Impact of the Russia-Ukraine War on Global Oil Markets and India's Position
Background and Overview
On February 24, 2022, Russian President Vladimir Putin initiated a military invasion of Ukraine. This move was expected to conclude quickly but has now spanned over multiple years, affecting global geopolitics, energy markets, and economic strategies.
Geopolitical Effects
- The conflict has become a proxy battle involving the US-led Western bloc against Russia.
- Neutral countries like India, China, and Turkey have benefited from the situation, especially in terms of energy supplies.
India's Strategic Autonomy
India has leveraged the conflict to reinforce its strategic autonomy by maintaining good relations with both the US and Russia. Prime Minister Narendra Modi's government capitalized on the geopolitical rivalry to secure economic benefits.
Shift in Oil Import Structure
- India's oil import structure experienced a significant shift, with Russia becoming a major supplier of cheaper, high-quality crude oil.
- This shift allowed Indian refiners to save billions in sourcing costs and maintain stable pump prices.
Refiner Benefits and Fiscal Impact
The availability of discounted Russian oil improved the gross refining margins for Indian refiners like Indian Oil, Bharat Petroleum, and Hindustan Petroleum. This reduced the need for government subsidies, easing fiscal pressures.
Statistics on Russian Oil Imports
- In 2022, India's imports of Russian oil surged to 740,000 barrels per day (bpd), capturing a market share of 16.4%.
- By 2023, the imports more than doubled to 1.8 million bpd, accounting for 39% of India's total crude imports.
- India imported Russian oil worth $132 billion over three fiscal years, averaging $44 billion annually.
Impact of US Sanctions
- The Biden administration's sanctions in January 2025 targeted Russian oil shipments, disrupting India's imports.
- These measures affected major Russian shipping and trading companies, potentially reducing Russia's market share in India.
- Indian refiners have rejected US-sanctioned cargoes, but Russian shipments continue at significant levels.
Future Outlook on Prices and Supply
Future oil prices and supplies are contingent on the outcomes of US-Russia talks and peace prospects in Ukraine. Experts predict prices to stay stable between $70-$80 per barrel. However, changing geopolitical conditions and OPEC's production strategies may influence the market dynamics.
As the situation evolves, India's reliance on discounted Russian oil may diminish, and strategic adjustments will be needed to navigate the complex global oil market landscape.