India Braces for Energy Crisis as Trump Targets Russian Oil Firms

India’s energy landscape faces significant challenges following the announcement of fresh sanctions by the Trump administration against Russian oil giants Rosneft and Lukoil. The sanctions, introduced on March 13, 2024, threaten to substantially reduce the flow of Russian crude oil to Indian refiners, which currently rely on these sources for about one-third of their total crude imports.

Refining companies such as Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. purchase Russian crude on the spot market, while Reliance has a long-term supply agreement with Rosneft. The potential drop in supply could lead to increased international oil prices, although analysts remain uncertain about the extent of the rise given prevailing expectations of a market surplus.

Despite the looming threat of sanctions, Brent crude prices surged by over $2 per barrel immediately after the announcement. President Trump’s administration aims to diminish Russian oil exports as part of broader efforts to reduce the country’s financial resources amidst ongoing tensions in Ukraine. The U.S. has shifted its focus to India, which maintains a more favorable relationship with Washington compared to China, another major importer of Russian crude.

The Indian government has repeatedly signaled its intention to resist external pressures, even in light of additional tariffs on Indian goods entering the U.S. Reports indicate that U.S. officials have revealed that Indian buyers of Russian crude have begun to reduce their purchases, contrary to public assurances. President Trump asserted earlier this week that Prime Minister Narendra Modi had committed to ceasing Russian oil purchases.

Meanwhile, despite the increasing pressure on importers, Bloomberg reported that Russian maritime oil exports have reached their highest levels since early 2023, averaging 3.82 million barrels per day over the past four weeks. This surge occurs as buyers grapple with conflicting international dynamics and the implications of sanctions.

The evolving situation presents a complex challenge for India, which must navigate its energy needs while responding to international diplomatic pressures. The outcome of this energy shock will have lasting implications not only for India’s economy but also for its geopolitical relationships in a rapidly changing global landscape.