India caught in crossfire as US sanctions jolt Russian oil trade | Capital Beat

In the latest episode of Capital Beat, former ambassador Meera Shankar and senior journalist Sanjay Kapoor discussed the impact of US sanctions on Russian oil giants Rosneft and Lukoil. The panel addressed how these measures affect India's oil imports and broader geopolitical relations, including Prime Minister Narendra Modi's virtual attendance at the ASEAN summit.

India's top oil companies are set to reduce purchases of Russian crude following the US sanctions. Global oil prices rose by 3 to 5 per cent in the last two days, reaching a peak of $66.02 per barrel.

A Reliance spokesperson stated that the US has provided companies time until November 21 to wind down transactions with the sanctioned Russian oil producers.

Also read: Trump reiterates claim that India will stop buying Russian oil by year-end

The sanctions complicate India's ability to acquire Russian oil, which constitutes about 35 per cent of its purchases. This shift poses challenges for the country's energy-dependent economy.

Sanctions strain India-Russia ties

Meera Shankar noted that the sanctions make it more difficult for India to buy oil from Russia. She added that Russia would likely seek workarounds, such as establishing dummy companies or routing sales through third countries like Turkey.

She linked the sanctions to US President Donald Trump's frustration over stalled peace efforts in Ukraine. Trump had proposed direct discussions on a political settlement, bypassing an interim ceasefire.

Russia argues that a ceasefire would allow Ukraine to rearm and resume fighting. Ukraine and Europe prefer a temporary halt on current lines before negotiating a final deal.

Also read: Congress posts AI video of Trump instructing PM Modi on ceasefire, Operation Sindoor

Kapoor highlighted the political embarrassment for India. He stated that the country faces pressure from the US, despite prior alignment with American interests on Russian oil purchases.

Kapoor referenced statements from former US ambassador Eric Garcetti and Petroleum Minister Hardeep Singh Puri, noting that India bought discounted Russian oil at the US administration's behest.

Economic repercussions

Private sector companies like Reliance have been key importers of Russian oil. Meera Shankar explained that firms assess the risks of violating sanctions against the benefits of continued purchases.

Public sector undertakings have already reduced Russian oil imports for commercial reasons. Private players, including Reliance and Nayara Energy, formerly Essar Oil and now owned by Rosneft, dominate the remaining imports.

India's companies have until November 21 to adjust. Options include sourcing alternatives, avoiding US dollar payments, or using new Russian entities and third-country routes.

Higher oil prices will impact India as a net energy importer. Meera Shankar pointed out that the country faces increased costs across its economy.

Also read: Trump dials Modi on Diwali, reiterates India is not going to buy Russian oil

Reliance reportedly earned $6 billion in windfall profits from discounted Russian crude over three years. The sanctions now force a reevaluation of such strategies.

Ukraine conflict fuels global tensions

Meera Shankar emphasised that the sanctions reflect Trump's impatience with Putin, who rejects ceasefires without territorial gains. Ukraine resists surrendering land but may accept a temporary pause.

Trump seeks to bridge these positions, but progress remains elusive. The outcome of the Ukraine talks will influence Russia's oil export tactics.

Kapoor described the situation as a misreading by India of Trump's return to power. Expectations of favorable treatment have given way to scrutiny over actions like Russian oil buys.

Also read: Trump warns India: Stop buying Russian oil or continue paying 'massive tariffs'

India's involvement in BRICS adds complexity. Kapoor noted that yielding to US pressure could anger Russia, the group's fulcrum, and upset China.

Domestic political fallout

Opposition leader Jairam Ramesh has criticised the government, tweeting that Modi proposes but Trump disposes. Kapoor observed consistent backlash over perceived buckling under pressure.

Prime Minister Modi is attending the ASEAN summit virtually, raising questions about avoiding an in-person meeting with Trump. This decision came days before the event.

Kapoor called it deeply embarrassing, citing three missed opportunities for Modi-Trump meetings. He questioned the effectiveness of recent visits by Foreign Minister S Jaishankar and Commerce Minister Piyush Goyal to the US.

Also read: PM Modi not going for ASEAN summit to avoid meeting Trump: Congress

Negotiators reportedly exhausted options, concluding that only direct leader-level talks could resolve differences. Rumors persist of a US-favorable deal, including increased corn imports.

Diplomatic maneuvers under scrutiny

Meera Shankar attributed tensions partly to Trump's personalisation of foreign policy, including resentment over India's denial of US mediation in cross-border conflicts in Ladakh.

Once the US commits to a path like sanctions, momentum builds to avoid loss of face. India becomes collateral damage in this dynamic.

Kapoor argued that Modi's foreign policy, often politicised through personal rapport, faces limits. Hugs and summits have not yielded tangible economic deals.

The government is accelerating free trade agreements with the UK, EU, and others to offset losses. Recent GST reductions aim to boost domestic demand.

Also read: Congress slams PM Modi over Trump's repeated Russian oil import claims

Sectoral impacts, job concerns

Meera Shankar warned of adverse effects on labour-intensive exports like garments, gems and jewellery, leather, and shrimps due to potential 50 per cent US tariffs. These sectors risk job losses.

Finding new markets will take time. Immediate compensation for economic damage remains challenging.

China has paused public sector Russian oil imports to assess sanctions. It may create standalone companies to evade restrictions.

European Union and UK measures target Russia's shadow fleet, barring over 200 ships from ports and banks. This tightens global enforcement.

Global ripple effects

She stressed that Trump must pressure both Russia and Ukraine to narrow gaps, including on NATO membership assurances for Ukraine.

Without a peace deal, higher energy prices burden the world, including India and China. Putin may hold out for eastern territorial gains.

Also read: PM Modi writes to citizens on Diwali, highlights Op Sindoor, GST reforms

Kapoor viewed the broader context as a serious misreading. India expected advantages from Trump's presidency, but now it confronts opposition on multiple fronts.

BRICS cohesion is at risk if India reduces Russian ties. China questions India's stance amid ongoing negotiations.

India's balancing act

Kapoor noted that no country has thrived under Trump's policies. Canada faces similar uncertainties, with its leader seeking talks with India.

India's hostile neighborhood amplifies vulnerabilities. Domestic policy influences Trump's foreign approach, complicating relations.

Meera Shankar suggested that economic diplomacy gaps from US tensions require urgent fixes. FTAs and market diversification are underway but slow.

The panel discussion underscored the interconnected challenges of energy security, trade, and alliances amid escalating US-Russia frictions.

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