In recent advancements, India has signed a deal with Russia for the supply of crude oil. This is significant in many ways. India’s Reliance Industries and Russia’s Rosneft have signed a 13 billion dollar deal for the supply of crude oil with this deal India has done its largest oil deal with Russia.

Committing to supply about 500000 barrels per day of crude oil for 10 years. This deal comes forward amid China’s economic slowdown and Russia is now mainly focusing on growing the Crude oil market India being one of the biggest oil markets.

This deal constitutes about 0.5 percent of the global crude supply. So how it is going to change the market situation for other players?

Now the Sanctions have already been imposed on Russia from the West, but still, India went for the deal as one of the boldest steps and at the same time new Trump administration is taking charge.

India may benefit from the discount of about 3-4 dollars per barrel, but is the move a welcoming step for the West especially among the lot sanctions?

Impact of this deal on OPEC+ countries:

OPEC+ is the organization of the Petroleum exporting countries and other oil-producing countries. Its main goal is to control the global oil supply.

Now Russia is among the leaders of the group. With this deal, Russia has side-lined other OPEC+ members.

It means the Oil we may buy from Saudi Arabia or UAE, we are now buying from Russia. This step may cause friction between Russia and other OPEC+ members.

This step is simply encroaching on the share of gulf producers in the high-potential and fast-growing oil markets. India is one the fastest growing market.

As previously the competition for the share of the Indian market was increasing with this step of Russia it is now intensifying, and it has become more after the economic slowdown in China. Now major oil-producing countries are focusing on India as it has a high potential and is the fastest-growing economy.

Facts in the deal:

Reliance will receive 21-22 Aframa-sized cargoes and about three to four oil cargoes per month at its Jamnagar refinery.

The Pricing of the Crude oil will be market-driven for the first year.

Reliance Industries will now account for around half of Rosneft’s seaborne exports.

Impact of the sanctions:

This deal is now facing a big challenge due to the increasing sanctions from the West on Russia especially the UK, USA, EU, etc. and this may lead to some problems for the importing countries.

As already seen from the fact that the sanctions had impacted Russia’s Arctic LNG operations.

The reason for this is that most of the operational parts and access to the ports of the west were rejected for the LNG operations and it is almost steady.

It has limited access to the European shipyards.

Even the sanctions may lead to an increase in oil prices and may lead to destabilize the deal.

Reason for India to make this deal:

In July last year, India became the largest importer of Russian oil surpassing China. The Data shows that India imported about 2.07 million barrels per day of Crude oil from Russia in July and China imported about 1.76 million barrels per day.

The main reason to go ahead with this deal is that India is now trying to diversify its oil supply to improve the oil demand needs and also to lessen the economic burden and also trying to reduce the influence of the West and its sanctions on its oil imports.

Even last month PM Modi in his visit to Guyana emphasized the need for energy security and also said that he see Guyana as the key to India’s energy security.

Secondly, the trade may take place in Rupee or other currency which may lead to a decrease in the dominance of USD in the oil market.

India may pay in Rupee, Dirhams, and yen and even in Rubles too.

The major reason for India to go ahead with this deal is the payment mode and it may reserve the foreign reserves and India can use other payment options.

A potential route for the transport of the oil:

Chennai Vladivostok maritime corridor is now operational and most of the cargo and container ships are arriving and they are operating in this route. This route is also known as the Eastern Maritime Corridor. This corridor reduces the time by 16 days and distance up to 35%-40%.

With this route, the time for the transport will come down to about 25-27 days as compared to 40 days by the previous route.

Way Ahead:

This deal has sent out a clear message that it is now trying to diversify its oil supply needs and also looking for potential markets to buy the oil and meet its energy demands.

It has also made clear with this deal that it is the fastest growing economy and will widen its sources, especially for the energy supply needs.