Key facts
- US President Donald Trump's decision to allow Russian diesel exports may give India leverage in its dispute with Washington over discounted crude purchases.
- The move could also open diplomatic opportunities for India, including pressing for consistent treatment by Washington.
- Russia agreed to supply over 300,000 tonnes of diesel to the US and global markets, with additional volumes planned.
- The US Treasury Department issued a temporary license for Russian diesel imports until April 7.
- India imports over 85% of its crude requirements and seeks flexibility in purchasing decisions.
- The US has previously imposed tariffs on Indian goods over Russian crude purchases.
US President Donald Trump's decision to ease sanctions on Russian diesel exports and allow supplies to reach global markets, including the US, could provide India with greater leverage in its ongoing dispute with Washington over discounted crude oil purchases. Analysts suggest this move might also present New Delhi with diplomatic opportunities, such as advocating for more consistent treatment from the US and building on its efforts to mediate the Russia-Ukraine war.
The US Treasury Department has issued a license that temporarily permits the import of Russian diesel until April 7, aiming to alleviate fuel shortages. Russia has agreed to immediately supply over 300,000 tonnes of diesel to the US and global markets, with further shipments of 500,000 tonnes in November and an additional 1 million tonnes thereafter. However, some analysts believe these initial volumes may not lead to sustained price relief.
The global diesel market has been under pressure due to disruptions stemming from the conflict between Israel and Iran, attacks on Russian refineries, and shipping challenges in the Strait of Hormuz and Red Sea. This has impacted supply chains, with West Asia's diesel exports significantly reduced and global refining throughput falling.
The US has previously expressed concerns over India's purchases of Russian crude, arguing it funds Russia's war in Ukraine. India's imports of Russian crude saw an increase, though they fluctuated following US tariffs. Russian crude accounted for approximately 30% of India's oil imports in the last fiscal year.
According to Rajeev Sharan, Head of Research at Brickwork Ratings, Washington's decision bolsters India's stance that energy security and affordability should guide purchasing decisions, suggesting that these factors can sometimes outweigh sanctions. He noted that while India imports a significant portion of its crude, the US license is temporary, and the threat of tariffs on large buyers of Russian oil remains. Nilanjan Banik, professor of economics and finance at Mahindra University, believes the deal could strengthen India's diplomatic position.