India ‘Fuels’ Russian Economy During War; West Plans New Sanctions That Could Make India A Collateral Target  

With China, India, and countries in the Middle East, Africa, and Latin America making the Western sanctions on Russia’s exports of oil and gas nearly ineffective, the European Union is about to impose what will be the 13th round of “sanctions package” on individuals and companies doing business with Moscow. 

This will be done, it is said, on February 24, the second anniversary of Russia’s full-scale invasion of Ukraine.

Reportedly, some Indian companies will come under the EU sanctions. But this threat is unlikely to change the Indian decision to import oil from Russia, which Indian foreign minister  S. Jaishankar described on February 17, during a panel discussion at the just concluded  Munich Security Conference, as a “smart” decision.

“Is that (imports from Russia) a problem, why should that be a problem? If I am smart enough to have multiple options, you should be admiring me”, he answered a questioner.

In fact, Jaishankar gets invariably asked about India not observing sanctions on Russia in almost all the Western capitals during his visits. He has always been candid and consistent in explaining India’s position that the Western countries, particularly those in Europe, have no moral right to ask India when they themselves have not stopped buying Russian oil and gas and that India’s purchases from Russia have helped towards the stabilization of the global oil market.

“We have actually softened the oil markets and the gas markets through our purchase policies. We have, as a consequence, actually managed global inflation, and people should be saying thank you. I’m waiting for thank you,” he had said to a London audience not long ago.

The West’s grudge against India is understandable as the country, along with China and the Gulf countries, has considerably eased the effects of sanctions on Russia. The Russian economy seems to be growing steadily. Russia’s oil and gas sales are still strong despite attempts to stop them. The Russian oil companies have shown remarkable resilience.

In 2022, crude oil production and exports increased, and oil revenues grew. Gasoline and diesel fuel production also jumped significantly.

According to Nina Poussenkova of the European University at St. Petersburg, in 2022, Russian crude production grew by 2% and oil exports by 7%. Russia’s petroleum revenues rose by 28% in the same year. Russian oil companies drilled over 28,000 km of wells in 2022, breaking a 10-year record.

Gasoline production jumped by 4.3% and production of diesel fuel by 6% in 2023. In September 2023, Russian oil export revenues surged by $1.8 billion to $18.8 billion. Crude exports rose by 460,000 barrels per day (b/d) to 7.6 million b/d.

Apart from China and India, which bought Russian oil at a discounted price, Russia significantly increased deliveries to Turkey, Egypt, and the UAE and began supplying nontraditional customers, particularly those in Africa and South America.

And Russia has managed all this, notwithstanding a series of unprecedented Western sanctions targeting  Russia’s citizens, companies, technologies, and processes.

The US banned the import of Russian oil and petroleum products in March 2022. Thereafter, the G7 and the EU imposed various restrictions on investments in Russia’s energy sector and supplies of energy technologies and goods. International majors such as ExxonMobil, Shell, and BP left Russia, writing off billions in assets. Foreign oil service companies largely halted their Russian activities.

Moreover, the EU has imposed an embargo on seaborne imports of Russian oil (from December 5, 2022) and petroleum products (from February 5, 2023). This has been combined with an EU and G7 “price cap” on Russian oil ($60/barrel, above which Russia’s seaborne exports of crude oil are not insured by British and European companies, which dominate the insurance market). There are also caps on petroleum products ($100/barrel for light fractions and $45/barrel for heavier fractions).

This mechanism of caps is based on the notion that  Russian goods can be exported to third countries with the use of Western transport, insurance, technical, and financial services only when they are sold below the price cap. But with global oil prices remaining around $80 per barrel most of the time, Russia has not suffered much.

In any case, the idea behind price caps was to undermine Russia’s oil sector, crippling its ability to produce and export hydrocarbons because transport infrastructures, including insurance, are overwhelmingly dominated by Western groups.

Russian oil was transported mostly by Western ships and guaranteed by Western insurance companies. But Russia seems to have found ways to circumvent them.

Russian companies now export through what are called “shadow fleets” that do not recognize the price cap but are not illegal either, as they use non-Western logistics and deliver to countries that did not join the embargo.

Russian players have acquired or leased the shadow fleet of tankers, and most of them are registered to offshore companies in countries with lenient shipping rules. So much so that nearly three-quarters of all seaborne Russian crude flows are now said to travel without Western insurance.

