Some Indian refiners are planning to import Russian diesel and other refined products for domestic consumption so they can free up locally produced fuels for export to the West, which has almost stopped taking refined products from Russia, as per people familiar with the matter.
The European Union has stopped the import of refined petroleum products from Russia, including petrol, diesel and jet fuel, from February 5.
The European Union, along with G-7 nations, has also placed price caps on Russian refined products.
Russia has already turned the top supplier of crude to India, accounting for 28% of India's crude imports, up from less than 1% in 2021. India's imports of Russian refined products have also risen to record levels in recent months, though mostly limited to fuel oil. They may soon expand to petrol and diesel.
"Our people are exploring if we can source cheaper products from Russia," stated a top executive at an Indian refiner.
"If India can import so much crude, it can, of course, import products as well. But imports of products must make commercial sense. We are in the business to make money."
The executive added that the decision will be based on the discount, as well as the cost of insurance and freight. "Actual prices being quoted in the market are sometimes very different from the published information on prices and cracks. So, we will have to take a call based on what is being offered in the market," he said.
Imports of Russian refined products could assist meet rising domestic demand while allowing Indian refiners to export some of their own output, mainly to Europe, which has blocked imports from its biggest supplier, Russia.
The Russian imports could also help set up a domestic inventory of petrol and diesel, which could be drawn down during the planned maintenance shutdowns of domestic refineries later this year.
"There is a possibility that India could look to import the discounted Russian diesel barrels. But Africa, the Middle East and to a certain extent South America, could also be potential markets vying for these discounted barrels as well," stated Serena Huang, analyst at energy cargo tracker Vortexa.
India has been a net exporter of refined products for years and has shifted its exports away from Southeast Asia since the middle of last year towards the western markets, where realisations were better. Russian oil makes up closely a quarter of crude processed in India now. This has triggered criticism in the western press that Indian refiners were defeating the purpose of sanctions by supplying products processed from Russian crude to the US and Europe.
The criticism will expected get harsher if Indian refiners choose to bring Russian products for domestic consumption and increase the export of domestic output to the West.
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