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May 21, 2024

India Urges Unified Front in Russian Oil Negotiations: A Strategic Move Amid Volatile Markets

In an unprecedented move, the Indian government has called upon its state-run oil refiners and the private sector giant Reliance Industries Ltd. to collaboratively negotiate a long-term oil supply agreement with Russia. This strategic request aims to secure a substantial portion of India’s oil supply at a fixed discount, thereby protecting the nation’s economy from the volatility of global oil prices, according to sources familiar with the matter.

Strategic Collaboration Amid Market Uncertainty

The informal request from the government seeks to leverage the collective bargaining power of India’s oil refiners to secure more favorable terms from Russia. By locking in at least a third of their contracted supply at a discounted rate, the government aims to mitigate the economic impact of fluctuating oil prices. However, the collaboration between state-run refiners and Reliance Industries is fraught with challenges due to competitive dynamics within the domestic fuel market.

Despite the potential benefits, Reliance Industries is unlikely to share sensitive market information with state refiners, which complicates the government’s collaborative strategy. The reluctance to share data stems from the competitive nature of the domestic fuel market where Reliance and state-owned companies vie for market share.

Historical Context and Current Challenges

India’s demand for Russian crude has surged since the onset of the Ukraine conflict. However, the increasing enforcement of US sanctions has disrupted this trade, compelling Indian refiners to source more expensive alternatives. The South Asian nation is now urging its state-owned refiners to pool their efforts, enhancing their negotiating power in discussions with Russian suppliers rather than competing against each other.

There is a historical precedent for such collaboration among state refiners. Joint negotiations with suppliers from the Middle East and West Africa have previously resulted in more advantageous terms for India. However, soliciting the involvement of a private refiner like Reliance Industries in these talks is an unusual step.

Negotiation Stalemate and Pricing Discrepancies

State refiners have been striving to secure oil at a discount of over $5 per barrel to the Dated Brent benchmark. However, Russian suppliers have been resistant, offering discounts of only $3 per barrel. This unwillingness to meet the state refiners’ pricing demands has stalled progress. The discount on some Russian oil grades expanded to over $30 per barrel in the immediate aftermath of the war but has since narrowed considerably.

The complexities of securing a long-term deal are further highlighted by Indian Oil Corp.’s recent experiences. The company had a long-term supply agreement with Russia that expired at the end of March. Efforts to renew this contract have been hampered by disagreements over pricing and volume, reflecting the broader challenges faced by Indian refiners in the current geopolitical climate.


The Indian government’s push for a unified approach in negotiating oil supplies with Russia underscores the nation’s strategic efforts to stabilize its energy market amid global uncertainties. While the potential benefits of such collaboration are significant, the competitive landscape and pricing discrepancies present formidable obstacles. As India navigates these challenges, the outcome of these negotiations will have critical implications for the nation’s economic resilience and energy security.

Jhumpa Lahiri

Jhumpa Lahiri

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