India Shifts Energy Strategy: A Trade Deal with the US and a Cooling on Russian Oil
Indian oil refineries are increasingly avoiding purchases of Russian oil slated for delivery in April, with expectations this trend will continue. This shift comes as New Delhi and Washington edge closer to a significant trade agreement, potentially easing tensions and reshaping global energy dynamics.
The Trade Agreement Catalyst
The United States and India are nearing a trade pact, having announced a framework aiming for completion by March. This agreement is expected to reduce tariffs and broaden economic cooperation. Sources indicate that the move away from Russian oil is, at least in part, a strategic maneuver to facilitate this deal.
While the framework doesn’t explicitly mention Russian oil, former US President Donald Trump previously lifted additional 25% tariffs on Indian imports, contingent on New Delhi curbing its reliance on Russian crude. He stated India had “committed” to reducing imports “directly or indirectly.”
Refinery Behavior and Consumption Trends
Indian Oil Corporation, Bharat Petroleum, and Reliance Industries are reportedly declining offers from traders for Russian oil deliveries in March and April. However, some refineries had already scheduled Russian oil shipments for March, while most others have halted new purchases.
Data indicates India’s consumption of Russian oil fell to a two-year low in December. India became the largest importer of seaborne Russian crude following the conflict in Ukraine in 2022, drawing criticism from Western nations imposing sanctions on Russia’s energy sector.
Looking Ahead: Reduced Reliance on Russian Crude
Sources suggest India is preparing to lower its Russian oil imports to below 1 million barrels per day by March, with further reductions to between 500,000 and 600,000 barrels per day. This represents a significant decrease from an average of 1.7 million barrels per day in the previous year, and a peak of over 2 million barrels per day in mid-2025.
Nayara Energy, a privately-owned Indian refinery backed by Russia, currently relies entirely on Russian oil for its 400,000 barrel-per-day capacity.
Energy Security and Diversification
A spokesperson for India’s Ministry of External Affairs emphasized the nation’s strategy of diversifying energy sources, aligning with market conditions and evolving international developments, to ensure energy security for its large population.
FAQ
Q: Will India completely stop importing Russian oil?
A: While India is reducing its reliance on Russian oil, there are currently no official plans to halt imports entirely.
Q: What is driving India’s shift in energy policy?
A: The potential trade agreement with the US and a broader strategy to diversify energy sources are key factors.
Q: How will this affect global oil markets?
A: A decrease in India’s demand for Russian oil could potentially shift supply dynamics and impact global oil prices.
Q: What was the condition set by the former US President regarding tariffs?
A: The former US President lifted tariffs on Indian imports based on a commitment from India to reduce its reliance on Russian oil.
Did you know? India is the world’s third-largest consumer and importer of oil.
Pro Tip: Keep an eye on geopolitical developments, as they significantly influence global energy markets and trade agreements.
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