Research Unit for Political Economy

Part 1

1. Introduction

On December 21, 2023, India’s Parliament passed bills replacing three existing legislations regarding criminal justice[1]with revised Acts titled in Sanskrit.[2] The Prime Minister said that this was a “watershed moment in our history. These bills mark the end of colonial-era laws. A new era begins…”

This is the latest in a series of such measures by the Indian government. In his 2022 Independence Day speech, the Prime Minister asked Indians pledge to remove “any trace of the colonial mindset”. Shortly thereafter, he changed the name of the capital’s central avenue from Rajpath to Kartavya Path, and congratulated the Indian people “for their freedom from yet another symbol of slavery of the British Raj”. In September 2023, the Indian Parliament moved from its colonial-era building to a brand new structure. The Finance Minister no longer carries a briefcase when presenting the Union Budget, but instead the Indian ‘bahi-khata’, thereby “shedding another vestige of a colonial past.”[3]

Nor are these changes merely symbolic, says the Government. It claims there is a change in India’s political and economic relations with the rest of the world. Thus on September 26, India’s External Affairs Minister S. Jaishankar declared to the United Nations General Assembly that “The days when a few nations set the agenda and expected others to fall in line are over.”[4]

Indeed, over the last two years, the apparent independence, self-reliance, assertiveness and nationalist spirit of India’s government, and even the Indian corporate sector, have been much in the news. From time to time, their spokespersons use words such as ‘colonial’ and ‘imperialist’, in order to describe the actions and policies of the western powers. Let us set out a few developments, all of which are well-known, but bear repeating.

i. Oil imports: First, despite much pressure from the US and European powers to condemn the Russian invasion of Ukraine in international fora, the Indian government has avoided taking any stand on the conflict. At the same time, it has massively increased its purchases of Russian oil – so much so that Russia has become the number one supplier of oil to India, and India has become Russia’s number one customer. In the face of western criticism, the external affairs minister has asserted bluntly: “Indian foreign policy is there to serve the Indian people; we will do whatever it takes to discharge that responsibility”.[5] A commentator notes: “Since the start of the war in Ukraine, India’s Foreign Minister S. Jaishankar has been vocal in defending his government’s refusal to accede to Washington’s pressure.”[6]

ii. ‘Human rights’: In the wake of India’s decision to remain neutral in the Ukraine conflict, the Modi government’s human rights record has come under criticism in the west. In 2022, the US Secretary of State twice raised questions about the rise of human rights abuses in India. One of these occasions was in the presence of the Indian external affairs and defence ministers, in what Reuters referred to as “a rare direct rebuke by Washington of the Asian nation’s rights record.”[7]

Then, in January 2023, the British Broadcasting Corporation (BBC) broadcast a documentary on the Gujarat riots of 2002, directly indicting Narendra Modi. The Indian government promptly blocked its screening on Indian platforms. The spokesperson of the external affairs ministry declared that the documentary reflected a “continuing colonial mindset.”[8]The Indian tax authorities raided the BBC offices in Delhi and Mumbai.

iii. Assassinations: On September 18, 2023, Canadian Prime Minister Justin Trudeau made the sensational announcement that his government was investigating “credible allegations” that the Indian government agents were linked to the June 18, 2023 killing of Hardeep Singh Nijjar, a Canadian citizen and the head of Khalistan Tiger Force. The Indian government termed this allegation “absurd”, and External Affairs Minister Jaishankar asserted: “One, we told the Canadians that this is not the Government of India’s policy. Two, we told the Canadian[s] saying that, look, if you have something specific, if you have something relevant, you know, let us know. We are open to looking at it.” He added that “the picture is not complete without the context… you also have to appreciate then that in the last few years Canada actually has seen a lot of organized crime, you know, relating to, you know, the secessionist forces.”[9]

