Concerns Mount On Global Trade As India Retreats From Russian Oil
There are serious concerns being raised that India’s retreat from Russian oil could create global trade shockwaves.
The US secondary sanctions are forcing a rapid reassessment of crude buying patterns in Asia, and the implications could reshape pricing, freight and supply balances worldwide.
With India holding the key to two-thirds of Russian seaborne exports, the stakes could not be higher.
The oil market for several years have worked on an unwritten rule: no matter how complex the geopolitics, barrels will find a home.
India, which takes roughly 2 million barrels a day (b/d) of Russian seaborne crude and has been one of a handful of major buyers since the start of the Ukraine war, is beginning to pull back.
That flow represents about two-thirds of Russia’s seaborne exports, a cornerstone of Moscow’s post-Ukraine energy lifeline and if it falters, the effects will not stay in one region; they will ripple across shipping routes, price spreads, and supply balances from the Middle East to Europe.
The shift according to reports has not come through a formal prohibition, but being driven by the shadow of US de facto sanctions and the fear of getting caught on the wrong side of them.
Washington’s latest measures include a 21-day window before an extra 25 per cent tariff on India-US trade kicks in.
Technically, that grace period means business can continue, but sentiment has changed.
Indian refiners have been buying more legitimate spot cargoes in recent days. Whether this marks a short-term hedging move or the start of a deeper reset is still unclear.
But, on the other hand that shift is bringing some business to Nigeria as crude oil refiners in India are turning to Nigeria’s crude oil to satisfy their domestic market demand and this is calculated to position Nigeria for a higher export target between September and October this year.
The Country’s would rise in those months due to increased imports of non-Russian crude by Indian refiners, according to Reuters.
In response to US pressure, Indian Oil Corp and Bharat Petroleum purchased 22 million barrels of non-Russian crude, including U.S. Mars, Brazilian, and Libyan grades.
These spot purchases represent about 6 per cent of India’s May crude processing and are supported by favorable arbitrage economics for Asian refiners.
However report shows that if Indian demand shrinks, there is only one buyer with the scale and the geopolitical leverage to take significant extra volumes which is China. China’s trade negotiations with the US complicate the picture, making every incremental Russian barrel a potential diplomatic bargaining chip.
Refiners in China could find space for some of the oil by easing back on other purchases. There is evidence they are already doing so. Saudi Arabia will reduce its term supplies to Chinese buyers for September, which could be a signal that Beijing is ready to take more discounted Russian cargoes.
The calculation is whether the economic reward outweighs the political risk. Additional Russian flows would come cheap but could disrupt broader trade talks. Elsewhere, the options are thin. Some smaller refiners in Southeast Asia or the Middle East might be able to handle the grades, but the same sanction pressure may end up being directed at them, and few governments will be willing to take that risk. Even core OPEC producers such as Saudi Arabia and the UAE are unlikely to process and re-export Russian crude in the way Indian refiners have.