Mukesh Ambani's RIL Is India's Biggest Beneficiary Of Discounted Russian Crude Oil

(MENAFN- The Arabian Post)

By Nantoo Banerjee

One's pain could be another's gain. The phrase aptly describes those big business gainers across the world out of the three-and-a-half-year-old Russia-Ukraine war, killing thousands of soldiers and civilians on both sides. The list of such gainers may be short but very impressive. They include some of the giant US defence manufacturers such as Lockheed Martin, Boeing, and Raytheon and oil firms like ExxonMobil and Chevron; Russia's Rosneft, Novatek and Sibur and Russian fertiliser exporters Uralchem and PhosAgro; Communist China's major refineries; and India's own Reliance Industries Limited (RIL). During the first six months of the current year, RIL is believed to have made or saved nearly $571 million from Russian crude oil purchases. RIL may be easily the biggest Indian business gainer of the ongoing Russia-Ukraine war and NATO trade and financial sanctions on Russia.

White House trade counsellor Peter Navarro may not be entirely wrong to say that“Brahmins (a metaphor of elites) are profiteering at the expense of Indian people.” The cheaper import of Russian oil since last year by Indian refineries, including the country's state sector oil companies, did not benefit India's millions of domestic petrol and diesel consumers although the oil refiners made big profits. RIL sold around 35 percent of its products, including refined oil, in the Indian market in fiscal year 2024. Recent reports indicate that RIL's Jamnagar refinery sold 33 percent of its production in the domestic market. India's other major private refiner, Nayara Energy, in which Russian investors hold a single majority stake, sells approximately 70-75 percent of its refined oil products in the Indian market. The rest are exported. Nayara's domestic focus is supported by its network of over 6,500 fuel stations across the country.

While the two private petroleum crude refiners consumed a significant portion India's total import of Russian oil, the country's state-owned refiners like Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) purchase Russian oil from the spot market. They too benefited from the discounted price of Russian oil. India, as a whole, saved about $3.8 billion from Russian oil purchases during the current year alone. However, there was no effort on the part of the government to induce the oil refineries to even partly pass on the benefit to the country's consumers. The last time India reduced the retail price of fuel was on March 14, 2024, just before the Lok Sabha elections. The prices were cut by only Rs.2 per litre. This came after a period of price freezes that began on May 22, 2022. Clearly, a handful of Indian oil refineries, led by RIL, are pocketing the high profits from purchases of discounted Russian oil.

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In fact, the latest reports suggest that Russian crude has become even cheaper as the India government is faced with sustained pressure from the Trump administration to cut oil trade with Russia. Lately, the price of Russian Urals crude has dipped to a discount of $3 to $4 a barrel to Brent on a delivery basis. Imported primarily by the two private refiners, RIL and Nayara, India's purchase of Ural crude is significant and ongoing. During the first six months of the current year, India imported over 231 million barrels of crude oil. The two private refiners have secured a long-term deal with the Russian producers and are now the largest buyers of Urals. India purchased about 80 percent of Russia's seaborne Urals exports this year, a policy driven by commercial viability and national interest amidst Western pressure. RIL and Nayara Energy account for 45 percent of India's Urals imports, with Reliance's Urals share rising to 36 percent of its total crude purchases and Nayara's at 72 percent. Incidentally, the prices of US Brent crude are edging up as the US crude stocks drop.

Earlier this year, RIL signed a 10-year deal with Rosneft to increase its purchases of Russian crude up to 500,000 barrels per day, making the Indian company the world's largest buyer of Urals. The 10-year agreement between the two amounts to 0.5 percent of global oil supply and is valued at roughly $13 billion per year at current prices. The deal is supposed to ensure stability in crude oil flows. For Rosneft, it means a major effort to expand its presence in India.

The access to cheaper crude has boosted RIL's gross refining margin (GRM), a key indicator of profitability in the refining business. RIL's GRM was $8.5 per barrel in FY2025, outperforming its domestic peers. It is not clear why India's state-owned oil refiners have been lacking initiative in buying Russian crude as aggressively as RIL. India's government-controlled refiners collectively have a much larger refining capacity than RIL, which operates the world's largest single-site refinery. With nine refineries, the public sector Indian Oil Corporation is a major player, accounting for a significant portion of the country's total refining capacity.

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As mentioned earlier, the Russia-Ukraine war has many global business benefactors of which India's RIL is one. The conflict has created significant new business opportunities across Asia and the western world. Global oil and gas majors such as ExxonMobil, Chevron, BP, and Shell have recorded massive profits since the Russian invasion. The European bid to cut dependence on Russian energy has redirected demand toward other suppliers from countries like the US (supplying liquefied natural gas or LNG), Qatar, and Norway. Companies like Lockheed Martin, Raytheon, Northrop Grumman, and General Dynamics have profited from high demand for weapons and munitions, such as Javelin missiles and HIMARS. Some of the world's top agricultural commodity traders, such as ADM, Bunge, Cargill, and Louis Dreyfus - known as the“ABCD” quartet – are having big profit surge by rerouting and managing global grain flows.

The Russia-Ukraine war has benefited Russian businesses as well, from import substitution to the acquisition of highly discounted foreign assets as those Western operators exited the Russian market. Russian billionaires profited by acquiring such assets left behind by departing Western companies in sectors like energy, retail, and technology. Russian industries, including pharmaceuticals, retail, and manufacturing, have grown by filling the market void created by the exit of foreign competitors. Cybersecurity firm Kaspersky Lab took over software infrastructure development from existing foreign companies.

Russian retailer Gloria Jeans expanded by acquiring prime retail locations vacated by companies like H&M and Zara. The realignment of trade flows has also created opportunities for many countries. West Asian energy producers are witnessing an increase in export revenues and economic benefits. Turkey has become a potential energy hub for European imports and a hub for re-exporting Russian energy. In addition to increasing its purchase of Russian oil, China also resold its own shipments of liquefied natural gas (LNG) to Europe at a profit. Obviously, these business establishments may wish the Russia-Ukraine war to continue as long as possible for their commercial benefits. (IPA Service )

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