Outside the Government, others were more direct. The principal Indian opposition party, the Congress, implicitly endorsed the killing of Nijjar, saying: “The Indian National Congress has always believed that our country’s fight against terrorism has to be uncompromising, especially when terrorism threatens India’s sovereignty, unity and integrity”. Sections of the Indian media too tacitly acknowledged Indian culpability by celebrating the incident: “Times Now wondered whether India’s Research and Analysis Wing…had become ‘the new Mossad’.”[10]

Then, in November 2023, US federal prosecutors filed charges alleging that an “identified Indian government employee” had directed a plot to assassinate, in New York city, a US citizen who runs a pro-Khalistan organisation banned by India. For this purpose, the government employee is said to have hired an Indian, Nikhil Gupta, facing criminal charges in Gujarat. These events took place in May-June 2023. The charges appear to be extensively documented, and more difficult to refute[11].

The indictment cites what it claims are transcripts of conversations between Gupta and the Indian government official. In these, the latter indicates that a number of persons are targeted in the US and Canada. Gupta in turn told an undercover US agent that “we have so many targets”. For the Indian government to have carried out even a single assassination on US or Canadian soil would have been unprecedented; a series of such ‘hits’ on US soil would be even more extraordinary.

The Indian government did not rebut the US allegations in the same fashion which it did in the case of Canada. The spokesperson for the Ministry of External Affairs said that the case was a “matter of concern”, and that the acts alleged were “contrary to government policy”. He acknowledged that the US had “shared some inputs”, and said that on November 18, a high-level inquiry committee had been constituted to look into the matter.[12]

The Indian government invited the US President Joseph Biden as its chief guest for the Republic Day celebration on January 26, 2024, but the US government discreetly declined. The media speculated that it would have been difficult for Biden to accept in the immediate wake of the Pannun case and consequent dispute. The French President, Emmanuel Macron, has consented to substitute Biden on the occasion.

iv. Adani: In January 2023, the American hedge fund Hindenburg released a detailed investigation of the business house of Gautam Adani, who was at the time considered the world’s second-richest man, and the richest in India. In response, the Adani conglomerate declared: “This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.”[13] The Adani Group’s Chief Financial Officer, Jugeshinder Singh, compared the drop in Adani stock prices to the Jallianwala Bagh massacre under British rule.[14]

The billionaire investor George Soros explicitly linked the crisis of the Adani conglomerate to the Modi government’s foreign policy. One should note that Soros is no run-of-the-mill billionaire: his Open Society Foundations (OSF) claims to “support democracy and human rights in more than 100 countries”. In particular, he has actively intervened in the political life of Eastern Europe and the region of the former Soviet Union, in favour of western political and economic interests, and against Russian political influence. Western experts celebrate OSF as having had a “huge” impact in Eastern Europe, often “the only funder of independent civil society” in some parts of the region, including Ukraine, where its ‘International Renaissance Foundation’ has “spent over $230 million on pro-democracy activities and supported more than 9,000 projects and initiatives”.[15] For all practical purposes OSF can be seen as an arm of US-UK foreign policy. In this fight between billionaires, Soros is almost as closely identified with the US and UK governments as Adani is with the Modi government.

In his address to the Munich Security Conference in February, Soros pointedly remarked:

“Modi maintains close relations with both open and closed societies. India is a member of the Quad (which also includes Australia, the US, and Japan), but it buys a lot of Russian oil at a steep discount and makes a lot of money on it.

“Modi and business tycoon Adani are close allies; their fate is intertwined. Adani Enterprises tried to raise funds in the stock market, but he failed. Adani is accused of stock manipulation and his stock collapsed like a house of cards. Modi is silent on the subject, but he will have to answer questions from foreign investors and in parliament.

“This will significantly weaken Modi’s stranglehold on India’s federal government and open the door to push for much needed institutional reforms.

