While acknowledging that the decision of Organisation of Petroleum Exporting Countries (OPEC)+ countries, that includes Russia, to cut production by two million barrels a day, is a matter of sovereign right, India has indicated that the decision has caught many by surprise and it will have an impact on global prices, inflationary cycle and recessionary climate building up in other parts of the world.
Speaking to reporters in Washington DC, Union minister of petroleum and natural gas Hardeep Singh Puri, while expressing the confidence that India will be able to navigate the situation, said, "At the end of the day, the amount of energy that is released by producers and suppliers matches the demand that there is in the market and there is an equilibrium, you will have market forces playing out. How much energy you release will have an impact on price levels."
On Friday, Puri also participated in the second US-India Strategic Clean Energy Partnership ministerial, with his counterpart, US Secretary of Energy, Jennifer Granholm. The two sides discussing deepening their partnership across five pillars — responsible oil and gas, power and energy efficiency, renewable energy, sustainable growth and emerging fuel and technologies. During the discussion, Puri proposed the creation of an India-US green corridor to create an institutional mechanism to deepen ties on green, to which the US side responded positively.
On OPEC+'s decision, which has shaken global energy markets, Puri said that it had been widely commented upon, and how much of the proposed cuts absorbs lesser production from earlier and will involve fresh cuts "will be carefully studied".
US President Joe Biden has already said that he is disappointed with the decision. Washington is unhappy with both the implications of OPEC's decision in its larger plan to isolate Russia and squeeze Vladimir Putin of oil revenues; domestically, the Democratic Party see the OPEC+ move as being driven to hurt the party's prospects in the upcoming midterm elections where inflation is a major issue.
Puri said that the market was preparing for a one-million-barrel cut. "The announcement of a two-million-barrel cut has taken large parts of the world by surprise and questions are being asked. It stands to reason that if there is a large shortfall in the amount of energy that is released in the markets, then prices will escalate and prices escalating will in turn exacerbate movement towards recession which in turn will lead to loss of demand. So, it becomes a vicious cycle."
The minister said that decision had been taken, but all decisions with global ramifications have both "intended and unintended consequences".
"On India's part, we are very confident of being able to navigate through the situation. Obviously when prices go up, energy affordability and security is a major concern."
When asked specifically if India was unhappy with the decision given its consequences, Puri said that India had traditionally taken the view that it was the sovereign right of countries to decide how much to produce and put in the market. "If oil prices shoot up and go back to where they were, it will affect the global economy…. What has happened is likely to be scrutinised very carefully. I am told that there were assurances given that they were not planning to do this."
Hardeep Sing Puri said India has not been told by anyone to stop buying oil from Russia. The Indian government has a moral duty to provide energy to its citizens and it will continue to buy oil from wherever it has to as this kind of a discussion can not be taken to the consuming popultion, the union minister said in Washington after his bilateral meeting with US energy secretary Jennifer Granholm. "If you are clear about your policy, which means you believe in energy security and energy affordability, you will buy from wherever you have to purchase energy from sources," the minister said.
"India will buy oil from wherever it has to for the simple reason that this kind of a discussion cannot be taken to the consuming population of India," the minister said reiterating New Delhi's stand on buying oil from Russia amid the ongoing Ukraine war.
"Have I been told by anyone to stop buying Russian oil? The answer is a categorical No," the minister said.
"There has been a fair amount of misconception on energy buys from Russia. Typically what Europe buys in one afternoon is what we buy in a quarter. We ended the financial year with a total amount of Russian oil import of 0.2%. Yes when 24th February took place, and in the following months imports from Russia significantly arose as a result of the dislocation in the market," Hardeep Singh Puri said.
"But subsequently, other suppliers stepped in. And I think, in the following months, another middle-eastern supplier was in the No 2 situation. And Saudis were No 1 always and one quarter I think Russia moved up," the minister said.
"Very often people don't understand how the oil trade takes place. If I have to buy, let's say, crude from a very distant place, where the price of icebreaker has to go in...it does not work out. For me, it's much easier to buy from a proximate point. Let's say in the Gulf. The oil markets will play and we have to play the market card to choose," the minister said.
External affairs minister S Jaishankar, on several platforms, explained what went behind India's decision to continue buying Russian oil. Recently, Jaishankar said PM Modi's advice on the issue was to do what is best for the nation. "Due to the Russia-Ukraine conflict, petrol prices doubled. We had pressure from where to buy the oil but PM Modi and the government were of the view that we have to do what is the best for our nation," Jaishankar said.