New Delhi: The Democratic Party’s sweeping victory in the US midterm elections, wresting control of both the House of Representatives and the Senate from the Republicans, could put President Donald Trump under greater pressure to end the Iran conflict through diplomacy and bring down global energy prices.
However, the change in Congress could make it harder for Washington to ease sanctions on Russia, as Democrats are likely to push for tougher action against Moscow, particularly over its oil revenues. This could create fresh uncertainty for India, one of the largest buyers of Russian crude oil.
The Democratic victory on Tuesday marks a major shift in the balance of power in Washington. The new Congress will take office on 3 January, giving the Democrats more power to question the Trump administration’s policies and spending plans.
For global oil markets, one of the biggest implications could be a push towards negotiations with Iran, market experts said. A possible end to the conflict could help restore oil supplies through the Strait of Hormuz, a key route for global crude shipments, and bring down shipping costs.
Abhishek Kumar, a senior oil analyst at global energy and commodities consultancy Sparta Commodities, said the election results could increase pressure on Trump to bring down energy prices and take a more diplomatic approach towards Iran. “That (diplomatic approach) would be bearish for crude, particularly if it helps restore oil flows through the Strait of Hormuz,” he said.
Kumar said Brent crude, which has already eased to around $103 a barrel, could fall below $100 if Gulf oil supplies continue to recover and there is progress in US-Iran peace talks.
According to Natalia Katona, commodity analyst based in Abu Dhabi, the Democratic control of both chambers could make it harder for Trump to secure additional funding for the Iran war and avoid scrutiny of its costs and objectives. “This could increase pressure for negotiations (and speed up the deal between Iran and the US), although it does not guarantee an end to the fighting,” she said.
The election results, Katona added, would also have a gradual impact on US energy policy. Democrats-led states could support renewable energy and impose additional checks on fossil fuel projects, but would not be able to reverse federal policies immediately.
For India, any easing of tensions in West Asia could mean more reliable oil supplies from Gulf producers and lower tanker freight rates, helping reduce the cost of importing crude.
The overall impact for India could be positive if crude prices fall, but there are risks to its Russian oil supplies, market analysts said.
Lower oil prices would reduce India’s import bill, they said and added that it would ease inflationary pressures. However, tighter US restrictions on Russian companies, banks and shipping could make it harder for Indian refiners to continue buying discounted Russian crude.
“The benefits of cheaper oil would likely outweigh the challenges for Indian refiners. However, increased competition from Gulf countries exporting refined petroleum products could put pressure on their export margins,” Kumar said.
Russian oil and the Graham Act
However, market experts said that the impact on Russian oil purchases could be more complicated for India.
The Lindsey O. Graham Act that Trump signed in September allows the US President to impose tariffs of up to 100 percent on goods imported from the five largest buyers of Russian crude oil and natural gas, including India and China. Trump has since waived these additional tariffs and certain sanctions under provisions in the law, citing US national interests. The waiver covers tariffs on major buyers of Russian energy, but does not remove other US tariffs that may apply to Russian exports.
Katona said Democrats could push Trump to take tougher action against countries buying Russian oil, but cannot independently bring back the tariffs that he has waived.
“The administration still controls that decision unless Congress changes the law (and Trump can veto those changes),” she said.
The waiver also has no fixed expiry date, meaning the election results will not immediately change the rules for India’s Russian oil purchases.
In fact, the Democrats are more likely to push for tougher action against Russian oil companies and banks, rather than penalising countries buying Russian crude, Katona said.
For Indian refiners, this could mean discounted Russian oil remains available, but making payments and arranging shipments could become more difficult.
“Stronger sanctions on Russia will prolong the situation with discounts on Russian crude, but at the same time it will keep payments and shipping more difficult,” she said, adding that security risks in the Black Sea from drone attacks could also affect deliveries.
Kumar said a Democrat-controlled Congress could make further sanctions relief for Russia politically difficult, even as the US administration seeks to lower oil prices.
The immediate impact on oil markets will largely depend on whether the Trump administration moves towards a settlement with Iran and how it uses its existing powers to impose sanctions on Russia, he added.
(Edited by Viny Mishra)