US sanctions threaten India’s cheap Russian oil supply, risking inflation

India may face significant economic challenges as the US escalates sanctions against Russia's energy sector, potentially ending the country's reliance on discounted Russian crude.

Analysts have warned that these sweeping measures will complicate India's ability to import affordable oil, which could lead to rising inflation and an oil shock in the South Asian economy, Caliber.Az reports via foreign media.

On January 12, 2025, the US Treasury imposed sanctions on two major Russian oil producers and 183 oil tankers primarily involved in transporting Russian crude. While these tankers are still allowed to offload oil until March 12, the restrictions are expected to have long-term effects, particularly for India, which imports a substantial 40% of its oil from Russia.

Between April and November 2024, India relied on imports for 88% of its oil needs, with Russia being a key supplier.

According to trade intelligence firm Kpler, 75 of the sanctioned tankers have previously delivered Russian crude to India, which has heavily relied on these shipments. In 2024, approximately 30% of the 687 million barrels of crude carried by the sanctioned tankers were delivered to India, making the country more vulnerable than China to the impact of the sanctions.

Analysts, such as Bob McNally, President of Rapidan Energy Group, and Aldo Spanier, Senior Commodities Strategist at BNP Paribas, emphasize that India will feel the brunt of the sanctions due to its significant dependence on Russian oil.

While the sanctions were more extensive than anticipated, the disruptions are expected to worsen, leading to higher costs for India’s oil refiners and a possible ripple effect on inflation across the nation.

By Aghakazim Guliyev