Is India Benefitting from Russia's Invasion of Ukraine?

And how should you as a citizen feel about it?

In the wake of accusations that amount to war crimes committed in Ukraine by the Russian state and army, it is important to understand India’s relationship with Russia and what it means for us as a nation and citizens of the country.

What Are India’s Major Imports from Russia?

By a large distance, the largest import from Russia is crude oil, petroleum products and natural gas. Last year total imports from Russia stood at 8.7 billion dollars, of which 3.53 billion dollars was related to liquid and gas fossil fuels. India imported 2% of its overall oil requirement from Russia.

Holistic data is not easy to come by- but to put our current trade with Russia in context- in 2021, India’s monthly peak purchase of barrels of crude oil was 2 million barrels. This year in March 2022 it was more than 8 million barrels.

Other notable imports are precious stones and metals and fertilisers to name a few. Data is not available for how much we are importing of these materials at the moment compared to previously.

How is India Benefitting From Fossil Fuel Trade With Russia Now?

India is said to be getting significant discounts from Russia for continuing purchases. As much as 35$ dollars per barrel according to an article written on the 1st of April. This could be even more now, depending on the global price of crude oil. If India were to continue importing more oil from Russia at these discounted rates, it could end up saving the country billions of dollars- a back-of-the-envelope calculation indicates that India has already saved in March and April compared to last year about 455 million dollars.

This is quite strange because as we know, fuel prices in India have been going up steadily since a few weeks after election results in several key states were declared. Where is the benefit in cost being passed on to?

In India, the key cost of fuel is government excise duty. Collections of taxes at the central level have gradually increased, while state taxes have remained relatively flat. The source for the below graph is this article, which got the graph from Petroleum Planning & Analysis Cell (PPAC).

This now begs the question of why taxes are constantly increasing during times of historically low purchases like in April 2020 or now when India is gaining significant discounts from Russia.

Perhaps the only benefit is for the business class and indeed businesses who have contributed tens of thousands of crores less due to a tax code revision instituted by the central government. This reduction in tax revenue had to be made up somehow in order to meet India’s budget requirements, and this can be clearly linked to the hikes in excise duty on petroleum products despite advantages that have come India’s way in the market. Unfortunately, the common man will end up being the one’s paying the most for this as inflation surges. It is not even clear that the economy or businesses (other than large ones- perhaps, such as Reliance or Adani group) have benefitted from this policy. It seems that the greatest benefit of trading with Russia may be plugging a hole in the government revenues more than anything else.

India is also looking into piggybacking on a Russian SWIFT alternative in order to facilitate trade. This will benefit the country even more as India plans to plug Russia’s import gaps due to sanctions with exports from India.

Why has this happened and What does this mean for the country?

India has of course been a strategic ally of Russia for many decades. Around 46% of India’s weapons imports over the last 5 years alone have come from Russia. This was even higher in the decades prior.

In fact, India depended upon Russia for many things- from fertilisers to technology, support various ways for India’s energy and weapons nuclear program, to consumer and industrial goods such as refrigerators and tractors. These days India trades less for consumer and industrial products, but more for raw materials such as precious metals, stones, fossil fuels, etc. India is not dependent on Russia, as evidenced by Russia not even being one of India’s top 20 trade partners.

But India has taken a neutral position on the war in Ukraine. This in my opinion is because of a few things-

· Authoritarian leaders and tyrants tend to stick together. You can see this in verbal and practical support offered by leaders from countries with low democracy indexes. India and Russia are notably low on these measures. For a good article explaining the decline of democracy, check this article.

· The US and the West need India as a counterbalance to China in the coming decades, and are therefore unwilling to push India and overtly criticise it in many ways, not just in terms of Russia’s invasion of Ukraine.

· India has been historically unhappy with the West, the US in particular in terms of support in weapons and related technology- this led India to be militarily closer to Russia.

· It is simply smart to use Russia’s offer of oil discounts to soften the blow of globally soaring oil prices.

What this means is that you can expect the Indian state to continue to stay silent or at best express concern (while expressing the need to verify) about atrocities committed in Ukraine, while also not outright condemning Russia. This has all been occurring and will continue to occur with India of course staying neutral or abstaining in UN votes of various kinds to denounce and punish Russia.

What Does This Mean For Us As Citizens And Voters?

It's quite simple really.

If a citizen does not support war crimes and crimes against humanity- and in fact war in general, that citizen should be pretty upset with India’s stance on Russia and the invasion of Ukraine, and that the benefits are ultimately going to India's crony capitalists rather than the average person.

If a citizen were to be generally ambiguous towards the seemingly abstract suffering of people thousands of kilometers away, you may laud India as being strategically astute. In fact, you may outright support Russia for slightly perplexing and alarming reasons.

If one were to think about it as a voter, see above and decide which statement you relate to the most. Elections happen frequently in India, and it is one way to make your voice heard. Remember that there is a general election in two years, and think about what this government would do if a similar situation were to come up again.