As the old saying goes, “one man’s crisis is another’s opportunity.” Russia’s invasion of Ukraine and the subsequent sanctions and ruined trade relationships with the U.S. and Europe represent a tremendous crisis. But for the country’s long-term ally, India – and to an extent, China – it represents opportunity. From cheap Russian oil and coking coal to steel, India continues to benefit from its close ties to Moscow.
Russia, India, and China form a triumvirate of sorts in their part of the world. Of course, Moscow and China were natural “red” allies for decades. That said, the former USSR also developed a special relationship with China’s traditional “enemy,” socialist India. This began around the time of the latter’s independence in 1947. But even after the dissolution of the USSR, Russia and India maintained very strong political, defense, and trade connections.
Before the invasion of Ukraine, India and Russia had several defense and trade agreements under their belts. India also benefited in many ways from Russia’s expertise in nuclear energy production. However, the fallout from the war has seen India expand its economic ties with Russia in never-seen-before ways. This includes sectors like steel, coking coal, and Russian oil.
Indeed, India is now the primary consumer of Russian oil and natural gas. Moreover, the subcontinent has also sought to diversify its oil import list. Essentially, it hopes to become one of the largest importers of oil from Russia, accessing prices that can be politely dubbed “cost-effective.”
Forbidden Russian Oil Finds a Home in India
India and Russia have already signed several energy agreements, including some to develop the energy industry in the Far East of Russia. They also plan to build gas pipelines between the two countries and form a joint venture to produce liquefied natural gas in India.
Before the Ukraine invasion, India was a minor importer of Russian crude oil. But that was then, and this is now. In February 2023, top energy executives from India and Russia participated in the India Energy Week conference, where they discussed even more ways of boosting the oil and gas trade.
Analysts estimate that Russian crude oil imports to India reached a record high of 1.2 million barrels per day in December 2022. Clearly, the deep discounts on Russian crude proved too tempting for India, even with the U.S. enforcing an oil price cap. Currently, India is still purchasing large volumes of discounted Russian crude. It has even started adding Russia’s Arctic crude oil varieties to this mix for the first time.
Despite howls and protests from the West, Russia is now the largest oil supplier to India, replacing Iraq. Moreover, India says it will continue to buy oil from wherever possible as long as the rates suit its needs. This is hardly surprising, considering India is the world’s third-largest crude oil importer and can’t exactly turn down a discounted supply.
Igor Sechin, the CEO of Russia’s oil major Rosneft, takes India’s side as well. In fact, a report by Reuters quoted him as saying that Europe was no longer setting the reference price for Russia’s flagship Urals crude. Since the sanctions, Asia has proven itself more than eager to buy up the prohibited Russian oil.
Coking Coal Also Ripe for Russian-Indian Cooperation
A few days ago, India’s steel industry asked its government to create a blueprint to ensure the availability of 161 million tons of coking coal. Representatives stated that the supply would aid in scaling up the country’s annual steel-making capacity to 300 million tons by 2030. Of course, both coking coal and iron ore are key raw materials used for manufacturing steel.
According to a report in the Business Standard, India’s Steel Minister and other high-level government officials joined the sixth meeting of the Advisory Group for Integrated Steel Plants. This is where the Indian Steel Association made its presentation regarding the 161 MT of coking coal. The group also reached a consensus regarding the possibility of expanding its sources of coking coal. According to reports, they are mainly considering four sources: Russia, Mongolia, Canada, and the U.S.
Russia exported around 32 MT of coking coal in 2021. Hetal Gandhi, Director of Research at CRISIL Market Intelligence and Analytics, was quoted in Business Standard as saying that because Europe refused to pick up Russian coal, the nation redirected this lot to China. Gandi added that this led to a sharp uptick in exports, which hit roughly -48 MT in 2022.
Russian Imports Worrying Indian Steel Companies
On the steel front, again, one man’s crisis is another’s opportunity. Cheap steel imports from Russia have flooded the Indian markets, much to the dismay of Indian domestic steel players. This lot has cautioned the government on the import surge, and even suggested remedial measures to cut it down. For many analysts, this outrage mirrors previous attempts to reduce the influx of cheap Chinese steel into India.
According to government data, India’s import of Russian steel rose to an eight-year high during the first 10 months of the April 2022 financial year. In fact, India imported 281,000 tons of steel from Russia between April and January alone. This, said experts, was about five times higher than the same period a year ago. India’s domestic producers are naturally worried about this trend. After all, if it continues, they will likely lose a lot of their market share to Russian imports.
Another concerning figure is the fact that Russia was the fourth-biggest steel supplier to India during this period. In the process, Russia displaced Japan as the second-biggest supplier of HRC to India for the first time in at least eight years. According to this report in The Economic Times, Russia ended up on the list of Top 5 steel importers for the first time since fiscal year 2016-17.
About 72% of Moscow’s steel shipments to India constituted hot-rolled coil (HRC) and strips. Moreover, suppliers sold some of their HRC stock to India at about US $555.86 a ton. This is roughly 20% cheaper than domestic prices.
The U.S.’s Stance on India Purchasing Russian Oil
With its “neutral” stand on the Russian invasion of Ukraine, India has gained a lot in terms of trade. Meanwhile, Russia has been able to divert its exports from Europe to Asia, bolstering its economy from sanctions. This relationship may miff the U.S. and its European allies, but experts believe the U.S. can’t do much against India. The United States considers India a staunch ally in its strategy to counter Chinese expansion. For now, at least, it’s a win-win situation for India, which gets affordable Russian oil, steel, and more.