Syllabus: GS2/IR/GS3/Energy
Context
- India has firmly pushed back against NATO Secretary’s warning of secondary sanctions over its continued trade with Russia.
What are Secondary Sanctions?
- Secondary sanctions target third-party countries, companies, or entities that continue doing significant business with a sanctioned nation (in this case, Russia), even if they are not directly engaged in the initial conflict.
- These could include:
- Hefty tariffs (e.g., 100% on exports to the US from countries trading with Russia)
- Restrictions on access to US/EU financial systems and markets.
Crude Oil Imports of India
- India is the world’s third largest crude oil importer, it depends on imports to meet around 88% of its crude oil needs.
- Since the Russian invasion of Ukraine in 2022, India has ramped up the purchase of discounted Russian oil.
- India’s main sources of crude oil imports are Iraq, Saudi Arabia, Russia, United States and the United Arab Emirates.
India’s Stand
- Energy security first: India, with ~88% crude oil import dependence, has prioritized affordable energy supply to meet domestic economic and developmental needs.
- Global circumstances: India cites fluctuating oil markets and ongoing global volatility as key factors in its strategic sourcing decisions.
- ‘Double standards’ criticism: India points out that even as Western countries warn others against Russian oil, European countries themselves continue buying Russian gas/LNG (though they promise to end this by 2027), and also import refined fuels made from Russian crude in third countries like India.
Implications for India
- Trade risk: The threat of 100% tariffs or secondary sanctions could impact India’s exports to the US/EU and complicate broader trade negotiations.
- Oil import strategy: India can diversify imports to other suppliers, but this could lead to higher energy bills and inflationary pressures.
- Strategic autonomy: India’s resistance underscores its commitment to a multipolar, non-aligned foreign policy, maintaining ties with both the West and Russia based on national interest.
Steps Taken by India to Manage its Crude Oil Imports
- Diversification of Supply Sources: India is expanding its oil import base by sourcing crude from multiple countries, including Iraq, Saudi Arabia, the UAE, U.S. and even Russia to reduce dependency on any single region.
- Strategic Petroleum Reserves (SPR): India has developed strategic oil reserves to ensure supply during emergencies or geopolitical disruptions.
- Promotion of Domestic Production: India is encouraging domestic exploration and production of oil through initiatives like the Hydrocarbon Exploration and Licensing Policy (HELP) to increase self-sufficiency.
- Energy Efficiency and Alternatives: India is investing in renewable energy and improving energy efficiency to reduce overall reliance on crude oil.
- Bilateral Agreements: India has signed long-term agreements with countries like Saudi Arabia, Iraq, and Russia to ensure stable and reliable oil supplies.
Source: TH
