India’s Strategic Response to U.S. Sanctions on Russian Oil

Context:

Published on March 31, 2025, in The Hindu, this article examines India’s ability to navigate U.S. sanctions on Russian oil amidst shifting global energy dynamics. It explores India’s energy security, economic strategies, and diplomatic balancing act as of early 2025, given its reliance on discounted Russian crude.

Key Points:

• Sanctions Context: In December 2024, the U.S. imposed sanctions on Russia’s state shipping firm Sovcomflot and 14 crude oil tankers to curb Kremlin oil revenues funding the Ukraine war.
• India’s Oil Imports: India, the world’s third-largest oil importer, saw Russian crude rise from 2% of its imports in 2021 to 40% (2 million barrels per day) by 2024, leveraging discounted rates post-Western sanctions.
• Sanctions Impact:
• • U.S. measures target ships carrying Russian oil above a $60-per-barrel price cap, enforced since December 2022 by the G7, EU, and Australia.
  • Sovcomflot’s 14 tankers, previously transporting 10% of Russia’s Baltic and Arctic oil exports, are now restricted.
• India’s Resilience:
• • Experts argue India is well-positioned to adapt, with only 5-10% of its Russian oil imports (100,000-200,000 barrels daily) affected by the latest sanctions.
  • Indian refiners have diversified suppliers since 2022, reducing reliance on Sovcomflot’s fleet.
• Alternative Shipping:
• • Russia employs a “shadow fleet” of 1,400-1,800 aging, uninsured tankers (often over 15 years old) to bypass sanctions, delivering 70% of its oil exports in 2024.
  • India benefits from this fleet, which operates outside Western insurance and regulatory frameworks.
• Payment Flexibility:
• • India uses rupees, dirhams, and yuan for Russian oil payments, avoiding dollar-based sanctions risks.
  • Despite payment delays due to tightened U.S. enforcement, trade continues smoothly as of March 2025.
• Refinery Adaptability: Indian refiners, built for Middle Eastern heavy crude, have adjusted to process Russia’s medium-sour Urals crude, enhancing flexibility.
• Domestic Shipping Growth:
• • India aims to expand its tanker fleet from 7% to 10% of global capacity by 2030, reducing dependence on foreign shipping.
  • Rising freight costs (e.g., $10 million from Russia’s Baltic to India vs. $4 million from West Asia) underscore this need.
• Economic Benefits: Discounted Russian oil saved India $7-10 billion in FY 2024-25, bolstering energy security and economic stability.
• Diplomatic Stance:
• • India maintains a neutral stance in the Russia-Ukraine conflict, prioritizing affordable oil over Western pressure.
  • The U.S. has not objected to India’s imports below the price cap, avoiding direct friction.
• Future Outlook:
• • Analysts predict minimal disruption unless sanctions escalate to secondary measures targeting Indian entities.
  • India’s strategic diversification and shipping investments position it to manage ongoing sanctions effectively.

Key Terms:

• Sovcomflot: Russia’s state-owned shipping company hit by U.S. sanctions.
• Price Cap: $60-per-barrel limit on Russian oil set by G7, EU, and Australia to curb Moscow’s revenue.
• Shadow Fleet: Uninsured, aging tankers used by Russia to evade Western sanctions.
• Urals Crude: Russia’s medium-sour oil grade, now a major import for India.
• Secondary Sanctions: Potential U.S. penalties on non-Russian entities dealing with sanctioned parties.
• Energy Security: Ensuring stable, affordable oil supply for India’s economic needs.

Link To The Original Article – https://www.thehindu.com/business/Economy/is-india-firmly-positioned-to-manage-us-sanctions-on-russian-oil/article69397026.ece