It is not often that the Ministry for Petroleum & Natural Gas comes out with a strong statement reacting to an analyst report.

But on May 3, through a series of strongly worded tweets, the Ministry said: “Report by @CREACleanAir is misleading and is a deceptive effort to tarnish India’s image, the fourth largest oil refining country globally. It shows a lack of understanding of global supply demand dynamics and India’s long history as a major refined products exporter...”

A report by Helsinki-based Centre for Research on Energy and Clear Air, titled ‘The Laundromat: How the price cap coalition whitewashes Russian oil in third countries’, put India among the group of ‘laundromat’ countries, which buys Russian crude and sells refined products into Europe and G7 countries.

Why is India seen as an erring nation, when legally and commercially it is doing no wrong? Many here see it as an effort by a section of the developed world to target India, as India has emerged as a huge consumer market and Russian oil purchases by India and other markets leads to stability in oil prices.

External Affairs Minister S Jaishankar has been quoted as saying that “India is not a conduit for Russian oil sales to other countries.”

He had categorically denied international media reports that suggest Indian private refiners are “profiteering” by buying Russian crude at discounted rates and then selling it to other buyers at much higher prices.

“There’s an enormous shortage of oil...Getting access to oil is difficult. A country like India would be crazy to get oil from somebody and sell it to somebody else. This is nonsense,” he had said when asked about the reports at an international forum.

According to Lauri Myllyvirta, lead analyst, Centre for Research on Energy and Clean Air, and member of the team that put together this report, “The EU, most of G7 and Australia have banned or limited imports of Russian crude oil and oil products, leading to a significant fall in Russia’s oil prices and export revenues. However, these price cap coalition countries have increased imports of refined oil products from countries that have become the largest importers of Russian crude. This is a major loophole that can undermine the impact of the sanctions on Russia.”

Is this double standards on part of nations imposing sanctions on Russia?

The ‘loopholes’

“The main reason for the loopholes in the oil sanctions is caution over disrupting the global oil markets and oil prices. The EU has taken a very gradual approach, leaving a 6-month transition period for its own ban on crude oil imports, creating a very soft and porous enforcement system for the oil price cap mechanism, and leaving the loophole for refining in third countries. As Russia continues its aggression against Ukraine, and the oil market finds ways to work around the measures in place against Russia, there will be a need to close some of the loopholes,” he said.

“From India’s perspective, the US government’s admonition of India’s oil imports from Russia soon after the start of the invasion is remembered very well, and it came at a time when even the EU was still importing large amounts of oil from Russia. The US changed approach afterwards and pursued the price cap mechanism instead of trying to pressure more countries to ban oil imports from Russia,” he added.

According to Myllyvirta, “I don’t think it’s a double standard as much as different governments and organisations calling for different measures — some being more concerned about maintaining oil supply to the global market and some more concerned about stemming the flow of money to the Russian military. And in some cases, like with the US government, the same administration calling for two different approaches at different points in time.”

Ministry response

The Petroleum Ministry in its response to the report had further pointed out “Also, #CrudeOil import below $60 from #Russia or elsewhere not under any international embargo. There is also no self-embargo by ‘coalition country’ on buying #Diesel 4m refiners around the world. To use word like ‘Whitewashed oil’ is disingenuous at best or mischievous at worst.”

To which Myllyvirta said, “...Russia’s Urals crude oil sold for more than $60 for much of April, which indicates that the price cap policy was not being followed. We don’t know however where the gap in enforcement was though, and it’s the job of the authorities in the countries where the tankers are owned and insured to enforce the price cap.”

India is free to import or export goods and commodities within terms of international law.

“We used the term “laundromat” to refer to how, in the eyes of import bans instituted by the EU, US and others, Russian crude oil magically turns from an illegal product to one that is legal to import when it is processed into diesel, gasoline or other oil products in third countries. We did not intend to create an impression that those third countries refining the oil are violating laws or regulations that are currently in place. So the way the term has come across in India is not fair to be sure, even if our original meaning should be clear from reading the original report.”

If so, then why is it creating an issue when legally and commercially India is doing nothing wrong?

Clearly, India’s huge consumer base and refining capacity is troubling the other oil producing and refining nations.

“...India’s current capacity is around 250 MMTPA, which is being increased to 450 MMTPA. We are constantly modernising and upgrading our refining industry indigenously,” Prime Minister Narendra Modi had said at the India Energy Week 2023 in February.

So India is doing no wrong by leveraging the opportunities coming its way and it must not buckle under international pressure.