New Delhi: US President Donald Trump's recent sanctions on Russian oil giants Lukoil and Rosneft are pressuring India to reconsider its energy strategy. The sanctions, announced last week, could result in secondary sanctions on Indian oil refineries, banks, and shipping companies involved with the blacklisted Russian firms if they don't cease transactions by November 21.
According to Deutsche Welle, the Trump administration had earlier declared a 50% tariff on certain Indian exports to the US due to India's ongoing Russian oil purchases. In September, India imported around 1.6 million barrels of Russian crude daily, as reported by global trade analytics firm Kpler. Meera Shankar, a former Indian ambassador to the US, noted that the US sanctions target major Russian energy companies rather than the oil itself. She highlighted that eliminating Russian oil from the global market would likely lead to higher energy prices, which could be politically and economically challenging for both the US and Europe.
Reliance Industries, India's largest importer of Russian crude, has indicated plans to reduce purchases from Rosneft, as reported by anonymous sources to Reuters. A Reliance spokesperson stated that the company is "assessing the implications" of Western restrictions and will adjust operations to comply with relevant sanctions and regulatory frameworks. This includes adhering to new EU guidelines on importing Russian-sourced petroleum products. Reliance affirmed its commitment to fully comply with any guidance from the Indian government.
After Russia's invasion of Ukraine in 2022, India started buying discounted Russian crude, making Russia the largest source of India's oil imports. Before the conflict, Russian crude was a minor part of India's energy mix, with most of its oil coming from the Middle East. The discounted Russian oil has helped India save significantly, even as prices increased. Although India's imports have been criticized for supporting Russia's war efforts, they have also been viewed as stabilizing global oil prices. The Trump administration's actions aim to limit the Kremlin's revenue.
India now faces a decision on whether Russian oil is worth the risk of secondary sanctions and the possible impact on a US trade deal. Arun Kumar, a former economics professor at Delhi's Jawaharlal Nehru University, mentioned that India is likely to comply with US sanctions to avoid risks to its banking and energy sectors, as it has done previously with Iranian and Venezuelan oil.
Lekha Chakraborty, an economist at the National Institute of Public Finance and Policy, observed that Indian refiners are already shifting to Middle Eastern oil, with increased imports from Iraq, Saudi Arabia, and the UAE. She noted that while this strategic shift helps maintain supply, it could result in higher fuel prices, affecting India's economic growth and margins in manufacturing and transport.
Ajay Bisaria, a former Indian diplomat, emphasized India's strategic autonomy in energy policy, aiming for the most cost-effective oil for its consumers. He highlighted India's approach of realigning oil trade, negotiating tariffs, and strengthening regional partnerships to minimize geopolitical risks. Despite the current challenges, India maintains flexibility and resilience in its energy choices.
Indian analysts predict a short-term decrease in Russian crude imports but expect refineries to continue sourcing through unsanctioned third-party intermediaries. However, the extent and timeline of these developments remain uncertain, and it is unclear whether the US will target these alternative routes.