Why the US says India can buy Russian oil again

Why the US says India can buy Russian oil again

Within weeks of India’s pledge to halt Russian oil imports as part of a U.S. trade agreement, the administration has lifted restrictions, allowing renewed purchases. This shift comes amid concerns over global energy supply disruptions, with the U.S. aiming to ease immediate pressures. The Trump-era policy reversal raises questions about the consistency of Washington’s stance on Russian oil exports.

India’s commitment to cut Russian oil purchases was a cornerstone of the trade deal announced last month. The agreement sought to strengthen economic ties between the two nations, but it also required India to reduce its reliance on Moscow’s oil. However, the U.S. has now granted a 30-day exemption, enabling Indian refiners to import Russian crude again. The decision underscores the administration’s focus on short-term solutions to market volatility.

“India is an essential partner of the United States, and we fully anticipate that New Delhi will ramp up purchases of U.S. oil. This stop-gap measure will alleviate pressure caused by Iran’s attempt to take global energy hostage,” said U.S. Treasury Secretary Scott Bessent on social media.

The recent escalation in oil prices, following U.S.-Israel strikes on Iran, has intensified demand for flexible supply routes. The Strait of Hormuz, a critical chokepoint for global oil flow, saw reduced output, while production in the region faltered. With India as the world’s third-largest crude importer, the U.S. argues that resuming Russian oil imports will stabilize markets and prevent further price spikes.

Under the new waiver, Indian refiners can buy Russian crude already loaded onto ships before March 5, provided it reaches the country and is purchased by an Indian entity. This temporary license ensures the policy remains a short-term fix rather than a long-term adjustment. Analysts suggest the measure is designed to minimize benefits for Russia while addressing immediate supply concerns.

“The U.S. government is simply looking for quick fixes to the global oil price issue,” remarked Ben Hilgenstock, an expert in Russian sanctions at the Kyiv School of Economics. “The Russian oil that is already floating around is obviously a prime candidate for that.”

India’s oil stockpiles typically cover less than a month of domestic demand, leaving the nation vulnerable to market fluctuations. The move to allow Russian oil imports could ease this strain, offering refiners a buffer against shortages. “It’s a saving grace for Indian refineries,” noted Carole Nakhle, CEO of UK-based Crystol Energy. “It’s not that they have reduced their purchases to zero, but they were looking for other sources of supply. It helps Indian buyers who were buying Russian oil.”

Before the 2022 Ukraine invasion, India’s imports from Russia were modest. However, the country rapidly increased its reliance on Moscow’s oil after prices dropped significantly compared to alternatives. This shift was accelerated by sustained pressure from the Trump administration, which leveraged the low global oil market to secure the agreement. Hilgenstock highlighted that the decision was easier during this period, as India had viable alternatives at lower costs.

Despite the recent resumption, India’s oil minister Hardeep Singh Puri claimed the nation’s reserves were sufficient despite “short-term disruptions arising from the Middle East.” Nevertheless, about half of India’s crude imports pass through the Strait of Hormuz, making the waiver a strategic response to potential bottlenecks. Russia, anticipating this move, had already redirected more shipments toward Indian waters, positioning itself to capitalize on the situation.

Analysts believe the waiver could lower prices, benefiting Indian buyers given their role in the global market. “Everyone is having issues with supplies coming from Saudi Arabia, the UAE, Kuwait, and Iraq. Someone would have bought this oil anyway. And if it decreases the global price a little bit, then why not?” Hilgenstock added, emphasizing the policy’s pragmatic intent.