Price and discount — Since 2022 Russia has sold crude at a meaningful discount to benchmark grades; Indian refiners bought large volumes to secure low-cost feedstock and protect refining margins. As the Urals/Blended discount narrowed in 2025, India’s calculus began to shift, but recent discounts and logistical arrangements still make Russian barrels attractive.
- Energy security and refinery mix — India’s refining sector is structured to take heavy, sour grades like Urals and ESPO; switching quickly to lighter Middle East crudes would raise costs and require different processing. Indian refiners therefore prefer reliable, discounted cargos
- Strategic autonomy — New Delhi treats energy policy as a domain of strategic autonomy: it resists external pressure to subordinate long-term fuel security to political demands, especially when alternatives are more expensive. Recent U.S. pressure and tariff threats (Aug 2025) have put this autonomy to the test.
2. What are India’s explicit reasons (short list)?
- Cost savings — cheaper crude lowers refinery input costs and fuel prices domestically; high import bills if Russia purchases stop would hit the trade balance (SBI estimated a possible $9–12bn rise in oil bills if imports stopped).
- Securing refinery operations & product exports — India’s refineries (especially large complex refineries) were configured for heavier Russian grades and have commercial contracts and logistics set up for Arctic/Black Sea cargos
- Geopolitical hedging — Russia is a strategic partner on defence, high-tech, and multilateral diplomacy; energy purchases are part of a broader India-Russia relationship that New Delhi preserves even as it deepens U.S. ties.
3. Possible consequences (short- and medium-term)
For India
- Higher fuel import bill and inflationary pressure if Russia barrels are cut off suddenly; the SBI analysis suggests a multi-billion-dollar increase in costs.
- Refining margin squeeze and potential reconfiguration costs if India diversifies away from heavy Russian grades.
For Russia
- Revenue loss — India is a major buyer; a full stoppage by India and China would sharply reduce Russia’s oil revenue and force deeper discounts or shut-ins. Academic estimates show the 2022 embargo/price cap reduced Russian realized prices substantially. However, partial reductions are survivable due to re-routing and spare capacity.
For global markets
- Upward price pressure — removing large volumes from global markets would lift prices; this reduces the political attractiveness of sanctions for importers worried about domestic inflation.
4. Can sanctions on India’s purchases force the Kremlin to stop the war (plausibility)?
- Low near-term probability. Economic pressure that targets revenue can incrementally raise the costs of war, but Russia has shown resilience: it redirected flows to Asia, kept meaningful export volumes, and adapted its fiscal policy since 2022. A single buyer (India) changing course would hurt but not automatically force an unconditional Russian withdrawal. The most credible pressure would require China and India both sharply curtailing purchases plus tighter enforcement of price caps and banking constraints
- Political constraints matter — Even severe economic strain does not mechanically produce policy change in authoritarian regimes; decisions to stop a large-scale war are political and driven by leadership calculations about survival, prestige, and perceived strategic goals. Sanctions increase costs but do not guarantee political reversal.
5. Difficulties and limits of sanctioning India (practical and political)
- Secondary sanctions/backlash — Targeting India economically (tariffs, secondary sanctions) risks severe diplomatic blowback, supply-chain retaliation, and political costs for the sanctioning state—especially if global fuel prices rise. The U.S. move to levy tariffs is a high-stakes gamble.
- Global market spillovers — Curtailing Russian exports without adding alternative supply immediately drives prices up; importers are sensitive to inflationary effects. IMF/WB literature shows sanctions on major commodity exporters create significant spillovers.
- Enforcement & evasion — Russia and buyers have already developed workarounds (insurance, ship-to-ship transfers, complex trading chains). Policing every shipment, bank transaction and refinery feedstock route is resource-intensive.
- China’s role — If China continues to buy at scale, Russia can reallocate volumes; changing Chinese behavior is geopolitically and economically harder than changing India’s.
6. How seriously can these measures damage Russian interests? (scale & mechanisms)
- Revenue channel (most direct): If India and China cut purchases or pay only at strict price caps, Russia’s oil receipts would fall markedly, compressing the budget and military financing. Research on the 2022 embargo shows realized prices for Urals fell by tens of dollars per barrel at the nadir. That matters: oil revenues fund the state and war economy.
