At present, the brutal war in Ukraine is costing Russia $700 million per day. It is also estimated that the revenue to Russia for all of its energy exports is $700 million per day.
The math here is obvious, so the question is, “Could Russia afford to fund this war if its energy export sales were curtailed?” Energy exports, including oil, gasoline, natural gas, diesel, and coal, comprise roughly 74% of all export revenues to Russia, and 52% of all revenues. So the answer is no.
Prior to Russia’s most recent invasion of Ukraine, on February 24, 2022, India was an insignificant purchaser of Russian oil. But since then, India has increased its purchases more than fortyfold, rising to be the largest purchaser of Russian oil in the world.
India’s purchases of 2.2 million barrels per day of crude now dwarf China’s purchases, which vary but were recently reported at 1.7 million barrels per day. This is pariah oil, blood oil, sanctioned oil, that is literally funding Putin’s murderous war in Ukraine.
So why would India, a democracy with an elected prime minister, representative legislature, and well-educated, peaceful, and honorable people abet Russia in this war?
It would seem that it all hangs on the decision of just one man, Prime Minister Narendra Modi. And the why? Just money.
For accepting Russia’s blood oil, India, like China, has been demanding a $16 per barrel discount from the general market price.
The defense of this otherwise indefensible support of Russia’s war is the same as is often heard from corporate CEOs when they are confronted with doing things that are morally offensive: “We owe it to our stockholders to maximize profits.”
Just how much maximization, or savings, has India achieved for undermining the free world’s efforts to constrain Russian oil profits? The GDP of India was $3.6 trillion last year, and as of the time of this writing, its total savings from these discounted purchases was $3.6 billion. India saved 0.1% of its GDP.
An Indian Oil filling station in Mumbai
A PROPOSAL FOR CHANGE
It is true that India could simply stop purchasing Russian oil. That part of the world is awash in oil. Yes, other oil would be marginally more expensive. If you’re wondering whether Russia could not just sell its oil elsewhere, the answer is only a little, or not at all, and never at the same markup.
How about China? Wouldn’t they want to buy it? No. China already has access to as much Russian oil as it wants, and is receiving that. China’s brokering of a rapprochement between Iran and Saudi Arabia was about ensuring that when China decides to invade Taiwan, no world order will be able to cut it off from its oil supplies.
Here is a proposal that would move India to the moral high ground, save that nation even more money, elevate India’s global stature, and possibly win Prime Minister Modi a nomination for the Nobel Peace Prize by ending the war in Ukraine with a whimper. No escalation of the war, no more deaths: Publicly declare that it is capping its purchases of Russian oil at $60 per barrel. Russia will either agree and Modi is a hero, or it will refuse.
Should Russia refuse, then India would have to temporarily purchase oil on the open market. Desperate for the revenue, and unable to place that 2.2 million barrels per day, the most likely outcome would be for Russia to capitulate. India would rapidly recover in savings the added cost of having had to purchase oil on the open market.
Then the eight nations that have imposed the $60 cap on the transportation and insuring of Russian oil would lower that to $50 per barrel, and China’s leader, Xi Jinping, would tell his “dear friend,” Russian President Vladimir Putin, that China will not be anyone’s patsy and will pay no more than India—just $60 a barrel.
A month later, with India’s oil stocks and reserves filled to capacity, India could publicly announce that it will cap purchases of Russian oil at $50 per barrel. Sequentially, both NATO and India, with China in tow (as it will never agree to pay more for oil than India) could walk the going price for Russian oil down to $40 per barrel.
The production cost to Russia per barrel of oil is approximately $30.
At $40 per barrel, Russia would not cease production, as that would not only end the funding for Russia’s war in Ukraine, but could well cause the economic collapse of the government. Further, it is actually in the international community’s best interest to have that oil available, but just marginally profitable to Russia.
The way to end this war, is not more, bigger, and better weapons; it is to starve Putin of the means to pay for it.
Putin is weaker in his own country today than at any other time since he came to power. Should he suddenly find himself unable to fund his massive army buildup, to meet the payroll for all of Russia’s massive bureaucracy, and to pay out the state’s pension obligations, then from the internal turmoil Putin’s reign would come to an end, and the war in Ukraine with it.
It is time for India to stop the killing and to do the right thing.
Gary K. Michelson, MD, is founder and president of the Michelson Center for Public Policy and International Affairs
