Amid the ongoing conflict between Ukraine and Russia, India made a significant move in the edible oil market by contracting a record purchase of sunflower oil from Russia.
The strategic decision follows the severely disruption of global supply lines due to war, particularly from Ukraine, and Russia.
Russia and Ukraine produce a lion’s share of the world’s sunflower oil production.
The two warring nations are responsible for approximately 60% of the global sunflower oil output and 76% of its exports.
Russia’s war on Ukraine brought a substantial halt in sunflower oil shipments from the region, compelling countries heavily reliant on these supplies to seek alternatives.
India, the world’s largest importer of edible oils, has been affected by the suspended oil imports.
Around 90% of India’s sunflower oil imports are catered by Russia and Ukraine.
In response to the supply disruption, Indian refiners have tapped Russia to procure sunflower oil needs.
They contracted 45,000 tonnes of Russian sunflower oil at a record high price of $2,150 per tonne, including insurance and freight.
The purchase price marks a significant increase from the $1,630 per tonne before the Russia-Ukraine conflict started.
Gemini Edibles & Fats India managing director Pradeep Chowdhry said that his company alone has secured 12,000 tonnes.
The move is expected to be crucial in mitigating the shortfall at a time when alternative vegetable oils are also facing supply constraints.
For example, supply of palm oil from Indonesia and soybean oil from South America also hindered due to export restrictions and lower crop yields, respectively.
Economic effects of the purchase
India’s record volume of purchase will have significant ripple effects in the international markets.
Before the Russian-Ukraine conflict, sunflower oil was more cost-effective compared to other edible oils.
However, the supply limitations from Ukraine forced buyers to pay a premium, resulting in considerable raise in the price of sunflower oil.
The price surge has not only affected the importers but also the end consumers, as the cost burden is likely to be passed down the supply chain.
The high-prices could increase inflation rates for food products in India, where edible oils play a key part in the diet for majority.
Geopolitical Implications
India’s move underlines geopolitical shifts and economic adjustments by countries in response to the Ukraine-Russia conflict.
The purchase not only help address immediate supply shortages, but also reflects the growing economic ties between India and Russia amid global political realignments.
The situation also underscores the vulnerabilities in global food supply chains and the need for diversified sourcing strategies.
The edible oil market stands as a critical example of how global economies are intertwine, and how disruptions in one region can have far-reaching consequences.
In summary, India’s record purchase of sunflower oil from Russia is a strategic response to an urgent supply disruption.
Also, the decision highlights the intricate balance, which countries maintain in securing essential commodities while navigating global geopolitical tensions.
