Sanctions eased: India can temporarily buy Russian oil

The US Treasury Department has temporarily eased sanctions on Russian oil for now, for thirty days, specifically oil bound for India. According to US Treasury Secretary Scott Bessent, this is a “short-term measure” that will allow oil to flow to global markets and applies only to oil already at sea.

It is clear that this is a response to fears among major oil consumers, including India, that oil prices could surge. Oil prices have risen by roughly 20% since the start of the war.

Policy reversal

Paradoxically, since Donald Trump took office, Washington has been pressuring India to stop buying Russian oil, and was gradually succeeding. Last year saw the gradual addition of Russian-owned companies to the sanctions list, efforts by India to diversify its oil supplies and, according to data, by the end of the year, a fall in the share of Russian oil in India to its lowest level since 2023.

India had declared its intention to reduce Russian oil supplies to below one million barrels per day in March. That is now unlikely to happen. As it diversified its supplies, India also looked to deliveries from the region affected by the current US-Israeli conflict with Iran. It is one of the countries pushing for supplies from the region to continue despite the ongoing conflict.

India's response

Since the conflict began, India has responded swiftly, as has Asia as a whole—a consumer of fossil fuel products from the Persian Gulf, mainly LNG and oil. India responded by cutting gas supplies to industry, and the following day some refineries halted oil exports. On Thursday, 5 March, some refineries then stopped operating because of an oil shortage. In recent days, Russian oil has therefore been discussed as a solution, and Russia said it was ready to supply it.

According to some reports, some Indian refineries have already started buying oil from Russia, and the US Treasury Department's decision gives them the green light to do so. A short-term return to Russian oil will certainly help India cover the shortfall, but given the position of some Russian companies in the Indian market, high—and, if the conflict continues, ever-rising—oil prices will be unwelcome.

Much will depend on whether the conflict continues and, if so, in what form—in other words, how long supplies of raw materials will be restricted. India appears to have seized the opportunity to buy Russian oil very quickly.