“I may be naïve, but I expect a democratic revival in India.”[16]

Within hours of Soros’s statement, Union Minister for Women and Child Development Smriti Irani retorted:

This war is being mounted against India and what stands between the war and India’s interests is Modi…. Designs to weaken Indian democracy will be met with India’s might under PM Modi’s leadership..the imperialist intentions of an entrepreneur are coming to light who seeks to demonize our democracy.[17]

v. Atmanirbhar: The Indian government has continued to pursue its ‘Atmanirbhar’ (‘self-reliant’) economic policy. This includes increased tariffs on (and other barriers against) certain categories of imports, and subsidies to large foreign firms for carrying out manufacturing in India. Announcing the policy on May 12, 2020, Prime Minister Modi declared that “It is said in our scriptures – Aish: Pantha: That is – Atmanirbhar Bharat…. Friends, the Corona crisis has also explained to us the importance of Local manufacturing, Local market and Local supply chain…. The mindset of free India should be ‘vocal for local’.”[18] A month later, he declared: “India will turn this COVID-19 crisis into an opportunity. It has taught India to be self-reliant and we will reduce our dependence on imports.”[19]

Since then, a large number of policies and measures of the Government have been linked to, or branded as, ‘Atmanirbhar’. The latest measure, on August 3, requires Indian firms importing personal computers or tablets to obtain a license. The Union Minister of State for Technology tweeted that “It is govts objective to ensure trusted hardware n systems, reduce import dependance and increase domestic mfg of this category of products.”[20]

vi. Internationalisation of the rupee: Lastly, in the wake of the rise in oil imports from Russia, the Reserve Bank of India (RBI) in July 2022 announced a plan to allow overseas trade to be settled in rupees. This was intended to replace transactions in US dollars, and thereby make it easier to trade with countries under US sanctions, such as Russia and Iran. In September 2022, India’s finance minister, Nirmala Sitharaman claimed that many countries had shown interest in bilateral trade in the rupee after the RBI’s announcement. She pointed to the fact that this was a step towards capital account convertibility – i.e., treating foreign investors on par with Indians, and removing all barriers to the flow of international capital into and out of the country. What of the consequent risks of volatility? According to the RBI, “These risks are real, but they are unavoidable if India is to progress to be an economic superpower.”[21]

How do we interpret these developments?

These developments have given rise to divergent political responses.

On the one hand, some commentators with strong anti-American views view the Indian government’s recent foreign policy stances as assertions of its independence; one even celebrated the rise of Adani in this context.[22] Commentators who applaud the rise of ‘multipolarity’ in the form of platforms such as BRICS[23] see India’s participation in such platforms as a sign of its new, more assertive, foreign policy stance.[24]

On the other hand, several liberal commentators in India with strong anti-Modi views welcomed the the BBC documentary. Some harboured hopes that the Hindenburg report would deflate the Adani bubble. Others bemoaned the Government’s ‘Atmanirbhar’ economic policies as a ‘return to the pre-1991 license-permit raj’.

Yet other commentators are more sceptical of western powers’ concerns about human rights in India. But their scepticism is based on their assessment that countries like the US and France, eager to sell their goods in an expanding Indian market, and to sell their weapons to an increasingly powerful Indian State, will ignore India’s human rights violations.

In a sense, even such harsh critics of the present Indian rulers accept the claim that India is a burgeoning economic and political power. Their worry is that India’s increasing strength provides it too much ‘leverage’, insulating it from international questioning.

However, the reality of India’s economic and political power in the present world order is entirely different from the various views described above. Let us examine certain recent developments concretely, and see how far India has shed the vestiges of its colonial past.

Notes

[1] Indian Penal Code, 1860, Code of Criminal Procedure, 1898 and Indian Evidence Act, 1872.

[2] Bharatiya Nyaya Sanhita, Bharatiya Nagarik Suraksha Sanhita and the Bharatiya Sakshya Adhiniyam.

[3] Press Information Bureau, “New India: Shedding the Vestiges of a Colonial Past”, December 1, 2022.  https://pib.gov.in/FeaturesDeatils.aspx?NoteId=151220&ModuleId%20=%202

[4] https://www.mea.gov.in/Speeches-Statements.htm?dtl/37148/National_Statement_by_External_Affairs_Minister_Dr_S_Jaishankar_at_the_General_Debate_of_the_78th_UNGA

[5] ANI, “How Jaishankar defended the India way this year amid Ukraine conflict”, December 14, 2022.

