By R. Sasankan

India has been facing the heat from US President Donald Trump's tough economic sanctions against Iran, Russia and Venezuela - all of which have been major sources for cheap crude oil over the years.

Clearly, it is time that the cabal of experts in the Indian government hunkers down and rethinks the strategy on crude oil imports at a time when India's dependence on crude oil imports has started to nudge up to 90 per cent of its energy requirement.

Trump's latest salvo on economic sanctions has targeted Rosneft and Lukoil - two of the biggest oil companies in Russia - which have been accused of funding Kremlin's war machine against Ukraine.

The sanctions, imposed by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), effectively blacklist Russia's two largest oil producers - and threaten to slap severe penalties on buyers of Russian oil and gas.

India is the second largest buyer of Russian oil after China. After the announcement of the US threat, Indian refiners have scrambled to cut back on their purchases of Russian oil and have started to purchase more crude oil from Gulf nations in an effort to ward off onerous US penalties.

President Trump hasn't threatened penalties on Chinese purchasers of Russian oil yet, raising niggling concerns over whether India is being unfairly targeted. The reason for this is not difficult to fathom. After all, the war in Ukraine coincided with the emergence of the US as the world's largest producer of crude oil. At the same time, India is the world's third largest importer of crude oil.

President Trump has often insisted that he cherishes his close relationship with Prime Minister Narendra Modi and that none of his actions are intended to hurt India's interests. Instead, they are designed to protect US interests which previous incumbents in the White House had badly damaged because of their failure to push for reciprocity in tariffs resulting in yawning trade deficits with several nations including China and India.

Over time, US sanctions have choked off crude oil supplies first from Iran and then from Venezuela, which has the world's largest proven oil reserves estimated at around 304 billion barrels.India has one of the world's largest crude oil refining capacities. It also has the ability to process heavy crudes which are relatively cheap. India had gone all the way to Venezuela to source its heavy crudes. That source dried up after Trump imposed sanctions on Venezuelan crude oil exports.

Now, the American nooze has started to tighten on Russian crude oil exports. Before President Vladimir Putin's invasion of Ukraine in February 2022, Russia's share in India's crude oil imports was less than 1% as India used to primarily source its crude oil from the Middle East. The tilt towards Russian crude began after the Ukraine war when Russia started to offer enticing discounts on Russian crude. As a result, share of Russian crude oil in India's imports grew dramatically. Today, Russian oil enjoys around 37 per cent share in India's crude import basket.

Trump has threatened to penalise India by imposing an additional 25 per cent tariff on account of Russian oil imports. Prime Minister Modi has not buckled to Trump's bullying tactics. Frustrated by India's stoic silence on the latest tariff threats, Trump has claimed that Modi promised him during a phone call last month to halt all imports of Russian oil. Modi has not reacted to this claim, leaving it to the foreign ministry spokesperson to deny any such formal commitment. However, there are reports that suggest that several refiners in India have started to scale back imports of Russian crude.

It is true that the Indian economy benefited from discounted Russian oil. The price discounts were steep in the initial phase but have come down in recent months, and are currently hovering around $ 1.5-2 per barrel. Should India fret over the loss of cheap Russian crude? According to experts, India can easily overcome the loss by revamping its crude buying strategy.

The experts suggest that the current dynamics of the international oil market are in a delicate balance. Demand for crude has started to slow at a time when OPEC producers are looking to gradually increase oil production. At the start of the year, the OPEC had extended the deep production cuts totalling 3.6 million barrels per day till the end of 2025. But it started to unwind the cuts from April this year. The planned increase in production was supposed to continue till September 2026. But fears of an oil glut has prompted the group to pause the production increase till the first quarter of 2026.

Trump has been pushing hard for an end to the Ukraine war - and the latest sanctions against Russia were designed to hobble Putin's war machine. But here's the thing: If the war in Ukraine ends, oil prices which have already started to fall will tumble further. Paradoxically, Russian crude will then flow back into the oil market and Putin will not have to offer price discounts.

This presents a dilemma - as well as an opportunity - for India to rework its crude buying strategy. As the crude market stumbles, India would do well to sew up large oil purchase contracts with two or three Middle East producers from whom it could collectively source a third of its oil requirement. India currently imports about 240 million tonnes of crude oil annually.

If India moves quickly and strikes large deals with large Middle East producers, it can also hope to wangle huge price discounts before the oil market crumbles. Many believe that India could expect to gain bigger price discounts than Russia is currently offering. India could target deals with Saudi Arabia, Iraq or UAE.

India has frittered away the chance of negotiating sweet deals by parcelling out small contracts to oil producers all over the world - a strategy that was ostensibly designed to buttress its energy security. The disadvantage of this stratagem is that it has not been able to obtain cheap crude oil. It is time that the country abandoned this approach. Any change in the plan will have to be orchestrated from the highest echelons of the Modi government. India is a major force in the crude market. It is time to use its heft to extract the best price for the crude oil that it buys.