By John Q. Hosedrinker 
During a meeting in Moscow, External Affairs Minister S. Jaishankar defended India’s energy policy, highlighting that the United States had previously urged India to stabilize the global energy market, even by purchasing oil from Russia. Jaishankar met with President Vladimir Putin and Foreign Minister Sergey Lavrov, discussing plans to access the Russian market and expedite cases of Indians recruited to fight in Ukraine. Discussions also included enhancing India-Russia trade through infrastructure and logistics, as well as cooperation in multilateral platforms and addressing labor shortages. Furthermore, the meetings encompassed the International North-South Transport Corridor and other initiatives to enhance economic linkages.
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U.S. asked us to buy energy from Russia to stabilise global energy market: Jaishankar in Moscow. This statement, purportedly made by a high-ranking Indian official, immediately grabs your attention. It suggests a complex situation where global politics, economics, and the realities of energy supply intersect. The implication is that the United States, a nation often seen as a leader in the global fight against Russia’s aggression, actually encouraged another country to purchase Russian energy. It’s a scenario that immediately raises questions about the nuances of international relations and the tough choices nations have to make when faced with global pressures.
In the early days of the conflict, global energy markets were thrown into disarray. The immediate response to the invasion of Ukraine included sanctions against Russia, a move that, while aiming to cripple Russia’s war machine, simultaneously threatened to disrupt the global oil supply. With Western buyers, including those in Europe and Japan, starting to shy away from Russian oil, the supply chain began to shift, with many turning to options such as supplies from Saudi Arabia. This sudden shift in demand, coupled with potential shortages, was a recipe for skyrocketing oil prices. The economic consequences of such an increase, potentially exceeding $200 per barrel, could have been dire for economies worldwide, leading to inflation, economic slowdowns, and increased financial strain on households.
To avert such a crisis, the Biden administration seemingly adopted a strategy that balanced the need to constrain Russian revenue with the necessity of keeping oil flowing. It’s important to note that this strategy wasn’t simply about letting Russia continue to profit unchecked. Instead, the United States reportedly encouraged India to purchase discounted Russian crude, under a price cap imposed by the G7. This meant that India could buy the oil but at a price limit, effectively reducing Moscow’s profits while maintaining a relatively stable global supply. The intent was to reduce revenue for Russia, while also ensuring that global energy prices did not get completely out of control. This is not an easy decision.
The complexities continued to evolve. The EU implemented sanctions, banning direct imports of Russian crude and refined products. However, a loophole existed: Russian oil refined in third countries was not classified as “Russian” in origin. This paved the way for countries like India to step in, buying cheap Russian crude, refining it, and exporting it as finished products like diesel and gasoline, many of which then ended up in the West. The profit motive drove Indian refineries to take advantage of this situation. As a result, by 2023, Russia became India’s primary oil supplier, accounting for a significant portion of its imports. The EU is attempting to close the loophole, but the market response will be interesting.
Adding further layers to the situation, the broader picture of global energy was also impacted by the actions of OPEC+, including Russia, who implemented production cuts to manage fluctuating demand. This further squeezed supply, meaning maintaining Russian oil on the market became even more crucial to avoid drastic price increases. The decision for India to buy discounted Russian oil was seemingly a pragmatic decision, allowing it to affordably meet its energy needs.
On top of the energy complexities, the war also had repercussions for global food supplies. Ukraine and Russia are major wheat exporters. This disruption led to increased demand for wheat from India, which then responded by imposing its own export ban to prioritize domestic food security. It is worth noting that this ban was designed to curb inflation in India. These pressures on the global commodities market further complicated the picture, especially as the cost of oil was also increasing.
The broader context also included sanctions by the U.S. and the G7 on oil from countries like Venezuela and Iran. These, which India largely complied with, significantly reduced its options for diversifying its energy sources. This left India with limited alternatives, particularly given the geopolitical pressures that shaped the environment.
In essence, India’s decision to pivot towards Russian oil appears to be the result of a confluence of factors: global energy market volatility, price pressures, and the absence of readily available alternatives. It was a calculated move, driven by the need to stabilize energy supply while meeting the economic realities of the time. The global market’s reaction to sanctions and supply chain adjustments are continuing to generate headlines.