Tycoons who profit from India's increasing demand for Russian oil

Business Standard

14 hours ago

The last time many Americans paid any attention to Jamnagar, a sunbaked industrial stretch on the mud flats on India's Gulf of Kutch, it was thanks to Rihanna.
She performed there in March 2024 for an exclusive audience — Bill Gates, Mark Zuckerberg, Ivanka Trump and the like — at the pre-wedding party for Anant Ambani, the younger son of Asia's richest man, Mukesh Ambani.
They were in Jamnagar, which had no international airport or hotel rooms for most of the guests, because its port and oil refineries have become central to the Ambanis' empire and $115 billion fortune.
One week later, Mr. Trump signed an executive order that doubled the punishment. In effect, he pushed India's exporters into peril on the grounds that their government was aiding Russia's war aims in Ukraine by letting Indian companies profit from the international oil trade.
Mr. Trump did not name the companies. But all roads lead back to Mukesh Ambani and his company, Reliance Industries.
Its principal refinery in Jamnagar — part of Gujarat, the home state of India's prime minister, Narendra Modi — is the biggest in the world. Many of Reliance's investments there and across India have been planned in consultation with Mr. Modi and other politicians. This area, including another refining business nearby, brings in 1.5 million barrels of oil every day, about a third of it shipped from Russia.
The Reliance name is everywhere in India. The company, started by Mukesh Ambani's father in Bombay (now Mumbai) in 1965 as a trading house for polyester, is the nation's biggest conglomerate, composed of dominant players in energy, data and mobile networks, retail, finance, and more. The companies stream HBO, they own one of the world's most valuable cricket teams, they run a legion of charitable foundations, and recently they bought up nearly every haute couture brand in the country.
The Reliance refinery at Jamnagar is internationally rated in the top percentile in terms of complexity. There are many kinds of crude oil, and the Jamnagar facility can easily switch from refining crude from the Persian Gulf, Latin America or wherever the best prices can be found. Jamnagar had processed 500 types over the past 25 years, a Reliance spokesman said.
While about 30 percent of the crude that Reliance buys comes from Russia, a company spokesman said, 'it is incorrect to attribute profitability only to Russian crude oil discounts.' He added that the company had been consistently profitable over decades, more so than any regional competitor, both before and after the wartime discounts. The money it makes selling refined products to Europe is a small fraction of its total output.
The other big refining business in Jamnagar is Nayara Energy, just a few miles away from Reliance's.
The Nayara refinery is massive and modern, too, though its output is only a third of Reliance's. Since 2017, Nayara has been 49 percent owned by Rosneft, Russia's state oil company. One of its other largest stakeholders is a Russian-owned investment firm. That means that a Rosneft-backed entity has been buying oil from Russia, processing it in India and in some cases selling the results back to Europe. Unlike Reliance, it has most of its eggs in one basket.
In the first year of the war in Ukraine, these private refiners became the world's biggest buyers of seaborne Russian crude. Shut out of the European market, Russia offered discounts to whoever would take its stranded crude. India, along with China and Turkey, stepped in.
For two or three years, Indians and Americans took it in stride. Eric Garcetti, President Joseph R. Biden Jr.'s ambassador in New Delhi, said at a conference in Washington in May 2024 that 'we wanted somebody to be buying Russian oil,' to stabilize the price.
Mr. Trump's salvo seemed to come out of the blue. Pankaj Saran, a former Indian ambassador to Russia who runs the NatStrat think tank in New Delhi, said archly, 'The trigger for the penalty would seem to be an action which has been going on in plain view since 2022.' To him, Mr. Trump's recent talk about Russian oil looks like a red herring.
India, home to 1.4 billion people and the world's fastest-growing large economy, has only modest oil reserves and needs to import 85 percent of its supply. Traditionally that meant spending hard currency in the Persian Gulf. The pressure those purchases put on India's balance of trade forces the government to take a strong interest in how its thirst for oil can be met.
'We are completely defenseless against energy costs, because we don't have oil,' Mr. Saran said. For that reason, 'the government has actively encouraged the refining sector.'
Reliance's balance sheet is such that it does not need the Russian oil trade, and Nayara Energy might not, either. (It did not respond to requests for comment.) There are indications that all of India's importers of crude were already scaling back their purchases, as European countries prepared to toughen up their constraints.
Mr. Trump's threats though have put Mr. Modi's government in a bind, and businesses like Mr. Ambani's with it. Any shift away from Russia now will look like a capitulation. Even if that were a good deal, it is not something that any elected leader of India can afford.