Trump pressure on India is beginning to reshape global energy flows, as New Delhi quietly reduces Russian oil imports under growing U.S. trade leverage. India is adjusting its purchases of Russian oil. The U.S., led by President Trump, has made Indian exports to the U.S. dependent on India’s reduction in oil imports from Moscow. India has not publicly confirmed President Trump’s assertions. Nonetheless, India’s refineries are already showing reduced imports from Russia, which became India’s largest crude oil supplier after Western sanctions were imposed on Russia. The discounts afforded to India are providing revenues to Russia and are helping secure India’s energy needs. However, this is clearly under significant strain, and any sustained reductions will hurt Russia’s budget. The immediate reaction among the various global energy markets was immediate.
Why Trump pressure on India makes Russian oil hard to replace
India faces difficulties replacing Russian crude as a major supplier of oil to its refining sector because Russian oil comprises approximately one-fourth of India’s overall imports of crude oil. In addition, heavy, low-quality Urals crude oil is preferred by Indian refiners for their diesel production process. On the other hand, American crude will likely cost more and is substantially different in quality from Urals. Furthermore, shipping from the United States to India will be much longer than from Russia, which will substantially increase freight costs.
Therefore, if Indian refiners move away from using Urals, an operational change will require several months to implement across all of the major refineries in India. Nevertheless, India has begun to look into new suppliers of crude oil, with growing amounts coming from the United States, the Middle East, Canada and Africa being included in procurement strategies. While government officials have kept the timeline for when Indian refiners will no longer be relying on Russian crude oil confidential, they will continue to monitor prices and global oil markets.
How India’s shift threatens Russian oil revenues
The Russian export market will suffer from a significant reduction in Indian customer volume. Russia’s best option for finding a new buyer is China. Infinite volumes of Russian crude oil cannot be quickly accepted by the Chinese market because of their sanctions. To convince buyers to purchase their crude oil, Russian producers will have to lower their prices considerably.
The Russian fiscal income will further decline as discount prices increase. Many tankers are currently sitting for extended time periods without having delivered the crude oil cargo. If demand continues to decline, production will decrease accordingly. For now, there is a generally balanced supply of oil in the world. OPEC will continue to increase production at a relatively measured pace going forward.
For more- https://civiclens.in/category/international-news/
About the Author
