Why in the News?
Recently, US President Donald Trump has threatened additional penalties on Indian imports, specifically targeting India’s purchase of discounted Russian oil.
Why is India buying more oil from Russia?
- Steep Price Discounts: Russian crude is sold at prices significantly below global benchmarks. In FY 2024-25, India imported $56.9 billion worth of mineral fuels from Russia, up from $2.1 billion in 2020-21.
- Energy Security Priority: Ensuring affordable and reliable energy is vital for India’s economic stability and consumer welfare.
- No UN Sanctions: India legally continues trade since Russian oil is not under United Nations sanctions, unlike US/EU bans. India cites international legality and moral justification for its purchases.
- Strategic Pragmatism: India follows a non-aligned, interest-driven foreign policy, prioritizing national needs over bloc politics.
What are the impacts of the US and NATO warnings on India?
- Trade Penalty Threats: The US has imposed a 25% tariff on Indian goods and hinted at an additional penalty linked to India’s energy trade with Russia.
- Secondary Sanctions Warning: NATO has warned that countries continuing business with Russia may face secondary sanctions. NATO Secretary General Mark Rutte issued a caution to India, China, and Brazil for sustaining Russia’s wartime economy.
- Legislative Pressure in the US: A proposed US Congressional bill seeks a 500% duty on imports from nations trading in Russian-origin petroleum and uranium. If passed, this could impact Indian exports to the US due to its engagement in discounted Russian oil.
- Strained Strategic Ties: Continued trade with Russia risks diplomatic friction with key Western allies, affecting defence cooperation and technology sharing. India’s balancing strategy between Russia and the West becomes harder as the Western bloc consolidates against Moscow.
- Push for Energy Diversification: Western pressure is pushing India to rethink its energy security strategy and reduce dependence on Russian crude.
How can India change its strategy to buy oil from other countries?
- Diversify Import Sources: India can increase crude purchases from Gulf countries, the US, Latin America, and Africa to reduce dependence on Russia. Eg: India has ramped up imports from Iraq and Saudi Arabia, traditionally among its top suppliers.
- Sign Long-term Contracts: Establish long-term supply agreements with stable oil-exporting nations to ensure steady and secure inflow. Eg: India signed a long-term deal with Abu Dhabi National Oil Company (ADNOC) for crude supply and storage.
- Invest in Strategic Partnerships: Strengthen ties through energy diplomacy and joint ventures in oil exploration and production abroad. Eg: Indian PSUs like ONGC Videsh have stakes in oil fields in Vietnam, Venezuela, and Russia.
- Leverage Spot Market and Strategic Reserves: Use the global spot market for short-term deals and enhance strategic petroleum reserves (SPRs). Eg: India has bought crude from the US and Nigeria on the spot market during price dips.
- Boost Domestic Refining Flexibility: Upgrade refineries to process diverse crude grades, enabling imports from a wider range of countries. Eg: Reliance and Indian Oil refineries are capable of handling crude from the US, Middle East, and West Africa.
How can India protect its interests and handle pressure? (Way forward)
- Prioritize Strategic Autonomy: India should maintain an independent foreign policy, making decisions based on national interest rather than aligning with any geopolitical bloc.
- Engage in Diplomatic Dialogue: Proactively communicate with Western partners to explain its energy needs and seek carve-outs or exemptions from potential sanctions.
- Strengthen Domestic Resilience: Increase investments in renewable energy, expand strategic oil reserves, and boost refining capacity to reduce vulnerability to external shocks.
- Balance Competing Relationships: Carefully navigate ties with both Russia and the West, ensuring that economic cooperation does not compromise strategic partnerships elsewhere.
Mains PYQ:
[UPSC 2019] What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem and ambitions” Explain with suitable examples.
Linkage: This question highlights the tension arising when India seeks to act according to its “National self-esteem and ambitions” rather than conforming to a global strategy dictated by another power (the US). This strongly aligns with the idea of India making independent decisions guided by its own interests.
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