India has made an unusual request to its state-run oil refiners and private processor Reliance Industries Ltd. (RIL) to jointly negotiate a long-term supply deal with Russia. The primary objective is to secure a stable supply of crude oil and protect the nation's economy from volatile prices.
India has been a major buyer of Russian crude oil since the invasion of Ukraine. However, tighter enforcement of US sanctions has impacted the trade, resulting in higher oil prices for Indian refiners.
According to a report by Business Standard, anonymous sources said: "The government wants its refiners to lock in at least a third of their contracted supply from Russia at a fixed discount to help shield the nation’s economy from volatile prices." The request to collaborate was informal, they added.
The Indian government aims to enhance the bargaining power of state-run oil processors (Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp.) during supply negotiations. Instead of competing individually, they are encouraged to collaborate.
While the government's appeal for collaboration was informal, Reliance Industries Ltd. (RIL) remains cautious. As a private refiner and competitor in the domestic fuel market, RIL is unlikely to share sensitive information with state oil refiners.
State refiners have been seeking oil at a discount of more than $5 per barrel to Dated Brent, but Moscow is offering crude at a discount of $3 and is showing an unwillingness to budge, according to the people. The discount for one Russian grade blew out to more than $30 after the war before narrowing.
Indian Oil Corp. previously had a long-term supply deal with Russia, but that expired at the end of March and hasn’t been renewed due to a lack of consensus on volumes and price.
Finding a balance between competition and cooperation will be crucial. State-run refiners must work together without compromising their individual interests. The ongoing India-Russia ties and geopolitical dynamics play a role in shaping these negotiations. India seeks stability in energy supplies while navigating global complexities.
