New Delhi: India’s growing dependence on Russian crude could come under fresh pressure after a group of US senators proposed a sanctions bill that would impose tariffs of up to 100 percent on countries continuing to buy Russian oil.
The revised proposal significantly softens an earlier version of the bill, which had called for a blanket 500 percent tariff on countries importing Russian energy. It now caps tariffs at 100 percent and narrows the scope to the world’s five largest buyers of Russian oil or natural gas, placing India and China at the centre of the bill.
According to Reuters, the bill also proposes exemptions for countries that import less than 15 percent of their natural gas from Russia and are taking steps to reduce those imports.
The top five purchasers of Russian crude are China, India, Slovakia, Hungary and Azerbaijan.
For India, however, the proposal comes at a time when Russian crude accounts for the largest share of its oil imports.
According to global trade data analytics firm Kpler, India imported around 2.6 million barrels per day (mbpd) of Russian crude in June, accounting for more than half of its total crude imports. The imports have been rising steadily since March, and July arrivals are also expected to remain strong.
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Russian crude: India’s energy cushion
Sumit Ritolia, Manager at Kpler, said Russian crude has become India’s strongest safeguard against supply disruptions, especially in view of the uncertainty around the Strait of Hormuz.
“Russian barrels have helped Indian refiners maintain high refinery runs, ensure uninterrupted fuel supplies and avoid the disruptions seen in several other Asian refining systems,” Ritolia told ThePrint.
He added that Russian supplies have also helped stabilise the global oil market.
“The original sanctions framework was designed to keep Russian oil flowing because removing millions of barrels a day from the market would have tightened global supplies and pushed oil prices sharply higher,” he said.
The biggest challenge, analysts say, is India and other importing countries finding alternative suppliers if Russian oil purchases are significantly reduced.
“If secondary tariffs are implemented in a way that materially reduces purchases of Russian crude, the first question would be: where will the replacement barrels come from?” Ritolia said.
He noted that global spare production capacity remains limited as risks around the Strait of Hormuz have not disappeared and alternative supplies remain constrained.
“For India, the challenge is even greater. There are very few suppliers that can replace Russian crude at the same scale, reliability and price. Russian crude remains the most practical and competitive option for Indian refiners,” he said.
Natalia Katona, Commodity Analyst based in Abu Dhabi, echoed Ritolia’s view, saying India cannot quickly replace Russian barrels, which now account for a majority of its crude imports. “Alternative supplies would be more expensive, many would still depend on vulnerable Gulf shipping routes, and refiners would need time to adjust their crude slates,” she told ThePrint.
For India, the Russian oil has remained attractive because it is available at a discount compared with many Middle Eastern grades, thereby allowing refiners to keep costs under control.
Bill may not be implemented immediately
“While the tariff proposal raises geopolitical uncertainty, its practical implementation and ultimate impact on crude flows are far less straightforward than the headlines suggest,” Ritolia said.
According to him, any policy that significantly disrupts Russian exports risks tightening an already constrained global oil market and pushing crude prices higher.
Katona also believes the proposal is unlikely to come into force quickly, or even in its current form.
She noted that lawmakers have already diluted the original proposal by reducing the tariff ceiling from 500 percent to 100 percent, limiting it to the five largest buyers of Russian energy, and adding exemptions and presidential waivers.
Katona warned that imposing punitive tariffs on buyers of Russian crude when Brent prices are already above US$85 a barrel and persisting supply risks in the Strait of Hormuz could backfire, as forcing India and China away from Russian oil would push global crude prices even higher.
For India, which imports more than 85 percent of its crude oil requirement, the proposed legislation creates fresh uncertainty over both its energy security and trade ties with the US.
However, analysts say the country’s growing reliance on Russian crude, coupled with the lack of readily available alternatives, makes any rapid shift away from Russian oil unlikely.
(Edited by Ajeet Tiwari)
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