- Longer-term strategic effects: sustained loss of export markets would force Russia to accept deeper discounts, re-orient trade, and draw down sovereign buffers—raising the cost of prosecuting an extended war. But this is gradual, not immediate; Russia has macro buffers and alternative buyers.
- Operational limits: Even large revenue losses do not necessarily cause immediate strategy reversal—authoritarian leaders can prioritize military spending at the expense of domestic welfare for significant periods. Empirical sanctions studies show political change often requires prolonged economic pain plus elite fractures.
7. Policy implications and recommendations (for the West and partners)
- Multilateral coordination is essential. Sanctions or tariffs are far more effective when coordinated with major buyers (China, large refiners) and enforced across banking, shipping, and insurance sectors. Unilateral measures risk blowback and limited impact.
- Mitigate knock-on effects at home. Donor countries should prepare buffers (strategic petroleum releases, refinery swaps) to prevent domestic price shocks that undermine political will for sanctions.
- Targeted financial measures + price-cap enforcement. Tighten financial plumbing (payment channels, maritime insurance) to make evasion harder while using price caps to limit Russian revenue per barrel. Past measures did lower Russian realized prices.
- Engage India diplomatically. Offer alternatives (longer-term energy contracts, access to non-Russian crude, trade offsets) and frame cooperation as temporary mitigation rather than permanent penalty—this reduces incentive to defy major powers.
- India buys Russian oil now primarily for economic (discounts and refinery fit) and strategic-autonomy reasons.
- Sanctioning India is politically and operationally difficult and risks global spillovers; unilateral tariffs can coerce behavior but bring costs.
- If India and China both curtail purchases, Russian oil revenue would be seriously hit and would raise the cost of war—but even large revenue losses do not guarantee immediate Kremlin policy change; political dynamics and elite cohesion are decisive.
- Sanctioning India is politically and operationally difficult and risks global spillovers; unilateral tariffs can coerce behavior but bring costs.
- If India and China both curtail purchases, Russian oil revenue would be seriously hit and would raise the cost of war—but even large revenue losses do not guarantee immediate Kremlin policy change; political dynamics and elite cohesion are decisive.
1. Strategic leverage over India
- Economic dependence on Western markets — India exports far more to the U.S. and EU than to Russia. If Washington links sanctions relief to India reducing Russian oil imports, it gains a powerful bargaining chip.
- Technology and investment access — cutting-edge U.S. tech, defense equipment, and capital inflows are vital for India’s growth. Conditioning these on compliance strengthens U.S. negotiating power.
- Diplomatic alignment — pushing India closer to the U.S. camp in the U.S.–China–Russia strategic triangle, reducing Moscow’s foothold in South Asia.
2. Weakening Russia’s economic fallback
- If India — one of Russia’s largest current oil customers — cuts back, Russia loses a crucial market.
- This limits Moscow’s ability to reroute oil banned in Europe, amplifying the effect of Western sanctions.
- The U.S. can then present itself as the main architect of this economic squeeze, enhancing its credibility as the leader of anti-Russian pressure.
3. Signaling to other Global South actors.
- Demonstrates that even major non-Western economies face consequences for sustaining Russia’s war machine.
- This could deter other countries (e.g., Brazil, South Africa) from deepening energy ties with Moscow.
- Enhances U.S. influence in multilateral forums like the G20 by showing it can set norms even outside the West.
4. Boosting U.S.–Middle East energy diplomacy
- Sanctions would likely require the U.S. to coordinate with Gulf states to offset any Indian oil supply gap.
- Such coordination strengthens Washington’s broker role in global energy markets, indirectly enhancing geopolitical influence.
5. Shaping the narrative of “economic deterrence”
- If sanctions on Indian-Russian oil trade visibly hurt Moscow, the U.S. can claim sanctions remain an effective foreign policy tool.
This boosts U.S. soft power — especially when competing with China’s Belt and Road promises — by proving it can alter state behavior without direct military intervention.