[6] Prashad, op. cit.

[7] Kanishka Singh, “U.S. monitoring rise in rights abuses in India, Blinken says”, Reuters, April 12, 2022, https://www.reuters.com/world/india/us-monitoring-rise-rights-abuses-india-blinken-says-2022-04-11/

[8] Kallol Bhattacharjee, “BBC documentary on PM Modi is ‘propaganda’ and reflects a ‘colonial mindset’, says India”, The Hindu, January 19, 2023.

[9] Council on Foreign Relations, “A Conversation With External Affairs Minister Subrahmanyam Jaishankar of India,” September 26, 2023 https://www.cfr.org/event/conversation-external-affairs-minister-subrahmanyam-jaishankar-india

[10] “‘Explosive, albeit unproven’: Canadian media on Trudeau’s allegations against India”, Newslaundry, September 20, 2023.

[11] See “U.S. Attorney Announces Charges In Connection With Foiled Plot To Assassinate U.S. Citizen In New York City,” November 29, 2023, with a link to the indictment. https://www.justice.gov/usao-sdny/pr/us-attorney-announces-charges-connection-foiled-plot-assassinate-us-citizen-new-york

[12] Hannah Ellis-Petersen and Leyland Cecco, “‘Contrary to government policy’: India responds to US assassination plot claims”, Guardian, November 30, 2023.

[13] Moneylife Digital Team, “Adani Replies with 413-page report; Hindenburg says fraud cannot be camouflaged with patriotism”, January 30, 2023, https://www.moneylife.in/article/adani-replies-with-413-page-report-hindenburg-says-fraud-cannot-be-camouflaged-with-patriotism/69662.html

[14] Swaraj Singh Dhanjal, Anirudh Laskar and Satish John, “Each one of Hindenburg’s allegations is a lie: Adani’s Jugeshinder Singh”, Mint, January 30, 2023.

[15] Stephanie Beasley, “Why the Ukraine crisis is a defining moment for George Soros’ OSF”, https://www.devex.com/news/why-the-ukraine-crisis-is-a-defining-moment-for-george-soros-osf-102796; also see the website of the International Renaissance Foundation, https://www.irf.ua/en/about/ 

[16] “Remarks delivered at the Munich Security Conference”, February 16, 2023, https://www.georgesoros.com/2023/02/16/remarks-delivered-at-the-2023-munich-security-conference/

[17] “BBC and Adani row: ‘George Soros to Rajan to BBC, it’s a confluence of interests’, Smriti Irani lashes out”, Mint, February 17 2023.

[18] https://www.pmindia.gov.in/en/news_updates/pms-address-to-the-nation-on-12-5-2020/

[19] Cited in Ronojoy Sen, John Joseph Vater, “Modi, the RSS and a Self-Reliant India”, ISAS Insights, June 24, 2020. https://www.isas.nus.edu.sg/papers/modi-the-rss-and-a-self-reliant-india/

[20] https://twitter.com/Rajeev_GoI/status/1687359889130311681?ref_src=twsrc%5Etfw

[21] “Internationalisation of the Rupee: Is It Time to Shift Gears?”, speech by T. Rabi Sankar, Deputy Governor, RBI, on October 20, 2022.

[22] M. K. Bhadrakumar, “Reports of Adani’s Eclipse are Greatly Exaggerated”, February 23, 2023, https://www.indianpunchline.com/reports-of-adanis-eclipse-are-greatly-exaggerated/

[23] A forum originally comprising Brazil, Russia, India, China and South Africa, and recently expanded to include six more developing countries.

[24] Vijay Prashad, “The Emergence of a New Non-Alignment: The Twenty-Fourth Newsletter”, Tricontinental, June 15, 2023.

❈ ❈ ❈

Part 2

2. The benefits of Russian crude oil imports

Western sanctions and Indian actions

The most frequently cited example of India’s independent and self-assertive policy in the recent period has been its decision to import crude oil from Russia, despite Western sanctions on that country.

