For several months now, US President Donald Trump has been pushing to bring an end to the Russia-Ukraine conflict. Trump has not only relied upon the traditional diplomatic route, he has also deployed economic tools such as levying tariffs on buyers of Russian oil, arguing that Russia’s energy exports were helping it finance the war. Russia’s oil and gas revenue accounts for a sizeable share of its budget. Trump has been pressuring India — through a 25 per cent tariff penalty — to stop its energy imports from Russia. India, along with China, accounts for most of Russia’s crude oil exports. But neither has cut back their purchases. The Trump administration has now gone a step further, targeting what US Treasury Secretary Scott Bessent says helps fund Kremlin’s war machine.
On Thursday, the US Treasury imposed sanctions on two of the biggest Russian oil companies — Rosneft and Likoil. Reportedly, the two account for around 5 per cent of global output, and also a significant portion of India’s oil imports from Russia. Firms have been given till November 21 to wind up their transactions with the companies. The US has been joined by the EU, which has also unveiled measures that target Russian oil and gas. This marks a significant change in Western policy. But these moves will also disrupt global oil markets. Some analysts do suggest that India could substitute Russian oil purchases with those from the Middle East, the US and other countries. However, others reckon that a seamless transition could be challenging given that India and China together import roughly 2.8 million barrels per day. Markets were quick to react to Trump’s move, with oil prices going up 5 per cent on Thursday.
Russian oil accounts for a little over a third of India’s imports. According to a report in this paper, oil imports from Russia had helped Indian refiners save at the very least $12.6 billion over three years. But, over time, the cost advantage from buying Russian oil has come down. The space to buy Russian oil, too, has shrunk. Private and public sector entities will now be wary of the risks of attracting secondary sanctions. Trump’s unpredictable ways make the situation even more uncertain. The US President may well change his position on the sanctions. His meeting with Xi Jinping on October 30, in South Korea, on the sidelines of the Asia Pacific Economic Cooperation Summit, will also be closely watched. But there is no mistaking that he is now squeezing Russia and the buyers of Russian energy. India, which is in the midst of negotiations with the US over a trade deal, will need to reassess its Russian purchases given how the sanctions play out — but holding its own. As Commerce Minister Piyush Goyal sharply put it, not with a gun to the head.
