US-Iran war pushes India back to Russian oil, undermining Trump’s pressure campaign

For much of the past year, Washington tried to weaken Moscow's war finances by reducing one of its key oil customers, India. 

As part of President Donald Trump's broader "pressure campaign," the White House hit New Delhi with high export tariffs and blacklisted two of the Kremlin's top oil companies, reports CNN.

The move initially showed results; while India maintained some ties to Moscow, it significantly cut Russian crude imports in favor of Middle Eastern alternatives.

A joint attack by the US and Israel against Iran last week effectively closed the Strait of Hormuz, a vital route for most Middle Eastern oil exports. Tehran has also warned it could target energy infrastructure in neighboring states after airstrikes hit major storage facilities in its capital.

Amid fears of supply disruptions, global oil prices rose above $100 per barrel on Sunday (8 March) for the first time since Russia launched its invasion of Ukraine in 2022. With limited alternatives, India is now turning back to Russian oil.

Acknowledging the crisis, the US Treasury last week granted Indian refiners a 30-day waiver to process Russian oil currently "stranded" at sea. US Treasury Secretary Scott Bessent noted that the move was necessary "to enable oil to keep flowing into the global market," even if it meant bolstering the very Russian war chest Washington spent a year trying to deplete. 

Pressure on India

For much of last year, the White House appeared to be winning its "economic war" on two fronts. By slapping 50% tariffs on Indian goods specifically targeting New Delhi's refusal to quit Russian oil and sanctioning Russia's largest oil firms, the US successfully pushed India toward Middle Eastern suppliers.

However, the joint US-Israeli offensive against Iran has effectively paralyzed the Middle East's primary oil artery. Data from analytics firm Kpler shows the Strait of Hormuz typically funnels 2.5 million to 2.7 million barrels of India's daily imports, sourced from Iraq, Saudi Arabia, and the UAE. With these routes compromised, India's promise to "tighten the tap" on Russian crude has unraveled.

The $100-barrel threshold

On Sunday (8 March), global oil prices surpassed the $100-a-barrel mark for the first time since the 2022 invasion of Ukraine. The price surge, fueled by fears of regional infrastructure attacks in Tehran, has intensified India's predicament.

Acknowledging the crisis, the US Treasury last week granted Indian refiners a 30-day waiver to process Russian oil currently "stranded" at sea. Treasury Secretary Scott Bessent noted that the move was necessary "to enable oil to keep flowing into the global market," even if it meant bolsterining the very Russian war chest Washington spent a year trying to deplete.

Inventory and long-term outlook

While India maintains a total inventory cover of nearly eight weeks for crude and petroleum products, experts suggest the reliance on Russia will only deepen if Middle Eastern tensions persist.

"The longer the crisis in the Middle East, the higher the chance of an energy crisis for oil-importing economies like India," said Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute.

Sumit Ritolia, a research analyst at Kpler, predicted India would return to "pre-sanctions levels," likely sourcing 40-45% of its crude from Russia in the coming months.