India is to buying more Russian crude than ever as West slaps tougher rules on Russian oil exports. Since the cap was imposed, one tanker a day has sailed out of Russian ports heading towards India’s west coast. That works out to about 1.6 million barrels per day. That’s up by almost 50 per cent from October and November, which were already record breaking months.

India has always bought its oil from giant producers like Iraq and Saudi Arabia which are only five-to-six sailing days away from India. But after the Russia-Ukraine war erupted, India became a huge buyer of Russian oil as it cashed in on discounts offered by sanctions hit Moscow.

Industry estimates put India’s savings from importing discounted Russian oil at more than Rs 35,000 crore since Moscow invaded Ukraine in February.

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In a further step to squeeze Moscow’s crude earnings, the G7 countries, the EU and Australia have imposed a price cap of $60 on the global sales of Russian crude. To enforce this rule, they decreed on December 5 that ships carrying oil bought at higher prices won’t be able to get insurance, shipping and banking services from Western countries. Cargoes bought at prices below the cap are exempt from the shipping and services ban.

Russia has refused to sell its crude under the price cap mechanism and India has said it will not adhere to the sanctions on Russian crude. But US officials have said market pressure from the price cap could give Indian and Chinese refiners a significant bargaining chip to obtain even steeper discounts from Russia.

The price caps aim to cut Russia’s oil earnings. Simultaneously, though, the G7 countries don’t want to close off the flow of Russian oil totally because they fear this could lead to global shortages and send oil prices through the roof.

When oil prices rocketed to $130 in midway through the year. The Indian companies were getting giant discounts of around $30. They were then re-exporting the refined oil at global prices, mostly to southeast Asian countries.

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Brent crude, a benchmark of oil prices in Europe and Asia, is hovering around $75. Prices have slumped as Western economies have been hit by recession fears and so demand has fallen. “The actual discount that the Indian refiners are buying flagship Russian Urals crude is somewhere around $60 a barrel on delivered cargoes,” said Katona.

A huge volume of Russian oil now is competing in Asian markets with output from geographically closer Middle East suppliers so Russia may have to offer even deeper discounts to defray the high costs of the longer voyages required to deliver cargoes from the Baltic, analysts say.

Buying oil from Russia initially landed India in the bad books of the G7 countries. But Oil Minister Hardeep Puri and Foreign Minister S. Jaishankar have been aggressively defending India’s purchases to the global media, insisting as a poor country it must give its own energy needs priority.

“It’s a sensible policy to go where we get the best deal in the interests of the Indian people and that is exactly what we are trying to do,” Jaishankar told parliament last week.

Russia on the weekend also offered India cooperation on leasing and building large capacity ships, according to a statement from the Russian embassy in New Delhi