The ongoing Russia-Ukraine war in Europe has entered its tenth month now. One of the biggest economic fallouts of the war has been a spike in global energy prices. As a country that imports more than 80% of its energy requirements, India, too, has been affected by the crisis, with inflation staying above the 6% mark – it is the upper limit of RBI’s tolerance band – for the tenth consecutive month now. However, an HT analysis shows that things could have been worse for India had it not found an alternative and discounted source of crude petroleum from Russia after the war erupted. Here are four charts that explain this argument in detail.
India’s imports from Russia have reached an all-time high
According to Centre for Monitoring Indian Economy (CMIE) data, India’s imports from Russia stood at $21.4 billion between April and September 2022. Despite being the import value for just half of the fiscal, this is an all-time high by quite a distance for India’s annual imports from Russia. The second highest number in the annual series is $9.9 billion in 2021-22. For the April-September period in 2021-22, India’s imports from Russia were $4.2 billion.
According to a preliminary official data, India’s merchandise imports from Russia was worth $3.84 billion in October 2022, more than 414% jump over $700 million worth of imports in the same month previous year. Imports mainly comprised energy (crude oil, petroleum products, coal, coke) and fertilisers.
Petroleum products are the biggest item driving Russian imports
CMIE data shows that the single biggest reason for surge in Russian imports is a jump in petroleum products. India imported petroleum products worth $15.6 billion from Russia between April and September 2022. This number was just $3.7 billion in fiscal year 2021-22. For April-September 2021, this number was just $1.6 billion. Monthly data on Russia’s share in India’s crude petroleum imports throws more light on how big the jump has been and continues to increase. CMIE data shows that for the period between April 2013 (the earliest period for which this data is available) and February 2022 (when the Ukraine war started) Russian crude petroleum imports had a share of 5% in India’s total crude petroleum imports in only two months. This number increased to 6.1% in April 2022 and increased almost consistently to reach 22.6% in September 2022, the latest period for which this data is available. In fact, data from the Ministry of Commerce trade database shows that Russia has been the second largest source of crude oil imports in value terms in three out of six months for which data is available for this fiscal.
How cheap is Russian oil compared to rest of the world?
Since official data on the price of crude petroleum imported from Russia is not available, this is not an easy question to answer. However, HT has used disaggregated trade data available at the Ministry of Commerce database to estimate the cost of Russian crude petroleum imports. The ministry’s database gives monthly value and quantity of exports at the disaggregated Harmonized Systems (HS) classification. Using the HS code 27090010 (petroleum crude), it is possible to get monthly value and quantity of crude petroleum from April-September 2022 for various countries, which can be used to calculate unit costs for crude oil imports. An HT analysis of the numbers shows that average price of crude oil imported from Russia during April-September 2022 comes to $96.2 per barrel. This makes Russian imports the cheapest among the top five crude importing countries – they have cumulative value share of 72.9% — to India during this period. To be sure, repeating the same exercise on a monthly basis shows that price of Russian crude has also seen fluctuations during this period and it was the lowest in September 2022.