India’s dependence on Russian oil remains contentious with the US notwithstanding President Donald Trump’s friendship with Prime Minister Narendra Modi and affirmation of special relations between the two nations. Trump admits that levying 50% tariffs on Indian goods—which include secondary sanctions of 25% for buying Russian oil—was not “an easy thing to do” and caused a rift with India. These oil purchases are likely to attract even higher sanctions as the US President seeks to reduce oil revenues that fund Russia’s 42 month-long war in Ukraine. During his Senate confirmation hearings, the US ambassador-designate to India, Sergio Gor, emphasised that persuading India to move away from Russian oil was a “top priority” for the Trump administration. The US President has urged North Atlantic Treaty Organization and Group of 7 allies to levy up to 100% tariffs on China and India. US commerce secretary Howard Lutnick also stated that the US will sort out the trade deal once India stops buying Russian oil.
Energy security versus geopolitics
India will therefore find it difficult to continue buying Russian oil as it seeks to ink a trade deal and bolster its special relations with the US. Discontinuing such purchases no doubt will impact its energy security as the availability of deeply discounted crude eased pressure on its external accounts. Since 2023, Moscow has provided 36% of India’s requirements of 5 million barrels of oil a day. On the face of it, New Delhi’s oil imports from Moscow remain resilient as volumes in the first fortnight of September surpassed imports in August as a whole. This reflects the timing of contracts fixed six-eight weeks in advance and that the true impact of US tariffs will surface from late September and October, according to Kpler’s lead research analyst, refining and modelling. But there are signs of change with India seeking to balance between discounted Russian oil and reliable West Asian supplies to ensure security and avoid overexposure to geopolitical shocks. The Adani Group recently banned the entry of sanctioned vessels at its ports like Mundra.
Global oil market offers alternatives
While India has the sovereign right to access oil from any source, a favourable conjuncture exists to rationally consider non-Russian options as well. Global oil prices are heading to lower levels with Brent crude spot prices slumping to $67 a barrel in the first fortnight of September from $79 a barrel in January, largely due to the unwinding of voluntary production cuts by the Organization of Petroleum Exporting Countries and its allies. This decision to boost output in a market that is awash with oil supplies—to win market share at the expense of rivals—will intensify downward price pressures. Prices are likely to hit an average of $59 a barrel in the October-December quarter and $50 a barrel in early 2026, according to the US Energy Information Administration.
Such prices are bound to narrow, if not eliminate, the differential between Urals crude, that is favoured by Indian refiners, and Brent spot prices. The prospect of sourcing cheaper oil also exists from the US, the world’s biggest oil-producing nation, as Big Oil braces for a prolonged period of lower crude prices. The dynamics of the global oil market widen the options for India, the world’s third largest importer, to consider switching to alternative sources of supplies at no additional cost and reduce its dependence on Russian oil.