Mumbai: Indian refiners, known for being major buyers of Russian crude, are planning to reduce their purchases slightly amid increasing pressure from the U.S. The decision comes ahead of a significant hike in U.S. tariffs, but reflects India’s ongoing commitment to maintain its relationship with Russia despite international scrutiny. While the projected crude purchases show a downturn, any trade negotiations with the U.S. could alter these plans significantly.
Indian Refiners Adjust Expectations Amid U.S. Pressure
Indian refiners, both state-run and private, are bracing for a modest reduction in their import levels of Russian crude oil. According to sources familiar with the situation, companies including Reliance Industries Ltd. are looking to purchase between 1.4 million and 1.6 million barrels per day for October and beyond. This adjustment comes in response to increased scrutiny from the U.S. government, which is eager to address its trade deficit with India and curb the country’s growing energy ties with Russia.
India’s average purchase over the first half of this year was around 1.8 million barrels per day, highlighting a clear shift in strategy as new geopolitical dynamics unfold. Analysts suggest that while the minor cutback appears to align with U.S. interests, it does not indicate an intention to completely sever economic ties with Moscow. Instead, it signifies a tricky balancing act for India, which must navigate its significant energy needs alongside international diplomatic pressures.
Impact of U.S. Tariff Increases
The situation is compounded by the announcement that the U.S. is set to double tariffs on Indian imports to 50%, starting Wednesday. This decision, crafted by the Trump administration, is part of a broader strategy to reduce reliance on foreign oil imports and pressurize countries like India, which has notably increased its Russian crude purchases since the Ukraine conflict escalated. Notably, India now represents 37% of Russia’s total oil exports, a striking statistic that underscores the pivotal role the country plays in Moscow’s energy strategy.
Refiners in India are under considerable pressure to adjust their strategies, particularly given the impending increase in tariffs. A potential trade deal with the U.S. could significantly shift existing dynamics and ease some of the pressure associated with funding Russia’s ongoing conflict in Ukraine.
The Role of Diplomacy in Energy Trade
Despite the looming tariff hike, Indian refiners’ resolve to maintain a relationship with Russia remains firm. The nation’s energy strategy emphasizes securing affordable and reliable oil supplies, and Russian crude has become an essential part of that equation. For example, oil companies like Indian Oil Corp and Bharat Petroleum, while facing U.S. scrutiny, have expressed their commitment to meeting domestic energy demands.
The U.S. administration has ramped up its criticisms of Indian energy tycoons, with officials publicly targeting the unusual surge in crude imports. These actions suggest a concerted effort by Washington to influence India’s energy decisions. The criticisms have not gone unnoticed by Indian officials, who have been forced to navigate the balancing act between national interests and international expectations.
The Future of Indian Energy Policy
The complexities surrounding India’s energy trade raise critical questions about the future of its policy. Reform experts indicate that as India continues to navigate its ties with both the U.S. and Russia, the implications for the Indian economy could be profound. A shift in energy sources may not just affect crude prices but also impact domestic inflation rates and the overall stability within the banking sector.
For instance, domestic consumers could face rising fuel prices as refiners navigate what could be an increasingly volatile market. Such price hikes could further exacerbate inflation in the economy, which remains a crucial area of focus for the Reserve Bank of India (RBI) and its monetary policies.
Ultimately, the actions that refiners take in the coming weeks will not only influence their operational strategies but could also reflect broader shifts within the Indian economy and its engagement on the world stage.
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Original source: www.livemint.com