Did India’s imports of Russian oil, “serve the Indian people”, as External Affairs Minister Jaishankar said, in defiance of the dictates of the US, UK, and Europe? The reality is that the Indian people did not benefit. As we shall see below, the beneficiaries were the western countries; private sector refiners in India; and to some extent the finances of the Government of India (as distinct from the Indian people).

Through their sanctions on Russia, the western powers intended to achieve two ends: (1) They wished to maintain the flow of oil from Russia, thereby bringing international oil prices under control, and (2) at the same time, they wished to keep Russia’s revenues down, thereby maintaining pressure on the Russian government. Therefore, they placed a cap of $60 per barrel on the price at which crude oil could be imported by any country from Russia; this was much below the market price. For imports within that cap, other services related to transport and financing too were permitted. The explicit aim of these exemptions was to “reduce price surges driven by extraordinary market conditions, while limiting Russian oil revenues.”[1]

The western powers could enforce this using the dominance of the dollar, their dominance in maritime transport and insurance, and their stranglehold on global financial infrastructure. For example, an Indian bank facilitating payments in defiance of western sanctions might find itself under western sanctions. Thus Indian firms importing crude oil from Russia by and large adhered to the $60 cap for a long time (and had to maintain detailed records to prove this fact to the western powers). Now that Russia is selling at prices above the cap, India is shifting, or rather is being shifted, to other suppliers. Significantly, the Government remains silent about the involuntary nature of this shift.

Western powers import Russian oil via other countries

It is true that the ‘price cap coalition’ countries – the European Union, most other Group of 7 countries, and Australia – banned or limited imports of Russian crude oil and oil products. However, the price cap coalition countries at the same time sharply increased imports of refined oil products from another group of countries: China, India, Turkey, the United Arab Emirates and Singapore. The latter countries in turn increased their imports of Russian crude (at a sizeable discount) – indeed, they became the largest importers of Russian crude, which they refined and exported as petroleum products to the price cap coalition countries. In brief, instead of directly importing Russian crude oil or petroleum products, the western powers made imports via a group of countries who refined the crude. Once Russian crude was converted into petroleum products in a third country, it became a product of that country, a loophole that allowed Europe to buy Russian oil refined into petroleum products by Indian firms.

Thus a report by CREA, a Helsinki-based NGO, terms the latter group ‘laundromat countries’; the implication is that they were ‘laundering’ Russian oil.[2] However, the aspersion is false. The source of the crude was known from day one. As the report itself admits, “This is currently a legal way of exporting oil products to countries that are imposing sanctions on Russia as the product origin has been changed.” Indeed, the sanctions were designed precisely to permit such a procedure.

Of the price cap countries, the biggest importers were the EU, followed by Australia, the US, the UK and Japan. The so-called ‘laundromat countries’ (such as India) increased their exports to price cap coalition countries by 26 per cent in volume terms (an additional 10 million+ tonnes) in the 12 month period after the outbreak of the Ukraine war, but their exports to other countries hardly increased at all.

In the period between the date of the imposition of the price cap (December 5, 2022) and the first anniversary of the war (February 24, 2023), India became, along with China, the world’s leading importer of Russian crude. India also became the single largest exporter of oil products to price cap coalition countries. The Indian port of Sikka in Gujarat, which serves Reliance’s Jamnagar refinery, is the biggest oil product export port to the price cap coalition countries, and the largest importing port in the world of seaborne crude oil from Russia; close behind is Vadinar, a nearby port serving the refinery of Nayara Energy (owned by the Russian firm Rosneft). Before the start of the Russia-Ukraine conflict in February 2022, Russia’s share of India’s crude oil import basket was 0.2 per cent; it rose to 42 per cent by April-June 2023.[3]

Who transported this oil? In this period, 56 per cent of the Russian crude oil shipped to ‘laundromat countries’ was transported in vessels owned and/or insured by price cap coalition countries. (Meanwhile the European Union remained the principal customer of Russian LNG and pipeline gas, and the second largest customer of Russian LPG.[4])

