Oil conundrum: On India’s energy imports from Russia

Union Ministry of Commerce and Industry (MCI) data on India’s May crude imports show that receipts from Russia had reached the pre-sanction levels of more than 40%, which is also the highest in two years. Though India has defended this as commercially prudent, its yuan-based payments give China an edge to internationalise its currency at India’s expense, even if it has no bearing on the domestic strength of the Indian rupee due to strict capital controls. Oil import concentration from a single source, and paying a premium, is risky for India, which has long pursued a diversified energy strategy. Moreover, sourcing fuel from the Gulf spot market amid evolving sanctions has its own risks. Secondary sanctions could hit trade channels, exposing Indian refiners to severe supply shocks. India’s crude imports from Russia surged in June, while UAE shipments were at record levels as refiners sought to secure supplies after the Strait of Hormuz reopened. However, renewed Iran-U.S. hostilities have put those flows at risk. And even as Venezuela has emerged as a key supplier, increasing and unsustainably high one-country concentration could weaken India’s bargaining power, reduce flexibility, and erode its credibility as an independent balancing power.