For much of last year, Washington sought to starve Moscow’s war machine of cash, in part by removing one of its most loyal customers: India.
Under President Donald Trump’s pressure campaign, the White House slapped high tariffs on many of New Delhi’s exports and sanctioned two of the Kremlin’s largest oil firms.
The strategy appeared to be working. While India didn’t quit its Russian oil habit entirely, it sharply reduced its purchases in favor of supplies from the Middle East.
But last week’s joint US-Israeli offensive against Iran effectively closed the Strait of Hormuz, through which almost all Middle Eastern oil flows. Iran has also threatened to attack energy infrastructure in neighboring countries in retaliation for airstrikes that hit major energy storage sites in Tehran.
On Sunday, oil prices surpassed $100-a-barrel for the first time since Russia’s 2022 invasion of Ukraine, boosted by fears of further production disruptions and restrictions.
Left with few other options, India is now turning back to Russian oil.
In an acknowledgement of New Delhi’s predicament, the US last week granted Indian refiners a 30-day waiver to buy Russian oil currently stranded at sea. US Treasury Secretary Scott Bessent said the move was “to enable oil to keep flowing into the global market.”
After months of White House pressure to stop buying Russian oil, it is now being given a pass to do exactly that, the proceeds continuing to bolster the very war chest Washington spent a year trying to deplete.
Pressure on India
As Western nations banned seaborne Russian crude after Moscow’s full-scale invasion of Ukraine in 2022, the Kremlin successfully pivoted east, finding an economic lifeline in China and India. The world’s two most populous nations absorbed millions of barrels per day, at steep discounts.
Home to 1.4 billion people and the world’s fastest-growing major economy, India emerged as one of Russia’s top buyers – defending its purchases as essential for its energy security.
But after returning to the presidency just over a year ago, Trump moved to sever that link.
Last August, he announced plans to impose steep tariffs on India, accusing New Delhi of profiting from the Ukraine war by buying discounted Russian oil and reselling it at a global premium.
The White House slapped 50% tariffs on Indian goods – half of them to directly punish New Delhi for its Russian oil purchases – and later sanctioned two of Russia’s largest oil firms, in a bid to choke off the Kremlin’s key source of foreign cash.
Eventually, the pressure campaign worked. After months of negotiations, Washington eased levies on New Delhi last month in exchange for a concession: tightening the tap on Russian crude.
But as missiles and drones crisscross the Strait of Hormuz, that promise is unraveling. Data from analytics firm Kpler shows that the narrow waterway funnels 2.5 million –2.7 million barrels of India’s daily crude imports, largely sourced from Iraq, Saudi Arabia, Kuwait and the United Arab Emirates.
And with the strait effectively paralyzed, ramping up Russian supply looks like an obvious solution.
As of Friday, there were about 130 million Russian barrels at sea, according to Kpler data. “Some of these barrels could be redirected toward Indian ports relatively quickly,” it said in a note.
Sumit Ritolia, a research analyst at Kpler, predicted India will go “back again to pre-sanctions level, buying around 40-45% of crude from Russia.”
‘Temporary relief’
While Russia lacks the capacity to fully plug the gap left by the Gulf paralysis, it now has incentive to maximize output – and the leverage to command a premium.
But, noted Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute, the 30-day waiver is a “temporary measure” that comes with “limitations, conditions and a deadline.”
“This waiver may offer temporary relief for India, but it is not enough to fulfil the energy demands of the market,” she said.
Shipments from Russia are also slower to reach Indian ports than tankers from the Middle East.
India has “around 25 days of crude oil inventory (and) maintains about 25 days of petrol and diesel inventory,” a source from its oil ministry told CNN Saturday, with a “total inventory cover of nearly eight weeks of crude oil and petroleum products.”
The source added: “In terms of our current stock, we are in a comfortable position. We are going to ramp up our supplies from other parts of the geographies and make up for our supply crunch from the Straits of Hormuz.”
On Friday, US Treasury Secretary Bessent said the US may lift sanctions on further Russian oil supply.
“To ease the temporary gap of oil around the world, we have given (India) permission to accept the Russian oil. We may unsanction other Russian oil,” he told Fox Business in an interview Friday.
This shift in US policy comes as analysts warn that ongoing tensions are squeezing global supplies.
“The longer the crisis in the Middle East, the longer the strain on global energy markets, and the higher the chance of an energy crisis for oil-importing economies like India,” Aamer said.
