New Delhi, Aug 30: After Peter Navarro, Senior Counsellor for Trade and Manufacturing at the White House, alleged in an X thread that India has extended a financial lifeline to Russian President Vladimir Putin’s war machine, government sources on Saturday rejected those claims, saying his view emanates from an oversimplistic and incorrect understanding of the global oil supply chain.

In a series of posts, Navarro alleged that New Delhi uses dollars to purchase discounted Russian crude, adding that while American consumers buy Indian goods, India restricts US exports through high tariffs and non-tariff barriers.

However, the reality is far from what Navarro has claimed on social media.

Navarro posted on X: “President Trump’s 50 per cent tariffs on Indian imports are now in effect. This isn’t just about India’s unfair trade—it’s about cutting off the financial lifeline India has extended to Putin’s war machine.”

However, this view emanates from an oversimplistic and incorrect understanding of the global oil supply chain.

According to government sources, it also completely ignores various set of decisions taken by G7/EU nations in the last 3 years, including 18 rounds of price cap sanction packages, aimed at ensuring that Russian crude oil keeps flowing, albeit at a price lower than the prevailing international price.

Russia, the world’s second-largest crude oil producer with an output of around 9.5 million barrels/day (nearly 10 per cent of global demand), is also the second-largest exporter, shipping about 4.5 mb/d of crude and 2.3 mb/d of refined products.

In March 2022, fears of Russian oil being pushed out of the market and the consequent dislocation of traditional trade flows drove Brent crude prices to soar to $137 per barrel. If India were to stop buying Russian crude oil today, global crude prices could jump to over 200 dollars a barrel for all global consumers.

According to government sources, India has not extended any financial lifeline to Putin’s war machine. If at all, India has extended a financial lifeline to all global citizens by ensuring that oil kept flowing, global prices were stable, markets were balanced, while preventing “war profiteering” by any nation.

Who benefited from India’s role? The West itself. US Treasury Secretary Janet Yellen said America was happy with India’s purchases. Ambassador Eric Garcetti admitted India prevented a price spike. Geoffrey Pyatt called India a key stabiliser.

In another X post, Navarro said: “Here’s how the India-Russia oil mathematics works: American consumers buy Indian goods while India keeps out US exports through high tariffs and non-tariff barriers. India uses our dollars to buy discounted Russian crude.”

However, Indian refiners do not use the US dollar to trade for Russian oil. Purchases are made through traders based in third countries, and transactions are therefore settled in alternative currencies such as AED rather than the US dollar, said sources.

In the aftermath of the Russia-Ukraine war, India was encouraged by the West to buy Russian crude, as removing the second-largest producer with 10 per cent of global production from the international market would have resulted in crude going to USD 200/barrel.

This is the reason why Russian oil has never been sanctioned by the US/EU/G7, but it was placed under a G7/EU price-cap mechanism. India’s crude purchases from Russia have remained legitimate and within the framework of all international norms, including the price cap.

At no point of time has the US administration ever conveyed to India either verbally or through any diplomatic channel that it should stop buying Russian crude oil. Suddenly, when the trade negotiations did not materialise as per the desires of the US administration, rash pronouncements have been made through social media and newspaper articles, the government sources noted.

According to Navarro, Indian refiners, with their silent Russian partners, refine and flip the black-market oil for big profits on the international market – while Russia pockets hard currency to fund its war on Ukraine.

This claim is also untrue.

Russian oil has never been sanctioned by the US/EU/G7, unlike Iranian and Venezuelan Oil, which is indeed sanctioned (which is not bought by our oil PSUs).

Russian oil was subjected to a G7/EU price-cap mechanism designed to prevent "war profiteering" while ensuring global supplies continued to flow.

“If the United States really wanted to stop the flow of Russian oil, then it should have sanctioned Russian crude. Perhaps the fear of spiralling prices has prevented the US from doing so. Also, India has refrained from LNG and LPG from any of the sanctioned projects from Russia,” according to sources.

In fact, the 18th package of EU sanctions has left Nayara Energy, a 20 MMTPA refinery, fully dependent on Russian oil. What was earlier 60-65 per cent of its crude intake from Russia has now become 100 per cent.

Navarro claims that before Russia’s invasion of Ukraine, Russian oil made up less than 1 per cent of India’s imports. Today, it is over 30 per cent — more than 1.5 million barrels a day. This surge isn’t driven by domestic demand — “it's driven by Indian profiteers and carries an added price of blood and devastation in Ukraine”.

In fact, India has been the only major economy in the world where the prices of petrol and diesel were reduced post the Russia-Ukraine crisis in May 2022. In March 2022, fears of Russian oil being pushed out of the market and the consequent dislocation of traditional trade flows drove Brent crude prices to soar to $137 per barrel.

But the prices of petrol and diesel could not have been increased for the 1.4 billion people in India. Therefore, the Government of India took several measures: Oil PSUs did not increase prices and were making a net cash loss of up to Rs 10/litre in diesel (despite Russian crude discounts). Cumulative loss from April 22-January 23 of 3 oil PSUs was Rs 21,000 crore (USD 2.5 billion).

As private refiners saw an opportunity to not sell in the domestic market and export, an export tax was levied to prevent any supernormal profits. The government also framed new rules requiring oil companies exporting petrol to sell in the domestic market at least the equivalent of 50 per cent of the amount sold to overseas customers for the fiscal year ending March 31, 2023. For diesel, this requirement was put at 30 per cent of the volume exported. This ensured uninterrupted fuel supplies so that not a single retail outlet ran dry.

The government and many state governments reduced taxes to the tune of Rs 10 per litre in May 2022.

These decisive actions demonstrate that India stood firmly with its citizens during a period of global turmoil, acting in the true spirit of democracy and not in the service of oligarchs or vested interests.

Without this intervention, global oil prices could have exceeded the March 2022 peak, reaching US$200 per barrel, intensifying inflation worldwide, said sources.

They also said that India has not sold any cheap Russian crude to anyone else. It has converted some part of the Russian crude (and hundreds of grades of other global crudes) into petroleum products and used most of the refined products for its citizens.

Refining crude and exporting fuels is how the global supply chain functions. After banning Russian crude, Europe relied on Indian diesel and jet fuel. That is not laundering, it is stabilising markets, and the claims of super-normal profits by refining entities are vastly exaggerated.

Navarro’s claim that while the United States pays to arm Ukraine, India bankrolls Russia even as it slaps some of the world’s highest tariffs on US goods, which in turn punishes American exporters, and we run a $50-billion trade deficit with India — and they’re using our dollars to buy Russian oil, also does not hold water.

“This is a hollow argument. The US runs trade deficits with China, the EU and Mexico. India’s $50 billion deficit is small in comparison. At the same time India buys billions in US goods, including aircraft, LNG, defence equipment and technology,” according to sources.

(IANS)

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