Contrary to the rhetoric of both western and Indian authorities, India’s imports of Russian crude did not face opposition from the US and Europe. US officials explicitly stated that India’s purchase of Russian Ural crude oil, being at rates below the ‘price cap’ of $60 set by G-7 countries in December, assisted the US’s “twin goals of ensuring that enough oil in the market, but not giving Russia a premium price for its exports.”[5]

The Indian government took a similar view: Petroleum Minister Hardeep Singh Puri said that Western countries were “not unhappy” that India was buying Russian oil, and pointed out that had India bought more oil from Gulf counties, it would have pushed up crude prices globally.[6] Jaishankar too reminded a London audience that “ we’ve actually softened the oil markets and the gas markets through our purchase policies. We have, as a consequence, actually managed global inflation. I’m waiting for the thank you.”[7]

Who benefited?

The imports of Russian crude were at a discount to the price at which Indian firms imported from their traditional suppliers Saudi Arabia and Iraq, and hence they brought the average cost of India’s oil imports to a level lower than they would otherwise have been. The Indian Express calculated that, in the 14 months ending May 2023, Indian public and private sector firms saved over $7 billion as a result.[8]

However, these imports did not “serve the Indian people”:

(i) Private firms importing Russian crude, namely Reliance Industries Ltd (RIL) and Nayara Energy, mainly exported their petroleum products. For example, RIL produced 42.1 million tonnes of transportation fuels in 2022-23, and exported 36.1 million tonnes of such fuels.[9] In this fashion, private firms accounted for 77 per cent of petroleum products exports in 2022-23.[10] The discount on Russian oil, and the elevated international prices of petroleum products, boosted private firms’ profits hugely. The activity of refining petroleum products generates negligible employment. The benefit of Russian crude imports by private corporations accrued not to the Indian people, but to the corporations.

(ii) Public sector firms – Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum – too imported Russian crude, refined it and sold the products domestically; however they have not passed on this benefit in the form of lower petrol and diesel prices, which have remained frozen since May 2022. Crisil Ratings projects that the three public sector oil marketing firms will rake in an operating profit of Rs 1,00,000 crore (Rs 1 trillion) in 2023-24.[11] These three public sector firms were the top three contributors to growth in corporate profit in the first quarter of 2023-24. The outsized profits of the public sector oil marketing firms represent in fact an extraction from Indian consumers. This is apart from the large contribution of the petroleum sector to the central exchequer in the form of indirect taxes, which has averaged over Rs 400,000 crore a year for the last three years.[12]

Both the revenues of indirect taxes and the oil marketing firms’ profits are at the expense of the Indian people. These are large extractions when we remember that the energy consumption of Indians is extremely low by international standards, reflecting their actual poverty. (India’s per capita oil consumption, measured in kilowatt-hours, is 1,970, compared to China’s 5,485, the US’s 29,684, and a world average of 6,642.[13] The proportions with regard to per capita total energy consumption are similar.)

It could be argued that any increase in the profits of Indian firms, whether private or public sector, is a benefit to ‘India’. This is in line with the thinking that celebrates India’s GDP purportedly scaling the peaks of $4 trillion, $5 trillion, and so on, without enquiring into the worsening condition of most Indians.

Continuing western stranglehold

The enforcement of the price cap continues. On April 17, 2023, the US Office of Foreign Assets Control (OFAC) issued an alert about the possible “evasion” of the price cap on Russian crude oil, and stipulated that transporters and financial institutions retain records (including shipping, freight and insurance costs) to prove that such oil was bought below the cap, failing which they would be penalised.[14] The same day, the Indian Finance Minister asserted that the cap would be breached if needed, saying that “We have a large population and therefore have to look at prices which are going to be affordable for us.”[15]

However, contrary to the Finance Minister’s assertion, an official at an Indian oil marketing firm stated bluntly that “The price cap has not been breached, and payments for Russian crude oil have been taking place. Had that been the case, the payments would have stopped.”[16] In August, Business Standard reported that “big banks like SBI, Bank of Baroda and ICICI are making life ‘miserable’ for refiners demanding extensive documentation, and refuse to entertain payments on trades made above $60 a barrel price, a cap imposed by western powers.”[17]

