US and India Collaborate to Purchase Stranded Russian Oil, Alleviating Global Crude Market Strain
As global crude oil prices surge past $90 per barrel, the United States announced on Friday that it is partnering with India to acquire excess Russian oil barrels floating in South Asian waters, a move designed to cool escalating prices. This development follows heightened tensions in West Asia, including conflicts involving Israel and Iran, which have disrupted oil supplies and driven up costs.
US Energy Secretary Outlines Strategy to Stabilize Oil Markets
US Energy Secretary Chris Wright revealed in a media interview that significant quantities of Russian oil are currently adrift at sea. "We have reached out to our friends in India to buy stored Russian oil. That pulls oil into Indian refineries and releases pressure on other global refineries to buy oil that is not competing with Indians in the marketplace," Wright explained. He emphasized that this is one of several short-term measures the US has implemented to ensure global crude availability, while clarifying that there is no shift in US policy towards Russia.
30-Day Waiver Enables Indian Refiners to Access Russian Crude
Shortly before Wright's statement, the US issued a 30-day waiver, or "licence," permitting the delivery and sale of Russian-origin crude oil and petroleum products to India. This authorization allows Indian refiners to purchase Russian cargoes that are currently stranded at sea, providing a timely reprieve from US sanctions amid soaring prices. Although temporary, this respite is crucial for oil-import-dependent nations like India.
India acted swiftly in response, with Bloomberg reporting that over 10 million barrels of Russian crude have already been acquired, much of it potentially before the waiver was officially announced. Approximately 15 million barrels are on tankers in the Arabian Sea and Bay of Bengal, while vessels carrying another seven million barrels idle near Singapore. Additional tankers from the Mediterranean Sea and Suez Canal are also en route to the subcontinent, with all crude expected to reach Indian ports within a week.
Background: India's Shifting Oil Procurement Amid Global Conflicts
Indian refiners had reduced purchases of Russian oil after the US agreed to a framework trade deal and removed penal tariffs. However, supply shortages due to the West Asia conflict, which have pushed global prices higher, have made resuming discounted Russian crude purchases a pressing necessity. The US decision to suspend penalties for buying from Russia alleviates concerns about potential responses from the Trump administration regarding new purchases of Ural crude.
West Asia accounts for over 40% of India's oil imports, with Russia's share at nearly 20% in February, down from over 35% a few months earlier. Government officials indicated that Indian refiners might engage in spot purchases of floating Russian crude to address supply gaps, even as crude is now available at a premium due to high global prices. India's crude oil basket reached $93.41 per barrel on March 5, marking a 35% increase from February's monthly average of $69.01.
US Treasury Secretary Highlights Temporary Measure and Future Expectations
US Treasury Secretary Scott Bessent stated on social media that President Trump's energy policies have led to record-high oil and gas production. "To enable oil to keep flowing into the global market, the treasury department is issuing a temporary 30-day waiver to allow Indian refiners to purchase Russian oil," Bessent said, noting that the order applies only to Russian cargoes stranded at sea. He added that this stop-gap measure aims to reduce pressure caused by Iran's attempts to disrupt global energy supplies and expressed Washington's expectation that India will eventually increase oil purchases from the US.
India's Ongoing Reliance on Russian Crude and Market Dynamics
Indian refiners have continued to buy oil from Russia, which remained the largest supplier of crude to India in February. Data from Kpler shows crude imports from Russia were slightly over 1 million barrels per day in February, compared to 1.1 million in January and 1.2 million in December. This decline is notable given Trump's earlier claims that Indian refiners would halt Russian purchases, with the Indian government maintaining that commercial interests will guide decisions.
India's crude imports are estimated at 5.5-5.6 million barrels per day, covering nearly 90% of domestic consumption. Officials noted that only 0.2% of imports came from Russia before 2022, when the Ukraine war made Russian oil available at deep discounts. Imports from Russia peaked at nearly 2.2 million barrels per day in May 2023.
Government officials assured that India has "very comfortable" crude stocks. "We have sourced more energy from different geographies across the world than what is blocked at the Strait of Hormuz. We are open to purchasing oil from all sources," a senior official stated, highlighting India's diversified energy strategy.
