Business concerns could end an impasse between United States and India over Russian oil, and whether India ought to feel free to buy it.
President Trump has said several times that India was on the verge of ending its purchases, which have saved India billions of dollars while generating billions in revenue for Russia in the years since it invaded Ukraine.
That has not happened.
But on Wednesday, the U.S. Treasury announced a new raft of sanctions aimed at Russia’s two biggest oil firms, Rosneft and Lukoil. The move could convince India’s private businesses and government-owned oil companies that it is time to quit buying oil from Russia, in a way that threats and tariffs did not.
Muyu Xu, a senior crude oil analyst based in Singapore for Kpler, a market research firm, wrote that the sanctions were expected to “trigger a decline in exports” almost immediately, as the Indian companies that buy the targeted Russian firms’ oil consider how they might be affected.
“India would scramble for prompt cargoes to fill the supply gap left by reduced Russian flows,” Ms. Xu wrote.
Duttatreya Das, a former official at one of India’s national oil companies who now works with Ember, a global energy think tank, said that “exposure to Middle Eastern supplies would increase.” Put another way, he said, it was “going back to the old times.”
Russia went from supplying a minuscule portion of India’s energy before the war in Ukraine, to becoming its chief supplier a few months after the invasion. Those purchases supplanted traditional sources from the Persian Gulf. At the time, both the United States and Europe discreetly viewed India’s purchase and refining of Russian crude as helpful in stabilizing the global oil market.
The discount on Russia’s sales to India has shrunk since then, in part because shipping between the countries has become more efficient. Severing that seaborne flow will cost both Russian firms and their trading partners, including the Indian state. But it paves a way to breaking a diplomatic deadlock between India’s prime minister, Narendra Modi, and Mr. Trump.
On Aug. 6, President Trump slapped an extra tariff of 25 percent on all Indian goods, calling it a penalty for India’s undermining “U.S. efforts to counter Russia’s harmful activities.” That shocked India, doubling already steep tariffs on its goods and devastating some industries. Yet according to the most recent data available, India’s refineries have kept buying a steady stream of Russian crude oil.
In September, India’s oil companies imported more than 1.5 million barrels a day from Russia, roughly in line with what they had been buying all summer. On Tuesday, Kpler published data that showed “no visible sign of a reduction, with October imports tracking around 1.8 million barrels a day.”
Before the sanctions on Rosneft and Lukoil, Kpler’s analysts noted that Mr. Trump’s claims that Mr. Modi had agreed to end India’s trade in Russian oil looked like “political posturing.” Whatever Mr. Modi and Mr. Trump have discussed — Mr. Modi only acknowledged receiving Diwali greetings, and talking about the need to stand up to terrorism — there has been plenty of posturing from both sides since August.
Ever since India and Pakistan ended an exchange of fire in June, Mr. Trump has been claiming credit for bringing peace to the region. India, a proudly sovereign democracy, does not take orders from abroad; it deflected and ultimately denied Mr. Trump’s claim. Likewise, Mr. Modi, who prizes his image as a strong leader, cannot stomach taking orders on energy policy.
There is precedent for India cooperating with the United States on energy matters. In recent years, it stopped buying both Venezuelan and Iranian oil in response to American nudging. But the insult of a 50 percent tariff rate, which escalated as Mr. Trump curtailed visas for Indians and Mr. Modi courted China as an alternative partner, made it harder for either side to back down.
By threatening to penalize any company that does business with Rosneft or Lukoil, the U.S. Treasury has pushed the decision-making away from political leaders. India’s biggest private buyer of Russian oil, Reliance Industries, said that a “recalibration” of purchases was underway. Nayara Energy, India’s second-largest buyer of Russian oil, did not respond to a request for comment.
Nayara is in a special predicament, because its owners include Rosneft. The European Union has already blocked Nayara’s exports, prompting India to absorb fuel that would otherwise have been shipped abroad. The U.S. Treasury’s announcement did not mention Nayara by name, but Washington would have to sanction it directly if it turns out to be majority-owned by Rosneft.
“It’s very difficult to figure out who’s buying from who,” said Amitendu Palit, a senior research fellow at the National University of Singapore. But, at this point, “the economic benefits of buying Russian oil are really not that significant,” he added. A broader trade deal between India and the United States would be a bigger prize.
Alex Travelli is a correspondent based in New Delhi, writing about business and economic developments in India and the rest of South Asia.
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