There have also been reports of Russian fuels and crude being trans-shipped in ship-to-ship operations fueled by credit from the Russian state. New Russian firms have also stepped in to provide insurance.

Similarly, there are stories of established oil traders buying products in a Russian port at a price that allows the use of Western transport and insurance services,  but later, they resell them to end users at a higher price. Allegedly, these traders are linked to Russian oil companies, thus enabling the evasion of Western sanctions.

Another way of evasion has been the  “blends.” Here, foreign companies mix the Russian crude oil in their own ports with other blends. Such mixed oil (such as Latvian blend) can be sold without any restrictions as of now.

As it is, even Saudi Arabia and the UAE import cheap fuels from Russia to meet their domestic demand or for re-export in Europe at higher margins, thus benefiting from sanctions themselves.

It is said that a certain proportion of Russian oil is refined in the Middle East, and some of the resulting petroleum products are exported to Europe, thereby bypassing restrictions on Russian products.

India also is practicing this. It is said that India’s fuel exports to Europe have grown significantly, especially diesel (produced from Russian crude oil).

Yet another way for Russia to neutralize Western sanctions on its oil trade has been the increased use of the Northern Sea Route (NSR) to China. As EurAsian Times had pointed out once, the NSR, connecting the Atlantic to Pacific oceans through the Arctic, gives  Russia enormous strategic and commercial benefits.

Offshore oil and gas drilling
Representational Image

For instance, compared to the Suez Canal route, the estimated shipping through the NSR reduces the distance between Shanghai and Rotterdam (Europe’s largest commercial port in the Netherlands) by almost 2,800 nautical miles or 22 percent. This route is also likely to reduce the transportation cost by 30 to 40 percent.

Reportedly,  Gazpromneft oil company transports ARCO blend from its Arctic projects via the NSR, and Rosneft company plans to begin delivering oil from its Vostok Oil project in 2024. Climate changes have now facilitated the use of the NSR for more than four months a year and thus help the dilution of sanctions.

The shorter delivery time along the route permits oil companies to reduce costs, which is particularly important given the restrictions that they face owing to the sanctions.

However, in the long run, the sanctions, if not lifted and the issue over Ukraine not settled, could adversely affect the oil production in Russia. And that is because of the sanctions on state-of-the-art Western technology to explore new oil fields and extract oil in Siberia and the Arctic. As it is, international majors such as ExxonMobil, Shell, and BP  have already left Russia.

Of course, Moscow has launched import substitution programs by developing its own technology and sought Chinese and Indian assistance through joint collaborations, but the Western exodus has created problems for developing hard-to-recover reserves for a considerable future.

And if, in the meantime, Russia exhausts or depletes its conventional reserves at a faster rate to maintain its growing share of crude production, longer-term prospects of Russian oil companies appear endangered.

But as of now, Russian oil companies are reasonably stable and appear optimistic that they will find competent and sophisticated indigenous technology as time goes on.

  • Author and veteran journalist Prakash Nanda is Chairman of the Editorial Board – EurAsian Times and has commented on politics, foreign policy, and strategic affairs for nearly three decades. A former National Fellow of the Indian Council for Historical Research and recipient of the Seoul Peace Prize Scholarship, he is also a Distinguished Fellow at the Institute of Peace and Conflict Studies. 
  • CONTACT: prakash.nanda (at)
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Prakash Nanda
Author and veteran journalist Prakash Nanda has been commenting on Indian politics, foreign policy on strategic affairs for nearly three decades. A former National Fellow of the Indian Council for Historical Research and recipient of the Seoul Peace Prize Scholarship, he is also a Distinguished Fellow at the Institute of Peace and Conflict Studies. He has been a Visiting Professor at Yonsei University (Seoul) and FMSH (Paris). He has also been the Chairman of the Governing Body of leading colleges of the Delhi University. Educated at the Jawaharlal Nehru University, New Delhi, he has undergone professional courses at Fletcher School of Law and Diplomacy (Boston) and Seoul National University (Seoul). Apart from writing many monographs and chapters for various books, he has authored books: Prime Minister Modi: Challenges Ahead; Rediscovering Asia: Evolution of India’s Look-East Policy; Rising India: Friends and Foes; Nuclearization of Divided Nations: Pakistan, Koreas and India; Vajpayee’s Foreign Policy: Daring the Irreversible. He has written over 3000 articles and columns in India’s national media and several international dailies and magazines. CONTACT: