Oil companies in India and China are scrambling to respond after President Donald Trump placed sanctions on Russia’s biggest oil producers, creating immediate shockwaves in two countries that have become Moscow’s largest customers during the Ukraine war.
Several firms began dropping their orders to meet a November 21 deadline after Trump targeted Rosneft and Lukoil, Russia’s two largest oil companies, people familiar with the matter said.
India and China have largely ignored Trump’s previous demands to stop purchasing Russian oil. But the latest sanctions appear to be having an effect, at least for now. Industry experts say this may be temporary as businesses work out new methods to keep buying cheap Russian oil through middlemen and a fleet of ships with hidden owners.
The real impact of Trump’s sanctions on Russia will likely be determined by what happens in Asia.
Together, India and China buy from 3.5 to 4.5 million barrels of Russian oil every day. Much of this is imported from the companies that just got sanctioned, according to analysts as reported by CNN.
India caught between Moscow and Washington
India faces a tough decision. The country needs cheap energy and has long been friends with Moscow. But it also has growing ties with Washington. India hopes to improve relations with Trump after he placed 50% tariffs on Indian goods, yet its Russian oil purchases remain a problem.
China, which has been a big financial pillar for Russia since the war began, must weigh protecting its major oil companies against its important relationship with Russia and concerns about the war’s impact on Putin’s leadership.
Following the Russian invasion of Ukraine, Western nations imposed bans on Russian crude oil, prompting Moscow to redirect its exports toward China and India. These two countries purchased large volumes, millions of barrels per day, at significantly reduced prices.
While this arrangement benefited Asian buyers, Western powers criticized it as indirectly supporting Russia’s war effort against Ukraine.
China and India justified their continued purchases by citing their domestic energy requirements. Yet recent developments suggest that the sanctions President Trump imposed on Rosneft and Lukoil are beginning to have an effect.
According to Farwa Aamer, Director of South Asia Initiatives at the Asia Society Policy Institute, these sanctions “will inevitably bring costs to the Russian economy.”
Major refiners step back
In China, several state-owned oil companies have stopped buying some Russian crude, according to Janiv Shah, a vice president at Rystad Energy who analyzes oil markets.
Between January and September this year, Reliance brought in just over 181 million barrels of Russian oil, based on data from Kpler, which monitors oil shipments.
On Monday, Indian Oil Corporation, India’s largest state-owned oil company, said it will follow all sanctions, the Press Trust of India reported.
Clayton Seigle, who chairs the energy and geopolitics program at the Centre for Strategic and International Studies, said “India is in a tougher spot” because China’s market is less transparent and its companies worry less about US blacklisting.
If companies don’t comply, they risk severe financial consequences. The threatened sanctions could destroy their ability to borrow from US banks if they keep buying directly from Russia.
India’s foreign minister S. Jaishankar on Monday seemed to criticize Trump’s sanctions, calling the energy trade “increasingly constricted.”
Smaller players may fill the gap
While major Chinese companies may step back, analysts suggest smaller independent refineries, called “teapots,” might keep buying Russian oil through third-party sellers, though their capacity to take more is limited.
China’s foreign ministry said Thursday the country has “consistently opposed unilateral sanctions.”
New Delhi hasn’t publicly commented, but the sanctions put two of India’s key interests in direct conflict.
India’s economy and energy security now depend on cheap Russian crude from a historical friend. But its growing partnership with the US through the Quad security group is equally important to counter China’s expanding presence in the Indian Ocean.
Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.
