Russia’s oil imports to India rises further, trade deficit balloons

Introduction:

• In February 2023, Russia surpassed Saudi Arabia to become India’s second biggest exporter of crude oil in FY23. This analysis delves into the reasons behind this shift, the impact of the rise in imports from Russia on India’s trade deficit, and the measures being taken to address the trade imbalance.

Reasons behind Russia’s Rise as India’s Second Biggest Crude Oil Exporter:

• In the four-month period between November 2022 and February 2023, Russia took over the top spot in India’s crude oil imports from Saudi Arabia and Iraq.
• Russia’s share zoomed to second-highest in FY23 from a negligible proportion in the previous years among select top countries in India’s crude oil imports in the April-February period for the past four financial years.
• Russia is leading the share of select top countries in India’s crude oil imports in the last seven months by quite a distance.

Impact of the Rise in Imports from Russia on India’s Trade Deficit:

• While the rise of imports from Russia was due to surging inflow of crude oil, India is also importing other products from Russia.
• In FY23 (till February), 50% of India’s imports of project goods, 30% of newsprint rolls, mineral/chemical fertilizers and sunflower/cotton seed oil each came from Russia.
• However, the sudden surge in oil imports has resulted in India’s trade deficit with Russia ballooning in recent years.
• India exports pharma products, crustaceans, tea, coffee, and some other products but relatively of much lesser value.
• India’s trade deficit with Russia has surged in FY23.

Measures Being Taken to Address the Trade Imbalance:

• On April 18, 2023, India and Russia agreed to address trade deficit and market access issues as New Delhi sought to narrow its trade imbalance with Russia.
• Reuters reported in November 2022 that Russia was potentially seeking to import more than 500 products from India.
• In December 2022, Indian representatives shared a list of Indian products with Moscow for access to Russian markets.

Impact of Rise in Oil Imports on Russia’s Wealth:

• India and China have snapped up the vast majority of Russian oil in April 2023 at prices above the Western price cap of $60 per barrel.
• Oil loadings from Russia’s western ports in April 2023 will rise to the highest since 2019, above 2.4 million barrels per day.
• This means that the Kremlin is enjoying stronger revenues despite the West’s attempts to curb funds for Russia’s military operations in Ukraine.
• Forbes Russia reported that Russia’s richest people added $152 billion to their wealth over the past year, buoyed by high prices for natural resources and rebounding from the huge loss of fortunes they experienced just after the Ukraine war began.
• Recently, Pakistan placed its first order for discounted Russian crude oil.

Conclusion: Russia’s rise as India’s second biggest crude oil exporter in FY23 has had a significant impact on India’s trade deficit. While the surge in oil imports has resulted in a trade imbalance, India and Russia are taking steps to address the issue. On the other hand, Russia’s wealthy elite are reaping the benefits of high oil prices and a rebounding economy.