India is expected to gradually diversify its oil imports away from Russia, but a complete halt remains unlikely, as uncertainty continues over the country’s trade negotiations with the United States.Experts told CNBC-TV18 that market pressures and US sanctions will influence India’s energy strategy in the short to medium term. Richard Rossow, Senior Adviser at CSIS, said the 25% tariffs announced by the US last summer were primarily aimed at pressuring India to conclude a trade deal. “India was really quite unfairly singled out at that point, but it was because of confluence of factors,” he said, adding that the US approach to Russia has since become more aggressive, with sanctions now broadly applied. “Certainly, seeing broad sanctions against Russian oil is not in India’s favour, but at least it’s not singling out India as much as it was late in the summer,” Rossow added.Jayant Dasgupta, Former Indian Ambassador to the WTO, highlighted that major Indian refiners have long-term agreements with Russian oil suppliers, making an immediate shift challenging. “Reliance has a long-term agreement with Rosneft, under which they buy about 500,000 barrels per day. So that is something that will need to be restructured,” he said. Dasgupta also noted that other refiners, including Nayara Energy in which Rosneft holds a stake, will seek alternative sources in the Middle East, Africa, and South America. However, he warned that rising oil prices could complicate diversification, with crude from other regions already trading at a premium.
Harsh V Pant, Vice President at ORF, said India’s political economy makes a full cessation of Russian oil improbable. “India will have to hedge its bets accordingly. Those buying oil from Russia will also have to hedge their bets,” Pant said. He added that diversification will be gradual, influenced by market dynamics and infrastructure constraints, while Russia is likely to remain a part of India’s energy mix.The experts’ views come against the backdrop of Washington’s fresh sanctions on Russia’s largest oil producers, Rosneft and Lukoil, a move described by Russian President Vladimir Putin as an “unfriendly act.” Analysts say these sanctions will have implications for major buyers, including China and India. According to Kpler estimates, Russian crude flows to India are likely to remain in the 1.6 to 1.8 million barrels per day range until at least November 21, with possible indirect imports continuing thereafter.Commerce Minister Piyush Goyal has insisted that India will not be rushed into trade agreements. “We do not do deals with deadlines or with a gun to our head,” he told the Berlin Global Dialogue. Sources in the Indian government say there is convergence with the United States on most trade issues, and both sides are reportedly “very close” to finalising a deal, though timelines remain uncertain.Below is the excerpt of the discussion.Q: You’ve got Minister Goyal now questioning that why single out India? We’re not going to negotiate with a gun to our heads. The point that he’s trying to make is you are saying that you will block Russia’s oil supplies for the rest of the world through Rosneft and Lukoil, which is about 50% of Russia’s oil exports. But you’re singling out India by also imposing a 25% penalty on the country. So, what do you think is Trump’s strategy really here?Rossow: I think the 25% tariffs that were announced late summer were clearly focused just on India, and that was the confluence, I think, of two different things. One is trying to put pressure on India to get the trade agreement across the finish line. And second is when you began to see the President really sort of changing his mind. You remember earlier in the year, he seemed to almost be blaming Ukraine for Russia’s invasion. At the same time, trying to use tariffs as a way to pressure India on the trade agreement, it was also a pressure on Russia to come to the table and negotiate an agreement. So, India was really quite unfairly singled out at that point, but it was because of this confluence. Now, you do see the United States’ approach to Russia changing quite a bit—much more aggressive. They see that negotiations directly with Putin aren’t resulting in anything closing in on a ceasefire, and therefore I think the sanctions are now more broadly applied. So certainly, seeing broad sanctions against Russian oil is not in India’s favour, but at least it’s not singling out India as much as it was late in the summer. That’s how I look at the situation right now.Q: Ambassador Dasgupta, there are some reports by analysts saying Russian oil will remain a part of India’s energy mix. Some companies may do front-loading before 21st of November when these sanctions come in. Do you think Indian refiners are going to take that risk, or will they start diversification immediately and stop purchases of Russian oil?Dasgupta: I think Reliance has a long-term agreement with Rosneft, under which they buy about 500,000 barrels per day. So that is something that will need to be restructured—the purchase of Reliance from Rosneft. The second point is about Nayara, in which 49% is owned by Rosneft itself. Barring these two, the others are all nationalised oil refiners, like Indian Oil and other petroleum companies. Now they will definitely try to diversify and look at other sources in the Middle East, Africa, and maybe even in South America. So, I think people will start taking advanced action to find possible sources of supply.Having said that, oil prices have already started showing an upward trend, and yesterday, they rose by about $2.5 per barrel. So, if oil from these sources—the Middle East, Africa, South America—becomes much more expensive than at present, that would be a second hurdle to cross, and refiners, including the nationalised refiners in India and the two major private sector players, will have to factor that in.Q: Harsh, do you think a trade deal is possible? Are we near one just yet? Is it all now boiling down to Russian oil? Will India stop completely?Pant: I don’t think the political economy of India would allow a complete cessation of oil supplies from Russia. We are going to see a gradual decline, which, as the other speakers have alluded to, will be a market-driven process. Given the inflationary pressures, India’s diversification will track that trend.But considering our investments, infrastructure, requirements, and political economy, imagining that Russia will not be part of India’s energy mix is unrealistic. How important and significant a part that will be is contingent on a number of factors. As President Trump himself has said, “I’m going to see how this works out over the next six months.” President Trump is not known for consistency, so he may change his mind tomorrow or work out a deal with the Russians. All kinds of opportunities exist in the short to medium term. India will have to hedge its bets accordingly. Those buying oil from Russia will also have to hedge their bets accordingly. So, Russia will continue to be a part of the mix, but market pressures will accelerate diversification.When a trade agreement happens, it will also be an important marker in terms of how this episode pans out. If there is a deal anytime soon, the number of pressure points will be marginalised. But in the short to medium term, Russia will remain a relatively important player.Q: Rick Rossow, there was a lot of speculation in the press about a possible one-on-one meeting between Trump and Modi at the ASEAN summit in Kuala Lumpur. That’s not happening. The Prime Minister is participating virtually. Does this mean trade talks could take longer? Do you think the October-November deadline can still be met?Rossow: We had a trade agreement reportedly put on the President’s desk in late summer, but they felt it wasn’t enough and wanted to go back to the table to try to squeeze more concessions from India. It appears to have been a one-sided negotiation, with the US pressing for concessions and probably not offering much in return. There have been moments when we were close, and then things were put into abeyance. We are waiting to see if the President will commit to visiting India for the Quad leaders’ meeting. That may now be pushed to early next year. Ideally, they would want the agreement signed in person. These moments when leaders could meet and finalise details keep coming and going without anything concrete. Even rumours of PM Modi attending the UN General Assembly opening have passed. Luckily, though, we’re back at the table, and it seems that the President’s personal envoy, Sergio Gore, has been to India trying to get movement. So, someone with the President’s ear is engaged, not just the trade negotiators. It’s hard to predict exactly when this will be inked, but there are opportunities that could progress quickly when the leaders meet together and get the agreement signed.Watch accompanying video for entire discussion.
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