Donald Trump's new sanctions on Russian oil companies Lukoil and Rosneft mark a significant shift in his foreign policy, directly targeting Russia's energy sector. This move, aimed at reducing Russia's revenue amidst the Ukraine conflict, also puts immense pressure on India, a major consumer of discounted Russian crude, while this policy change reverses Trump's earlier stance of using trade and tariffs over direct sanctions.
From Tariffs to Sanctions
The US Treasury clarified these sanctions aim to reduce Russia's oil revenue without completely halting supplies. While G7 nations previously set a $60 per barrel price cap, these new measures could tighten the global oil supply chain, while experts suggest increased demand for non-sanctioned oil will likely drive prices up.
Dual Pressure on India
India faces a challenging situation. Since the Ukraine war, India became the largest buyer of cheap Russian oil. With Lukoil and Rosneft now targeted, Indian companies are re-evaluating procurement, while reliance Industries, operating a major refinery, is reportedly preparing to reduce or halt Russian oil purchases, including a contract for 500,000 barrels daily from Rosneft. Nayara Energy, partly owned by Rosneft, is also in a quandary. State-owned oil companies like Indian Oil are scrutinizing deliveries for compliance.
Trade Deals and Tariffs
Trump previously imposed a 50% tariff on India, citing its Russian oil purchases, while he claimed PM Modi promised to gradually cease Russian oil imports, a claim denied by the Indian government. Efforts for a new US-India trade agreement to lower tariffs are hampered by energy disagreements.
India's Balancing Act
India's primary challenge is securing affordable energy while maintaining strong US relations, while india is considering increasing its LPG and crude oil purchases from the US, potentially valued at $15 billion. This is a strategic effort to maintain balance, not a break from Russia.
Diplomatic Maneuvers
PM Modi's decision to attend the ASEAN Summit virtually, avoiding a direct meeting with Trump, signals India's desire to de-escalate tensions without compromising its independent policy. India's growing economy and energy demands make abandoning Russian oil complex. Trump's "oil game" tests India's diplomatic agility, balancing US alignment with energy security.
