US Sanctions on Russia’s Oil Trade Pose Challenges for India Amid Shifting Global Dynamics

(Source – Indian Express, Section – Explained – Page No. – 14)

Analysis of the news:

Implications for India

• Russia, India’s largest crude oil supplier, accounted for nearly 38% of India’s imports in 2024.
• While Indian refiners can fulfill existing contracts until March 12, the sanctions are likely to disrupt the India-Russia oil trade beyond this wind-down period.
• However, India’s overall oil imports will remain stable as alternative supplies from West Asia are readily available.

Rising Freight Costs and Shifting Suppliers

• Sanctions will limit the availability of tankers to transport Russian oil, causing freight costs to rise.
• This, in turn, will erode the discounts on Russian crude, making oil from traditional suppliers like Iraq, Saudi Arabia, and the UAE more competitive.
• Indian refiners have already begun increasing imports from these countries to offset potential disruptions.

Russia’s Dilemma and the Price Cap

• The sanctions further pressure Russia’s shadow fleet, which operates outside Western restrictions.
• To maintain exports, Russia may be forced to sell oil below $60 per barrel to comply with Western price caps, allowing access to Western shipping and insurance.
• This would reduce revenues for Russia but ensure continued exports to India and China.

Impact of the Incoming US Administration

• Donald Trump’s upcoming presidency could reshape US policy on Russia and Ukraine.
• While Trump has expressed intentions to broker peace, his administration’s stance on sanctions remains uncertain.
• The new sanctions may serve as leverage for Trump in negotiations with Moscow, potentially influencing the trajectory of the Russia-Ukraine conflict and global oil trade.

Conclusion

• India’s oil trade with Russia faces near-term disruptions due to US sanctions, but ample alternative supplies from West Asia ensure stability in imports.
• The evolving US policy under Donald Trump will play a key role in shaping the global oil trade and geopolitical dynamics around the Russia-Ukraine war.

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