The decision to lift a sanction on Russian oil led to renewed speculation over India’s energy commitments. Russian crude has been a key part of India’s energy import strategy for many years, and Russian crude oil was often available cheaply, providing great support to India’s refiners amidst price volatility in the international market.
However, the recent gathering of geopolitical tensions is changing those long-term assumptions about the future of India’s imports. The executive order lifting the tariff was tied to conditions for continued tariff relief. Future tariffs will depend on India’s sourcing decisions regarding oil supply. While the Government of India did not disclose its future energy import commitments, it reiterated that energy security continues to guide India’s energy policy. As this situation continued to develop, the markets have been watching closely to see if there have been any significant changes in India’s overall energy strategy.
What the US Order Claims About India’s Russian Oil Imports
An Order from the White House has made several specific claims. The Order states that India has agreed to stop buying oil from Russia. It also warns that there will be consequences if India starts buying oil from Russia again. Energy purchases were linked to defense cooperation under this order as well.
However, in the Joint Statement between India and the U.S., no such reference was made. The statement focused on the framework for increasing trade between the two countries. Piyush Goyal deferred to the diplomats to clarify this issue, stating that the Ministry of Foreign Affairs (the Ministry) would present India’s position.
Officials made it known that India will make its own decisions about where to obtain its energy, emphasizing repeatedly that those decisions are based on factors such as current market conditions and global dynamics.
India acknowledged that it recently cut back on buying Russian oil, but Indian officials did not approve or deny that all purchases had ceased. The tariff reduction that was announced, a reduction of duties from more than 18%, was made following the removal of the penalty for purchasing oil. Officials stressed that India’s Russian oil imports remain guided by market conditions and energy security needs.
Can India realistically stop buying Russian crude?
Experts predict a gradual adjustment but don’t expect an abrupt disconnection. A series of contracted amounts will keep Russian professionals flowing for several weeks. Analysts anticipate Russian flows will continue to decrease slowly. “Russian volumes will remain relatively locked in place for the next 8-10 weeks and will still be critical for India’s complex refining process, as the Urals continue to sell at deep discounts to Brent,” he says. “Imports are expected to remain stable in the range of 1,1-1,3m/b/d through Q1 and into Q2 at least.” Another expert also shares a cautious view with regard to rapid changes.
India has consistently maintained its focus on ensuring energy security for its 1.4 billion citizens. Moreover, India has reaffirmed this priority in recent weeks after the United States claimed that New Delhi would stop purchasing Russian crude oil while outlining broader parameters of the trade deal. India has strategically changed its crude oil import list over recent months and will continue to follow through on this strategic plan,” stated another expert.
Other possibilities exist with regard to Middle Eastern countries. The USA has also increased its share of exports. There may be some technical hurdles to obtaining crude from Africa and Venezuela. At this point, India is mixing diplomacy, discount prices, and realities of refining processes. Analysts expect India’s Russian oil imports to adjust gradually rather than stop abruptly.
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