shipping and insurance capacity for Russian crude exhausted. Russia currently exports about 3.6 million barrels of crude oil a day by sea. To buy more oil they will have to secure deals at the capped price in order to access available services from European companies.
Unfortunately, this solution represents a potential stumbling block. Russian officials, including President Vladimir Putin, said they will refuse to sell oil to any countries that engage with companies or governments that participate in the price cap.
As a quickly expanding lower-middle-income country experiencing rapid industrialization and urbanization, India is heavily reliant on oil consumption, which is growing fast. But the country's consumers and corporations are very sensitive to both price changes and any massive disruptions to the economic cycle.
Indian consumption has been growing by around seven percent per year in the last 12 months. But signs of a slowdown were creeping in by October. If India is unable to secure some kind of deal with Russia in exchange for more crude oil, it could mean that the U.S., the EU and their allies played a significant role in the crippling of India's economic growth.
Secretary of the Treasury Janet Yellen has already bragged about how this new price cap could force Russia to undervalue its own oil exports and prevent it from contracting any kind of shipping services.
"They're going to be looking for buyers, and we think they're going to have a hard time selling all of it," she said. "Our estimation is there would be some shut-in on Dec. 5, unless they're willing to accept a price at or below the cap for buyers around the world."
"Some people feel Russia will not have trouble finding non-Western ships and services," she continued. "That's not our best guess, and I think if you read some of the more thoughtful and detailed analysis, you'll see that knowledgeable people are coming to the same conclusion we have."
Learn more about the energy situation around the world at NewEnergyReport.com.
Watch this clip from Fox News discussing how the oil trade with China and India is keeping Russian oil production at pre-special military operation levels.