New Delhi: US President Donald Trump's recent sanctions on Russian oil giants Lukoil and Rosneft are challenging India's energy strategy, as the country navigates potential penalties for continued transactions with these entities. As the November 21 deadline for winding down dealings approaches, Indian refineries, banks, and shipping companies are at risk of secondary sanctions.
According to Deutsche Welle, the Trump administration's sanctions do not target Russian oil directly but focus on major Russian energy companies. Meera Shankar, a former Indian ambassador to the US, noted that a complete removal of Russian oil from the global market would drive up energy costs, which could be politically and economically challenging for both the US and Europe. Private Indian companies, the primary importers of Russian oil, must weigh their options and benefits.
Reliance Industries, India's largest importer of Russian crude, is reportedly preparing to reduce purchases from Rosneft. A Reliance spokesperson stated that the company is evaluating the impact of the sanctions and will adjust refinery operations to comply with applicable restrictions, including new EU guidelines on Russia-sourced petroleum products.
The geopolitical landscape shifted after Russia's 2022 invasion of Ukraine, prompting India to purchase discounted Russian crude. This move made Russia the primary source of India's crude oil imports, a departure from its previous reliance on Middle Eastern oil. Despite the benefits of cheaper Russian oil, India's choices now face US-imposed constraints aimed at curbing Kremlin revenues.
Arun Kumar, a former economics professor at Jawaharlal Nehru University, stressed that India might have to yield to US sanctions to avoid secondary penalties on its financial and energy sectors. Historically, India has complied with similar demands, abandoning oil imports from Iran and Venezuela.
Lekha Chakraborty, from the National Institute of Public Finance and Policy, highlighted that Indian refiners are already increasing imports from the Middle East to offset Russian crude losses. This strategic shift, while essential for maintaining supply, could lead to higher fuel prices, potentially affecting India's economic growth and profit margins.
India's economic resilience remains robust, supported by substantial foreign exchange reserves and ongoing trade negotiations with the US. Ajay Bisaria, a former diplomat, emphasized India's strategy of energy autonomy and flexibility, avoiding explicit directives to halt Russian imports. This approach ensures diplomatic agility and the potential to resume Russian oil purchases when conditions permit.
As India continues negotiations on a trade deal with the US, reducing Russian oil imports creates diplomatic opportunities while maintaining the option to restore Russian supplies if the geopolitical climate changes. Analysts predict a short-term decline in Russian crude imports, but Indian refineries may still access Russian oil through third-party intermediaries, although the extent of this remains uncertain.