One of the important shippers of Russian oil to India since the outbreak of the war was the Mumbai-based Gatik Ship Management. Clearly a front for either Russian exporters or Indian importers, its fleet rose from two chemical tankers in 2021 to 58 vessels in 2023, almost exclusively transporting Russian crude to India. In April the American Club[18], part of the International Group of P & I Clubs that insure 90 per cent of shipping globally, withdrew insurance cover from Gatik’s fleet. Lloyd’s List remarked that this “suggests cargoes are no longer compliant with G7 oil price cap”.[19] Ingosstrakh, a large Russian insurer active in ship coverage, did not renew insurance cover for Gatik that expired in April.[20]

Lloyd’s Register has told India’s Gatik Ship Management, which has become a major carrier of Russian oil since the Ukraine war, that it will withdraw certification of 21 of its vessels by June 3. Classification societies such as Lloyd’s Register in London provide services including seaworthiness checks, certification that is vital for securing insurance, and entry to ports.[21]

The currency of payment for Russian oil has been an unsolved problem. While India made some payments for Russian oil by paying dirhams, the currency of the United Arab Emirates (UAE), into Russian bank accounts in Dubai, “UAE officials have told Indian counterparts that their banks or currency cannot be used to pay for Russian oil priced over the cap. Washington and London have intensified pressure on the emirate, prompting officials to scrutinise operations of Russian companies and banks based out of Dubai, and refuse licences in some cases.”[22]

India imported $49.4 billion worth of goods (mainly oil) from Russia in 2022-23, while its exports to Russia were just $3.1 billion. As a result Russia has accumulated vast sums in rupees for which it has no use. It has asked for payment in either US dollars, UAE dirham (which is pegged to the US dollar), or Chinese yuan. India is unable to continue making dollar payments due to the threat of US sanctions, and it is reluctant to keep making payment in yuan, the currency of the country it considers to be its chief adversary. Nevertheless, Indian firms – Indian Oil Corporation, Reliance, and Nayara Energy – have in fact made some payments in yuan[23] – a fact which is highly embarrasing for official quarters in India.

Tightening stranglehold and the silence of Indian authorities

Indian imports of oil from Russia have fallen sharply in the second half of calendar 2023. The Minister for Petroleum strenuously claims that this is solely due to the rising price of Russian oil. “If they (Russia) don’t offer us (good) discount why would we buy from them,” he said.[24]

However, it is unlikely that the Russian oil imports, even at the present higher prices, are uncompetitive. The real reason for the Indian government’s shift is that any import of Russian oil at prices higher than $60 a barrel attracts US sanctions, and the US is now more aggressively sanctioning tankers that are in ‘violation’ of this dictate. In November 2023, three vessels which regularly transported Russian oil to the Indian Oil Corporation (IOC) were sanctioned by the US.[25]

On January 5, Bloomberg reported that 14 oil tankers bearing 11 billion barrels of Russian oil, heading to India, “have either been dithering, u-turned or switched off equipment that informs digital tracking systems of their location and what they’re doing over the past month or so…. The signs of possible disruption come just weeks after the US Treasury imposed its most wide-ranging sanctions on Russian oil traders and state shipping company Sovcomflot since the war on Ukraine began.”[26]

This is pushing India to shift to other sources: Vessel tracking agencies reported that at least five cargoes of oil from Russia’s Sakhalin, originally destined for India’s IOC, were now heading to other locations, likely China, and IOC had to scramble to make up the shortfall with Saudi imports,[27] which are more expensive.[28] Since India was importing Russian oil precisely because it was cheaper, this forced shift from Russian oil means that it is now having to pay higher prices.

Remarkably, despite these aggressive steps by the US against vessels bound for India, causing India to shift to more expensive sources of oil, the Indian government has maintained complete silence on the subject.

