On a slippery road

India is examining the implications of US sanctions on the import of Russian oil. Since the outbreak of the conflict between Russia and Ukraine, India’s oil imports from Russia have risen to nearly 40 per cent. However, US sanctions on Russian oil imports have placed India in a dilemma.

“Re: the implications of the recent US sanctions on Russian oil companies, our decisions naturally take into account the evolving dynamics of the global market,” Randhir Jaiswal, spokesman for the Ministry for External Affairs (MEA) told Business India. “Our position on the larger question of energy sourcing is well-known. In this endeavour, we are guided by the imperative to secure affordable energy from diverse sources to meet the energy security needs of our 1.4 billion people”.

Energy experts feel that these sanctions are unlikely to have a major impact, given the surplus of crude capacity at present. “Sanctions on oil-exporting countries could push up crude prices,” said Fatih Birol, executive director, International Energy Agency (IEA), on the sidelines of Singapore International Energy Week recently. “But the effect will be limited because of the surplus capacity, as a result of which oil prices are likely to be about $60”. Birol is a Turkish economist and an energy expert.

Price of crude increased by 7 per cent last week, with Brent trading at $65 per barrel after US President Donald Trump imposed sanctions on Russian oil companies Rosneft and Lukoil (which jointly produce about 5 per cent of the global oil supplies), in a bid to bring Russian President Vladimir Putin to the negotiating table and end the ongoing conflict in Ukraine. However, the current price of crude was about $64 per barrel for Brent and $60 for WTI.

After the outbreak of the Russia-Ukraine conflict, the G7 had decided to cap Russian oil at $60 per barrel, while keeping the supplies flowing globally. However, the sanctions may have led to the short-term suspension of Russian oil purchases by buyers, including India and China.

According to reports, Rosneft and Lukoil produce more than half of Russia’s 9.2 million bpd and also account for 47 per cent of their seaborne crude exports. Rosneft also exports nearly 900,000 bpd of crude to China via pipeline. Notwithstanding the sanctions, Russian crude imports are likely to be impacted only marginally in the interim, say energy experts.

“Russian crude oil vessels may line up at sea, after which it could be gradually brought over through traders and refiners willing to use the `shadow fleet’ to circumvent sanctions,’’ say sources. At present, despite so many political tensions around the world (in the Middle East, Russia-Ukraine, etc) oil prices are still stable at $60, said Birol, adding that they could reduce further.

Trump’s trade deals

It may be recalled that, during his visit to Malaysia, US President Donald Trump signed trade deals with Malaysia, Thailand, Cambodia and Vietnam. In Japan, President Trump and Prime Minister Sanae Takachi released a list of projects in the areas of energy, artificial intelligence and critical minerals, in which Japanese companies are eyeing investments of up to $400 billion in the US.

Trump also met with Chinese President Xi Jinping and spoke about easing trade between the US and China, which includes China agreeing to import soya beans from the US. Trump has also said he could visit China in April 2026.

Talks for a bilateral trade agreement between India and the US are underway too. Meanwhile, Saudi Arabia is caught in a quagmire between US sanctions and its multifaceted relations with Russia. Organisation of Oil Producing Countries + includes Russia (since 2016). OPEC+ members are slated to meet soon to decide on their output quota for December.

Russia would expect Saudi Arabia to stop or even reverse OPEC+ production increases, as adding more oil into the market would exacerbate the glut and further curtail revenue for Moscow, which relies on oil & gas for a quarter of its federal budget. On the other hand, Trump will almost certainly push for the opposite, as he is expected to meet Saudi Crown Prince Mohammed bin Salman in the White House on 18 November.