Despite criticism from the West, India is not backing down on its commitment to buying Russian oil.
As Brent crude retreats back to near $100 a barrel, foreign policy experts say India's drive to buy oil will only escalate as inflation concerns take center stage.
As the world's third-largest oil importer, India is vulnerable to rising oil prices. Further, pressure is growing on Prime Minister Narendra Modi to tame rampant inflation for his 1.3 billion citizens.
Economists say for every $1 increase in the price of oil, India's import bill increases by $2.1 billion.Since February, due to geopolitical tensions, Russian oil imports to India have surged. Early data from June shows India's supply of Russian crude reached nearly 1 million barrels per day, up from 800,000 barrels per day in May, according to Again Capital. Russian oil currently accounts for 25% of India's energy imports, due in part to the sanctions placed on Iran. Still, critics blame India for financing Russia's wartime efforts in Ukraine.However, Americans frustrated with higher prices should take note that if India were not buying Russian oil in such volumes as it is now, oil prices would probably be $8-10 higher. Experts say recession concerns could reduce the amount of oil India buys, but they are making no major changes in estimates at this point.Last week, G7 leaders proposed implementing a price cap on Russian oil. However, strategists, including RBC Capital's Helima Croft, say this could backfire, especially now that the price of oil is trading off its highs.Foreign policy experts believe it is unlikely that the US would punish India for its oil purchases, given the important role the country plays in the US's efforts to challenge China's rise in the East.The relationship between Russia and India also has considerable history, going back more than 50 years."This was the 1970s... during the war between India and Pakistan. Russia stood by India whereas the US condemned India," said Akhil Bery, director of South Asia Initiatives at the Asia Society Policy Institute. At the time, then-President Richard Nixon and Secretary of State Henry Kissinger were working with Pakistan to open China to the West, he said.While US alliances in Asia have dramatically changed and its relationship with India has improved, officials still remember the conflict in the 1970s.The Council on Foreign Relations' Miller said that as the geopolitical threat of China grows, India will continue to maintain relations with Russia, which continues to be its No. 1 provider of defense equipment.Although India has diversified its military imports from Russia since the end of the Cold War, the fact remains that much of its military hardware is still Russian, which means that it has to rely on Russia for parts, upgrades and software.
