The US’s sanctions on two Russian oil companies—Rosneft and Lukoil—have dealt a blow to India’s energy security in the near term. The two firms account for almost 60 percent of Russian oil exports and have been major sources of cheaper oil for India in the recent past. Any transaction with these companies may now invite civil or criminal penalties in the US. The UK also sanctioned the two oil giants earlier this week. The EU has been piling pressure on buyers of Russian oil through other trade tools like price caps.
The impact on India is direct, as Russia is now the largest supplier of crude oil accounting for about 35 percent of the total imports. Two private Indian refiners—Reliance Industries and Nayara Energy—have direct links with Rosneft, which alone is responsible for nearly half of Russia’s oil production. Reliance signed a long-term deal to purchase 500,000 barrels of crude per day from Rosneft last year, and the Russian company holds just under 50 percent of Nayara’s stakes. India ramped up Russian oil imports after April 2022, benefitting significantly from its discounted crude; various unofficial estimates suggest India has saved roughly $15 billion by doing so. The discount, which was initially as high as $18-20 per barrel, has recently narrowed to around $5.
India had thus far refused to bow to the mounting pressure from the US and Europe to stop buying Russian crude, maintaining it would prioritise its own energy security first. This stance led to the US imposing an additional 25 percent duty on Indian merchandise exports. While the earlier bullying by the Trump administration had failed to break India’s resolve, the latest sanctions pose a more complex challenge. Indian companies—particularly Reliance—will find it difficult to ignore these measures, as doing so could make it directly liable to penalties. Late on Friday, Reliance stated it was assessing the implications of the new regulatory frameworks and would comply with the Indian government’s ‘guidance’ on the matter. State-owned oil marketers, while maintaining there has been no directive from the government, have begun reducing their purchases from Russia. India may now have to rely more on its traditional suppliers in West Asia and increase purchases from the US. Caution is required, as the broader trade relations with the US and Europe hang in balance.
