Trump has claimed that Indian Prime Minister Narendra Modi has agreed to reduce Russian oil imports as part of a potential US trade deal, but New Delhi has not officially confirmed this.
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Indian oil refiners may shift away from Russian crude after US President Donald Trump imposed sanctions on two major Moscow-based oil companies, but this will impact costs, analysts said on Friday.
Trump has claimed that Indian Prime Minister Narendra Modi has agreed to reduce Russian oil imports as part of a potential US trade deal. But New Delhi has not formally confirmed this.
Relations between the two countries have been strained since Trump raised tariffs on Indian exports by 50 percent in August. US officials have accused India of buying oil at a discount from Moscow to help fund the war in Ukraine.
“The key question is how much Prime Minister Modi is bowing to American will,” said Jorge Montepec of ONYX Capital. “The initial reaction has been very cautious from state oil companies.” Oil prices have risen more than 5 percent since the US sanctions.
Russian oil is structurally important to India’s energy system, accounting for about 34 percent of total imports and providing special discounts to refiners. India imported more than 1.6 million barrels of oil per day from Russia in September, according to Kepler.
“Indian refiners can easily switch to alternative suppliers if necessary, but that would mean pressure on refining margins and higher import bills,” said Vandana Hari, an oil market analyst in Singapore. A weak rupee will add to this burden.
The United States is India’s top trading partner, but a formal agreement is yet to be reached.
Indian Commerce Minister Piyush Goyal said, “Talks with Washington are progressing and we hope to reach a fair and equitable agreement in the near future.”
Analysts at Nomura said the near-term costs of recalibrating Russian oil could outweigh the benefits of the US tariff cuts.
The US President, who is initiating a Russia-Ukraine ceasefire, announced sanctions on Russian oil companies against the backdrop of no significant progress in the talks. The European Union (EU) has already decided to stop importing fuel from Russia. The EU has decided to impose a complete ban on all types of fuel imports from Russia from January 1, 2028. The EU took this step after Russia used gas supplies as a weapon since the start of the Russia-Ukraine war and after repeated supply disruptions.