Notes

[1] European Union Council Regulation 2022/1904 of October 6, 2022.

[2] Centre for Research on Energy and Clean Air, The Laundromat: How the price cap coalition whitewashes Russian oil in third countries, undated, https://energyandcleanair.org/publication/the-laundromat-how-the-price-cap-coalition-whitewashes-russian-oil-in-third-countries/

[3] “India’s fuel exports to EU up 572% since Ukraine war”, Times of India, June 14, 2023; “Has India’s appetite for Russian oil peaked? What latest data shows,” Economic Times, July 20, 2023.

[4] https://energyandcleanair.org/june-2023-monthly-snapshot-on-russian-fossil-fuel-exports-sanctions/

[5] Suhasini Haider, “US will not sanction India for buying Russian oil, say senior American officials”, Hindu, February 9, 2023.

[6] “Western countries ‘not unhappy’ that India is buying Russian oil: Hardeep Singh Puri”, PTI, March 15, 2023.

[7] “Jaishankar ‘waiting for a thank you’ as India softens oil markets amid Russia-Ukraine war”, Hindustan Times, November 16, 2023.

[8] Sukalp Sharma, “Discounted Russian crude imports saved Indian refiners $7 billion”, Indian Express, July 5, 2023.

[9] Reliance Industries Ltd Annual Report, 2022-23, p. 104.

[10] Petroleum Policy and Analysis Cell (PPAC), India’s Oil and Gas Ready Reckoner FY 2022-23.

[11] “BPCL expected to report better profit in Q1 FY24”, Hindu Business Line, July 26, 2023.

[12] PPAC, op. cit., p. 111.

[13] Our World in Data, https://ourworldindata.org/grapher/per-capita-oil?tab=table

[14] Office of Foreign Assets Control, United States, “OFAC Alert”, April 17, 2023, https://ofac.treasury.gov/recent-actions/20230417 

[15] “India could buy Russian oil past cap if OPEC+ cuts boost costs”, Bloomberg, April 16, 2023.

[16]  “SBI seeks oil data to avoid sanction risk”, Mint,

[17] S. Dinakar, “Indian purchases of Russian crude slump by record 25% in August”, Business Standard, August 12, 2023.

[18] American Steamship Owners Mutual Protection and Indemnity Association, Inc.

[19] Michelle Wiese Bockmann, “Dark fleet’s biggest shipowner Gatik Ship Management loses western insurance cover”, April 6, 2023. https://lloydslist.maritimeintelligence.informa.com/LL1144635/Dark-fleets-biggest-shipowner-Gatik-Ship-Management-loses-Western-insurance-cover 

[20] Reuters, “Lloyd’s Register drops ships of Indian carrier Gatik Ship Management”, May 26, 2023.

[21] Ibid.

[22] S. Dinakar, “India’s unabated tryst with Russian crude oil is slowly coming to an end”, Business Standard, April 24, 2023.

[23] Shivangi Acharya, Riddhima Talwani, “Indian refiners used yuan to pay for some Russian oil imports, official says”, Reuters, July 14, 2023.

[24] Nidhi Verma, “India’s Russian oil imports drop on pricing, not due to payment woes”, Reuters, January 3, 2024.

[25] Florence Tan, Muyu Xu and Nidhi Verma, “Tankers newly sanctioned by US supplied Russian oil to India”, Reuters, November 17, 2023.

[26] Sherry Su and Julian Lee, “Russia oil tankers do strange things since US sanctions ramp-up”, Bloomberg, January 5, 2024.

[27] Nidhi Verma and Mohi Narayan, “India turns to Saudi as purchases of Russian oil fall in Dec”, Reuters, January 2, 2024.

[28] See the chart in Nidhi Verma, “Indian refiners set to ask for extra Saudi oil after sharp price cut”, Reuters, January 10, 2024.

(To be continued in subsequent issues of Janata Weekly.)

(Research Unit for Political Economy is a trust based in Mumbai that brings out material seeking to explain day-to-day issues of Indian economic life in simple terms and link them with the nature of the country’s political economy.)