Making it easy

Blitz Bureau

NEW DELHI: It’s not clear whether the Trump administration’s decision to impose sanctions on two Russian oil companies was taken after back-channel deliberations with India, but the move will compel private refiners in the country to either halt or substantially reduce their imports of crude oil from Russia. In fact, India’s public sector refiners, too, must ensure no direct purchases are made from Rosneft and Lukoil though they could continue to buy Russian oil from traders, mostly European and outside the sanctions net. In all, India buys about 1.5 million barrels per day of oil from Russia, which is around 35 per cent of the country’s total imports.

President Trump has been demanding for some time now that India halt purchases of Russian crude altogether. The sanctions have made it easier for the Indian Government to start doing it. So far, the Government’s stance has been that India would buy crude oil from whichever market it wants to. But now there is a valid reason for paring imports from Russia. External Affairs Ministry officials have been saying that the country needed to ensure stable energy prices and it would diversify energy sources “as appropriate”. With Trump also saying that the discontinuation of oil imports “is a process”, experts believe the US might now be more inclined to finalise a bilateral trade deal with India.

By one estimate, substituting Russian oil with imports from other nations could cost $2.7 billion, taking the import bill up by 2 per cent as against the amount spent in the financial year 2024-25, if prices hold at these levels. Brent prices spiked to near $66 per barrel following widespread concern over the sanctions, but the gains were reversed somewhat the next day. Russia currently exports 5 million barrels a day of crude oil but experts say supplies are adequate for the moment.

Of course, any further escalation in geopolitical tensions could disrupt the market taking prices up. The good news is that an official of the Organisation of Petroleum Exporting Countries (OPEC) has indicated that the cartel would be ready to increase supplies, if needed, by the time of a scheduled ministerial meeting in late November, though he has cautioned that there has been “no official agreement or discussion” on the issue.

For India, a trade pact with the US would outweigh losses from a bigger oil import bill, especially if US tariffs are finalised at 15-16 per cent as is being talked about. Already, the country’s exports to the US have fallen 12 per cent in September, and labour-intensive sectors are understood to have been badly impacted. India’s total exports of gems and jewellery, for instance, slowed to 0.4 per cent year-on-year (y-o-y) in September versus 15.6 per cent y-o-y in August. A recovery in exports to the US would ease the pressure on the trade deficit and the currency, cushioning the impact of a bigger oil bill.

Trump’s renewed emphasis on sanctions reflects both his instinct for negotiation through pressure and his reluctance towards military involvement. Yet, the policy also risks collateral consequences for allies and partners. For India, this phase presents a test of its diplomatic agility. While it continues to champion dialogue and peace, its heavy dependence on imported energy remains an Achilles’ heel.

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