Impact of Russia Sanctions on India’s Economy and Geopolitics
The new U.S. and EU sanctions on Russian oil companies significantly affect India, a major importer of discounted Russian crude, complicating energy supplies and trade. India faces challenges in reducing purchases from sanctioned Russian firms like Rosneft and Lukoil, amid payment system disruptions and geopolitical tensions. While India seeks alternative oil sources and deepens U.S. trade talks, the sanctions highlight risks in India’s reliance on imported hydrocarbons and may boost its renewable energy ambitions.
India, the world’s second-largest importer of Russian crude oil, is experiencing substantial impacts following stringent U.S. and EU sanctions targeting Russian oil companies such as Rosneft and Lukoil. Prior to the Russia-Ukraine conflict, Russia comprised a small share of India's oil imports, but amid the war, India's purchase rose sharply due to cheaper prices. The sanctions now pressure Indian refiners to reduce imports from sanctioned entities, disrupting about 1.7 million barrels per day of crude oil. Reliance Industries, a major private player, has a large decade-long oil deal with Rosneft and must navigate compliance under the sanctions. These developments raise costs for India as immediate substitutes for discounted Russian oil are lacking, pushing India towards increased Middle Eastern imports and potential deeper trade negotiations with the U.S. to secure affordable oil. India's strategic sectors like defense and engineering goods are also affected by wider sanctions. The sanctions expose vulnerabilities in India's energy security emphasizing its dependence on imported hydrocarbons, especially oil, which accounts for nearly a third of total energy consumption. This scenario may accelerate India’s commitment to indigenous renewable energy growth under the Modi government’s national green energy initiatives. Concurrently, geopolitical sensitivities are evident, with Modi missing the ASEAN summit amid strained U.S.-India relations. Overall, India strives to balance maintaining its long-standing strategic ties with Russia while adapting to the realities of intensified Western sanctions and evolving global energy markets.
