India's Oil Imports from Russia and its Effects on Contemporary Geoeconomics
The phenomenon of India being a backdoor for Russian oil exports to Europe is a very interesting development in the current multipolar geopolitical and geoeconomic order. Source of Pictures: Unsplash
The global energy market has been shaken in recent years, as systemic disruptions have impacted global energy supply and demand. As the world progressively recovers from the effects of the COVID-19 pandemic where restrictions led to lowering use of energy, the war in Ukraine since February 2022 has led to renewed disruptions. The European Union, a longtime consumer of Russian hydrocarbons, have imposed economic sanctions against Russia's energy sector which was important to them and tried to diversify its energy sources, both by finding alternative partners (like the US) or speeding the transition to green energy (Council of the European Union, 2023). At the same time, Russia also tried to divert its energy exports towards Asia, including China and India, and have offered its cheap oil and gas for Asian customers. India is one of the countries that have tried to maximise its geoeconomic cloud in the current energy crisis (Sassi, 2022) as India has imported record amounts of oil from Russia and exported similarly large amounts of oil to Europe.
As a regional hegemon in South Asia, India has middle power status which plays an important role in regional dynamics. India has also achieved a rising power mindset because it is based on the emergence of a multipolar world which manifests the opportunities and renewal of India's foreign policy. The new form of India's foreign policy gave rise to an 'economy first' approach by Prime Minister Narendra Modi which was rooted in his desire to create the external conditions needed to advance the domestic economy. By all accounts, India has arrived on the world stage. In the last three decades, India's large and rapidly expanding economy coupled with its huge population and its nuclear powers captured international attention and enhanced the image of India with a profound change (Kukreja, 2020). Meanwhile, the Russian-Ukrainian war accelerated the calculation of the transition. On the one hand, US treaty allies in the Indo-Pacific—Japan, South Korea and Australia—have chosen to castigate Russia through economic sanctions and non-lethal military aid to Ukraine. On the other, a significant number of states—with China and India at the forefront—have remained non-committal. India strives to amplify the voices of the Global South as part of a much larger ambition: to shape a multipolar world that rejects great power politics, reflects today's diversity and hinges on inclusive cooperation (Panda, 2023). India also has good relations with Russia as one its key strategic partners in its vision of a multipolar world.
Even before the war, Russia has had good relations with India in the energy sector. India is involved in oil exploration in the Russian Far East, and Russia is also seen as ‘India’s most reliable energy partner (Donaldson and Nakarni, 2018; Trenin, 2023)’ However, before the war it is estimated that India’s oil imports from Russia was relatively miniscule, especially in comparison to China which is seen as Russia’s main partner in Asia. Since the war, India has significantly increased its oil imports from Russia, By April 2023, it is estimated that India’s seaborne imports of Russian oil have reached nearly 2 millions of barrels per day, almost twice higher in comparison to China (BBC, 2023). The lower price given by Russia is seen as an important motivation for India to get its oil sources from Russia. India’s energy imports from Russia have rose almost tenfold in comparison to pre-war numbers, to the point of over one-thirds of India’s oil imports.
At the same time, India has also increased its energy exports to European Union (EU) member states. It is reported that a huge number of Indian oil exports to the European Union were made with oil refined in Russia. However, the EU is also aware of this situation and its foreign policy chief, Josep Borrell, who has called for a crackdown of Russian oil being exported to Europe, including diesel (Reuters, 2023). From the Indian side, the European stance was seen as not respecting India’s independent foreign policy principles and as colonial-style ‘whining’. Regardless, India has become one of the EU’s biggest direct energy sources, even becoming the largest supplier for refined fuels in Europe (Al Jazeera 2023)
Most people see the impact of the Russian War on Ukraine as a huge loss. However, the fact is that the war also has quite serious implications from a geoeconomic perspective. This is because geoeconomically, the Russia-Ukraine war raises the potential for cooperation. This conflict then disrupted the pattern of cooperation that has been seen between Russia and European countries. But on the other hand, India's cooperation with European countries is heating up. Of course, this phenomenon has a positive impact on Asian economic growth, which in 2021 Asian economies constitute 39 per cent of global nominal GDP, making them the single largest continental bloc. Asian exports constituted 36 per cent of global exports, while the five largest Asian economies together — China and Hong Kong, Japan, South Korea, Singapore and India — accounted for a quarter of all global imports (East Asia Forum, 2023). By acting as a 'new supplier’, India—in this case representing Asia—has greatly reduced the impact of Western sanctions. While sanctions have reduced Russia's growth potential, its economy has been sustained by a major trade realignment. This geoeconomic reality seems to be profitable for both European and Asian countries, as India’s independent policy has opened possibilities of a more dynamic geoeconomic order.
The phenomenon of India being a backdoor for Russian oil exports to Europe is a very interesting development in the current multipolar geopolitical and geoeconomic order. It could be concluded that the landscape of international political economy has given more room for maneuver for non-Western powers, as Western powers have their power relatively reduced due to economic stagnation after the financial crisis of 2008 as well as the rise of non-Western centres of economic power, including BRICS and emerging economies like Indonesia. For Indonesia, two takeaways could be taken. First, Indonesia should be able to manage independently as an emerging power its foreign policy choices and not succumb towards external economic pressure from great powers. Secondly, economic resilience should be built in the current situation of de-globalisation as well as fragmentation of the international political economy as sanctions and restrictions are playing a bigger role in comparison to an open economy. The role of India, as an aspiring global actor in international economy trying to act independently in its economic relations could be a mirror for Indonesia’s own ambitions as a regional economic power.
References
Al Jazeera (2023), EU to curb Indian fuel imports made with Russian oil: Report. Accessed July 1,https://www.aljazeera.com/news/2023/5/16/eu-to-curb-indian-fuel-imports-made-with-russian-oil-report
Councll of the European Union, ‘EU sanctions against Russia explained’. Accessed June 29, https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-against-russia-over-ukraine/sanctions-against-russia-explained/
Donaldson, R. and Nakarni, V.,(2018) Foreign Policy of Russia: Changing Systems, Enduring Interests, London: Routledge.
Kukreja, V.. (2020). India in the Emergent Multipolar World Order: Dynamics and Strategic Challenges, Vol. 76.
Mulder, N. (2023). Asian economic heft keeps Russia’s economy afloat. Accessed July 1, https://www.eastasiaforum.org/2023/06/11/asian-economic-heft-keeps-russias-economy-afloat/
Panda, J. P. (2023). India in a World of Asymmetrical Multipolarity, Vol. 15, pp. 18-22.
Reuters (2023), Borrell urges EU to crack down on imports of Indian fuels made with Russian oil -FT. , Accessed June 30, https://www.reuters.com/business/energy/borrell-urges-eu-crack-down-imports-indian-fuels-made-with-russian-oil-ft-2023-05-16/
Sassi, F. (2023). Russia’s energy game in Asia. Accessed June 29, https://thediplomat.com/2022/09/russias-energy-game-in-asia/
Trenin, D. (2023), Noviy Balans Sil: Rossiya w Poiskakh Mezhdunarodnogo Ravnovesiya. Moscow: Alpina Publishing.