After Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) has bought two million barrels of Russian crude oil as Indian refiners stepped up efforts to secure Russian oil available at deep discounts. Just like IOC, HPCL also bought Russian Urals crude through European trader Vitol, sources with knowledge of the development said.

Separately, Mangalore Refinery and Petrochemicals Ltd (MRPL) has floated a tender seeking one million barrels of similar crude oil.

Western sanctions on Russia over its invasion of Ukraine has prompted many companies and countries to shun its oil. This has led to Russian crude being available in the market at deep discounts.

To capture the opportunity, Indian refiners are floating tenders to buy such discounted oil. The tenders are mostly won by traders, who would have stocked inventories of the cheap Russian oil.

A report by State Bank of India (SBI) economists showed that the ongoing conflict between Russia and Ukraine might impact certain high-frequency indicators like financial markets, exchange rate and crude prices in the short term for India. However, amidst the negative clamour, the Indian economy could see a silver lining as it may have the opportunity to fill the vacuum in global trade due to the war. ET's Sachin Dave and Kiran Kabtta Somvanshi explain.

The sources said IOC, the nation's top oil firm, late last week bought three million barrels of Urals through Vitol for May delivery at a discount of USD 20-25 a barrel to dated Brent.

HPCL this week made the rare purchase of two million barrels of Urals crude for loading in May, they said. Meanwhile, Reliance Industries Ltd, operator of the world's biggest refining complex, may avoid buying Russian fuel as it has a huge exposure in the US and the sanctions against Moscow may impact its business.

Since 2020, IOC has had a term or fixed volume deal to buy crude oil from Russia's Rosneft. But, it rarely imported volumes under the term deal as the cost of transporting the oil from Russia made it uneconomical.

But, with discounts of USD 20-25 per barrel have turned the tide in favour of Russian crude and Indian refiners are lapping it up, the sources said.

MRPL, which just like HPCL is also a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC), is also seeking one million barrels of such crude for the end of May loading, they said.

The refiners are buying Russian crude on a delivered basis to avoid any complications that sanctions may lead to in arranging shipping and insurance. The sources said the trade with Russia is being settled through in dollars as the international payment mechanism has so far been kept out of the western sanctions ambit.

Also, unlike the sanctions the US imposed on Iran over its controversial nuclear programme, oil and energy trade with Russia has not been banned. This essentially means that any country or company was free to buy oil and other energy commodities from Russia and use the international payment systems to settle the trade.

This wasn't the case with Iran, which was cut off from the international money and security transfer system, SWIFT. Also, companies or entities investing or buying oil from Iran were sanctioned.

IOC had in February 2020 signed a deal with Rosneft Oil Company to import up to two million tonnes of oil via the Black Sea port of Novorossiysk. In 2021, the deal envisaged supply of up to 1.7 million tons of crude oil but IOC bought just on parcel or shipload as the cost of transporting the oil made it uneconomical. In December 2021, it renewed the deal to buy up to two million tonnes of crude oil in 2022 from Rosneft.

India has tied up supplies from Russia to the US in a bid to diversify its oil import basket, cutting reliance on the Middle East to meet its oil needs.

With imports making up for 85 per cent of its oil needs, the recent spike in international oil prices have hurt it badly and it is now looking to cut spiralling energy bill through purchases from anywhere it can get at cheaper rates.

Oil Minister Hardeep Singh Puri on Monday told Rajya Sabha that the country will evaluate the Russian offer to sell crude oil at discounted prices after considering aspects such as insurance and freight required to move the fuel from the non-traditional supplier.

"Let me again reiterate that in a situation like the one characterised by the pandemic in the last two years and in the last few weeks by a war or a military action taking place between Russia and Ukraine, the government will explore all options which are available," he had said.

The minister said he has had discussions with the Russian government officials.

"Discussions are currently underway. There are several issues that are required to be gone into like how much oil is available either in Russia or in new markets or with new suppliers which may be coming in the market. Also, there are issues relating to insurance, freight and a host of other issues including the payment arrangements," he had stated.

New Delhi has historic diplomatic and defence ties with Moscow and has called for an end to the violence in Ukraine but stopped short of condemning the invasion.

Many countries, including European nations, remain heavily dependent on fuel from Russia, the world's second-largest crude oil exporter behind Saudi Arabia.

However, only one per cent (nearly 45,000 barrels a day in 2021) of India's total crude oil imports come from Russia.

Its decision to take up discounted Russian oil will not violate any of the US sanctions on Moscow, the White House has said.

US President Joe Biden last week announced a ban on Russian oil and gas imports over the country's invasion of Ukraine, targeting the main artery of Russia's economy.

"Our message to any country continues to be that abide by the sanctions that we have put in place and recommended," White House Press Secretary Jen Psaki told reporters at her daily news conference on Tuesday.

Asked about the possibility that India could take up the Russian offer of discounted crude oil, Psaki said, "I don't believe this would be violating that (sanctions)."

GlobalData, a leading data and analytics company, said given India's neutral stance on the Russia-Ukraine conflict, Moscow's offer of oil and other commodities at discounted prices will provide relief on the fiscal front.