Oil sanctions: India faces another US-Russia balancing act

THE substantial sanctions imposed by the United States on the two biggest suppliers of Russian oil, Rosneft and Lukoil, are set to limit India's import options and also potentially remove a major hurdle in sealing a trade deal with the US. President Donald Trump's announcement stems from the growing frustration over the stalled negotiations to end the Russia-Ukraine war. India has been the biggest buyer of discounted Russian crude in the aftermath of Moscow’s 2022 invasion of Ukraine. According to Washington, the oil companies are helping fund Kremlin’s war machine. Trump earlier imposed a 25 per cent punitive tariff on goods from India in retaliation for such imports. To New Delhi’s credit, it has been steadfast in resisting pressure to stop the purchase, saying its priority is to safeguard the interests of domestic consumers. India now faces another tightrope balancing act. If a calibrated reset is required, so be it.

The Narendra Modi government has distanced itself from Trump’s repeated claims of an assurance that it will sharply reduce Russian oil imports. For Indian refiners, a pullback from Russian oil dealings looks imminent in the short term to comply with the new sanctions. How the squeeze plays out in the long run would depend on how far both Russian President Vladimir Putin and Trump are willing to take the latest faceoff.

Indian refiners can easily pivot away to newer sources, if required, and costlier oil imports can be offset by the lowering of US tariffs. The key here is the quiet realisation that as the consumer India can make decisions that suit India’s interests. It chose to be an outlier in buying cheap Russian oil. Now is the time to leverage a sanction mandate for securing a trade agreement with the US that is favourable to both countries.