Global market not giving much credence to the US President’s conflicting signals
By Subrata Majumder
US President Donald Trump issued an ultimatum to Russia to end war with Ukraine, or, face secondary sanction, embracing 100 percent tariff on countries purchasing oil and other goods, if no peace agreement is reached between Russia and Ukraine within 50 days.
At present, over 90 percent of crude oil requirement in India is met by imports. Russia is the biggest exporter of oil to India. It surpassed OPEC in supply of oil to India. Nearly 35 percent of India’s total import of crude oil came from Russia in 2024-25, against 1.9 percent in 2021-22.
Interestingly, as Russia emerged an important supplier of oil to India, India also emerged significant oil partner of Russia. After the EU and USA sanctions in 2021-22, India emerged the second biggest Russian oil buyer. Therefore, oil has become an important factor for inter-dependency between Russia-India economic relations, which was derailed after the breakdown of Soviet Union.
Given the alarm bell ringing by sanction, concern loomed large on India’s oil based economy. There are genuine concerns about what will happen to Indian imports from Russia if the sanctions are imposed. NATO has also threatened with sanctions on countries dealing with Russia. This impacts India’s imports from the European nations.
Nevertheless, neither Russia, nor India, were jittered over the issue. Moscow stock exchange prices shot up by 2.7 percent immediately, despite Trump’s announcement. On global scale, oil market appeared to be relaxed, suggesting traders in no immediate threat to oil market.
Russia was unnerved by Trump’s empty threat, which tantamount to camouflage in his tariff war in the global market. As Artyan Nikolav, an analyst from Invest Era, quipped, “Trump performed below market expectation”.
Global analysts murmured on Trump’s own track record of vocal threat , leaving financial markets immune to his delaying the imposition of tariff. Market observers are under the impression that Trump’s threat has little impact on the market.
Eventually, many market watchers shrug-off the threat, simply believing Trump’s threat is a vacuum retribution. The 50 –day ultimatum is not viewed as a deadline. This is because, “Trump’s threat actively undermines more serious sanctions efforts that were gaining momentum in the US Congress”, says The Conversation.
India is confident to meet its oil requirement from alternative sources, if Russia supplies are disrupted according to Union Minister, Hardeep Singh Puri. He pacified the concern by reverting back to previous sanctions, saying that India had evaded the sanctions by expanding oil diversification from 27 countries to 40 countries.
Iran is a case in point. In 2018-19, after the US sanction, India lost Iranian oil. It used to account for nearly 9 percent of India’s total oil import. To compensate the Iranian oil loss, India diversified to USA, Algeria and Egypt. Import from USA spurred by 49.5 percent in 2019-20, followed by Algeria with 43.4 percent increase and Egypt with 34.7 percent increase in the same year.
Notwithstanding sanction on Russia in view of Ukraine war, India, utilizing its long years political relations shifted its bulk oil imports from Russia. In the pre Russia-Ukraine war, OPEC was the major source for crude oil import. Nearly, over 70 percent of oil used to be imported from OPEC.
Russian oil was not only substantiating the oil supply in the oil basket in India. It also provided a major pocket for saving foreign exchange. Russian crude was the cheapest among all major supplies during the war period. USA and EU levied a price cap of US$60 per barrel in December 2022, as a part of sanction. .
India is 4th biggest global oil importer and Russia is second biggest oil exporter in the world. Eventually, both played significant role to offset the Arab hegemony in the global oil supply and oil price fluctuation. After the outbreak of Russia-Ukraine war, followed by sanction on Russia, global landscape of oil supply has undergone dramatic changes. It gave a new lease of life to the importers shifting towards non-Arab world.
Oil is one of the primary energies in India. Nearly 30 percent of total energy is generated from oil. Unlike West, oil is mainly used for transportation in India. Nearly, 40 percent of oil energy is used for transportation. Eventually, oil is pivot to country’s inflation and economic growth.
Russian oil led India resilient to global oil shock. During past three years, since Russia emerged the major supplier of oil, petrol and diesel prices remained almost stagnant in India. For example, petrol and diesel prices varied between 2 to 3 percent prices in four metros during 2 years period of 2022 to 2024. (IPA Service)
