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News: India’s imports of Russian coal in June are reportedly expected to be the highest in at least seven and a half years.
This comes alongside Russia displacing Saudi Arabia to become India’s second-largest oil supplier after Iraq in May.
Neither of these are unwelcome developments, nor the fact that India has, for the first time, bought a large urea consignment from the US.
Why India’s trade with Russia has increased?
Russian traders are offering discounts of 25-30% for thermal coal and accepting payment in rupees. Hence, bulk purchases by Indian cement and steel companies have spiked in recent weeks.
Diversifying supply sources and buying at the lowest price for equivalent quality is also in national interest.
– It has, likewise, become economical now to import urea from the US, which is quoting $55-75 per tonne cheaper than that from the Middle East, notwithstanding higher freight costs and longer voyage time.
India’s imports of crude petroleum, coal and finished fertilisers in 2021-22 have increased, as against the previous fiscal’s corresponding levels. The country’s merchandise trade deficit hit a record $190.71 billion in 2021-22.
– A further widening of its deficits, whether external or fiscal, and uncontrolled weakening of the rupee, both external and internal purchasing value, is something India cannot afford.
If importing more coal and oil from Russia or urea from the US forces existing suppliers — the likes of Australia, Indonesia, Saudi Arabia and United Arab Emirates — to lower prices, it would aid in macroeconomic stability necessary for long-term growth.
India and China purchasing more from Russia, also reduces the pressure on the international oil market.
– Imagine where crude prices would have reached had these two Asian countries not stepped up buying from Russia.
Way forward
The growing trade with Russia may not be to the West’s liking. While the invasion of Ukraine deserves the widest condemnation, financial sanctions and not buying from Russia don’t really help.
That the economic and national interests of other countries overrides its geopolitical priorities is a reality that the West has to acknowledge and accept, sooner than later.
Source: This post is based on the article “India buys more coal from Russia, and urea from the US — diversifying supply sources is good policy” published in The Indian Express on 21st June 22.
