Trump's tariffs have forced no change in Indian refiners' Russian oil import strategy, say top officials

Indian Express

4 days ago

The additional 25 per cent tariff on Indian goods announced by US President Donald Trump earlier this month has had no bearing on Indian refiners' Russian oil import strategy, and purchases continue to be guided purely by economic and commercial considerations, according to top officials at India's public sector refiners.
While there has been a slowdown in oil imports from Russia—India's largest supplier of crude oil—in recent weeks, which was being seen by some industry watchers as a signal from New Delhi to Washington, officials in India's refining sector maintain that the reduction is primarily due to discounts on Russian crude narrowing considerably, and not due to threats by the US or any other reason.
Indian refiners' hefty imports of Russian crude have surfaced as a major irritant for the Trump administration. Earlier in August, Trump announced an additional 25 per cent tariff—over and above the 25 per cent tariff announced on Indian goods—as a penalty for India's Russian oil imports. New Delhi has called the targeting of India over the purchase of Russian oil 'unjustified and unreasonable' and said these imports began as its traditional supplies were diverted to Europe, with the US having 'actively encouraged such imports by India for strengthening global energy markets stability'.
'We have not received any instruction or indication (from the government). We are continuing with our crude procurement strategy based on economics. It was and continues to be a commercial exercise… No special effort is being made to either increase or decrease (oil imports from Russia). We are buying crude as per economic considerations,' said Arvinder Singh Sahney, chairman of IOC, which is India's largest refiner.
Sahney's comments echo what Vikas Kaushal, chairman and managing director of Hindustan Petroleum Corporation (HPCL)—another public sector refiner—had said last week. ''It's not that we are not buying Russian crude; those decisions are still open. It's just that whatever is economical will be bought,' Kaushal had said.
Although Russian oil's share in IOC's oil import basket contracted in April-June from around 30 per cent in the year-ago quarter, Sahney said that the reduction was due to a contraction in discounts on Russian crude, and not for any other reason. The share of Russian crude in IOC's total oil imports in the April-June quarter was around 24 per cent, and Sahney expects a similar level to be maintained going forward. He said that there could be some variation based on the economics and discount levels—purchases may rise if discounts deepen, or dip a bit if discounts contract.
India's second-largest public sector refiner BPCL expects Russian oil to maintain its share of 30-35 per cent in the company's oil import basket as long as there are no sanctions imposed on Moscow's oil, its director (finance) Vetsa Ramakrishna Gupta said in a post-earnings investor call on Thursday.
'Our crude procurement from Russia was around 34 per cent during the first quarter. Only slightly it has reduced over the past month, but we are expecting flows will come back to the normal level of 30-35 per cent…As long as there are no new sanctions on Russian oil, our procurement strategy would be having around 30-35 per cent of Russian crude,' Gupta said, adding that the discount on Russian crude had contracted to just around $1.5 per barrel, which had led to import volumes dipping a bit as Moscow's oil lost much of its price advantage over competing crude grades. BPCL bought oil from geographies like West Africa, Latin America, and the US to replace some of the Russian volumes.
India has stated over the years that as a country that depends on energy imports, it will buy oil from wherever it gets a good deal, as long as the oil is not under sanctions. To be sure, Russian oil is not under sanctions, and is only subject to a price cap imposed by the US and its allies that applies if Western shipping and insurance services are used for transporting the oil.
'Even today, there is no sanction on Russian crude…there is only a price cap, and till we honour the price cap, there is no violation by Indian refiners. We have been honouring the price cap and there is no change in our strategy,' Sahney said.
The renewed pressure from the US and other Western powers—pressuring Russia's top trade partners to cut down on imports from the country—is aimed at forcing the Kremlin's hand into ending the Ukraine war. For Trump, who wants the three-year-old Russia-Ukraine war to end within days, this is an opportune time to pressure India over its Russian imports, given the protracted trade pact negotiations between New Delhi and Washington.
When Russia invaded Ukraine in February 2022, Moscow's share in New Delhi's oil imports was less than 2 per cent. With much of the West shunning Russian crude following the invasion, Russia began offering discounts on its oil to willing buyers. Indian refiners were quick to avail the opportunity, leading to Russia—earlier a peripheral supplier of oil to India—emerging as India's biggest source of crude within a matter of months, displacing the traditional West Asian suppliers. Russia now accounts for 35-40 per cent of India's total oil imports by volume.
Despite the noise from sections of the West against India over the country's hefty purchases of Russian crude, this shift in oil and petroleum product trade had Washington's blessings, as the US wanted energy markets to remain stable and well-supplied, according to various US officials who served in the Joe Biden administration.