For much of last year, the US government sought to drain Russia’s war machine of cash by eliminating one of its most loyal customers, India.
Under President Donald Trump’s pressure campaign, the White House imposed high tariffs on many of New Delhi’s exports and sanctioned two of the Kremlin’s biggest oil companies.
The strategy seemed to be working. India has not completely eliminated its dependence on Russian oil, but it has significantly reduced its purchases in favor of supplies from the Middle East.
However, last week’s joint attack on Iran by the United States and Israel effectively closed the Strait of Hormuz, through which nearly all of the Middle East’s oil flows. Iran has also threatened to attack energy infrastructure in neighboring countries in retaliation for its airstrikes on Tehran’s main energy storage facilities.
On Sunday, oil prices rose above $100 a barrel for the first time since Russia’s invasion of Ukraine in 2022, amid fears of further production disruptions and restrictions.
With few other options left, India is now turning back to Russian oil.
Recognizing New Delhi’s plight, the United States last week granted Indian refiners a 30-day exemption to buy Russian crude currently stranded at sea. U.S. Treasury Secretary Scott Bessent said the move was “to allow oil to continue flowing into global markets.”
After months of pressure from the White House to end its purchases of Russian oil, it now has the green light to do just that, and the proceeds continue to shore up the very war chest that Washington has spent a year trying to deplete.
After Moscow’s full-scale invasion of Ukraine in 2022, the Kremlin successfully pivoted eastward, finding economic lifelines in China and India as Western countries banned Russian oil from being shipped by sea. The world’s two most populous countries absorbed millions of barrels a day at deeply discounted prices.
India, the world’s fastest-growing major economy with a population of 1.4 billion, has emerged as one of Russia’s top buyers, arguing that the purchase is essential to its energy security.
But after returning to office just over a year ago, Trump moved to sever that connection.
Last August, he announced plans to impose high tariffs on India and accused New Delhi of profiting from the Ukraine war by buying Russian oil at a discount and reselling it at a global premium.
The White House imposed 50% tariffs on Indian goods, half of which were imposed as direct punishment to New Delhi over its purchases of Russian oil, and then sanctioned two of Russia’s largest oil companies in a bid to block the Kremlin’s main source of foreign currency funding.
In the end, the pressure campaign worked. After months of negotiations, the US government last month eased the levy on New Delhi in exchange for concessions to tighten controls on Russian oil.
But that promise is crumbling as missiles and drones crisscross the Strait of Hormuz. The narrow waterway transports India’s 2.5 million to 2.7 million barrels of crude oil imports per day, mostly sourced from Iraq, Saudi Arabia, Kuwait and the United Arab Emirates, according to data from analytics firm Kpler.
And with the Strait effectively paralyzed, increasing supplies from Russia seems like the obvious solution.
There were about 130 million Russian barrels at sea as of Friday, according to Kpler data. “Some of these barrels could be directed to Indian ports relatively quickly,” the ministry said in a note.
Kpler research analyst Sumit Ritoria predicted that India would “return to pre-sanctions levels and buy about 40-45% of its crude oil from Russia.”
Although Russia does not have the ability to fully bridge the gap created by Gulf Paralysis, it now has the incentive to maximize production and the power to command premiums.
However, Farwa Aamer, director of the South Asia Initiative at the Asian Social Policy Institute, said the 30-day exemption is a “temporary measure” with “limitations, conditions and deadlines.”
“While this exemption may provide temporary relief to India, it will not be enough to meet the market’s energy needs,” she said.
Cargo from Russia arrives at Indian ports later than tankers from the Middle East.
An oil ministry official told CNN on Saturday that India has “approximately 25 days’ worth of crude oil inventory and also maintains approximately 25 days’ worth of gasoline and diesel inventory,” adding that the country’s “total inventory of crude oil and petroleum products is approximately eight weeks’ worth.”
“We are in a comfortable position in terms of current stocks. We will increase supplies from other regions to make up for the shortfall caused by the Strait of Hormuz,” the official added.
On Friday, US Treasury Secretary Bessent said the US could further lift sanctions on Russian oil supplies.
“To alleviate the temporary shortage of oil around the world, we have allowed (India) to receive Russian crude oil. We may also lift sanctions on other Russian oil products,” he said in an interview on Fox Business on Friday.
The shift in U.S. policy comes as analysts warn that continued tensions are straining global supplies.
“The longer the Middle East crisis drags on, the longer it will strain global energy markets and the more likely an energy crisis will be for oil importing countries like India,” Armer said.
