India now faces a complicated dilemma over its historic and sudden massive oil imports from Russia. Recent comments from former U.S. President Donald Trump have only further confused things. The conflict in Ukraine has shifted the dynamics of the global oil market, placing India in a challenging position as it navigates its energy needs alongside international pressures.
Since the onset of the war in Ukraine, India has emerged as one of the leading importers of Russian oil. There’s only one problem and it’s a huge one. Russian oil exports to India have surged. From just under 100,000 barrels per day prior to the invasion, they surged to over 1.8 million barrels per day in 2023. As a result, Russia’s share of all of India’s oil imports has surged from 2.5% to a record-breaking 39% this year.
On July 30, trump delivered a geopolitical body blow of historic proportions. In retaliation, he announced India would begin to incur a 25% tariff as of August 1 and threatened vague retributions for purchasing Russian oil and military supplies. Trump’s comments have raised alarms in New Delhi as officials assess the implications of these threats on India’s energy strategy.
Daleep Singh, a former U.S. deputy national security adviser for international economics, noted in March 2022 that “friends don’t set red lines” and emphasized that “there is no prohibition at present on energy imports from Russia.” The recent tariff announcement flies in the face of this claim. Most importantly, it marks a change in U.S. policy toward India and support for its continued Russian energy imports.
India’s energy minister, Hardeep Singh Puri, defended the country’s decision to purchase Russian oil, asserting that these imports have helped stabilize global oil prices. He stated, “If people or countries had stopped buying Russian oil, the price of oil would have gone up to $130 a barrel.” Puri further underscored the fact that even the U.S. was supportive of India’s efforts to take control of its energy needs in light of global market volatility.
Despite U.S. pressure, India has so far refused to commit to limiting its purchases of oil from Russia. Officials are currently weighing the trade-offs involved with this “Russia option,” considering it as a potential bargaining chip in negotiations with Washington. India should consider all other options for its oil supply, including Iran. This would require successfully negotiating an exemption from U.S. sanctions.
As Mizuho Securities’s Managing Director Vishnu Varathan told The Guardian, it’s not business as usual. He described the U.S. threats as a “clear and present danger” to India. He noted that for India to stop importing Russian crude, the country will need to search for comparable deals in the global market. This search for substitutes might just be the most difficult one.
When we saw this situation developing, Bob McNally, President of Rapidan Energy Group, was worried about what India would do. He stated, “Trump is serious. He’s frustrated with Putin… India is going to have a tough choice to make.” He expressed skepticism that India would be able to continue importing such high volumes of Russian oil. This would be a way forward should Trump’s administration decide to escalate its deterring punishment.
The Group of Seven (G7) nations officially agreed in December 2022 to impose a $60 per barrel price cap on Russian oil exports. Then, in July 2023, the European Union reduced that cap to slightly over $47 per barrel. These caps make it increasingly difficult for India to balance its oil imports in line with its commitments under international sanctions.
As India contemplates its next steps, officials like Daleep Singh have advised that purchasing Russian oil should ideally occur within the established price cap to mitigate risks associated with U.S. sanctions. He stated that India was encouraged by its allies to procure Russian oil but within parameters that avoid triggering broader economic penalties.