How Moscow might respond if Trump stops Russian oil to India

[ad_1] MOSCOW (Reuters) -U.S. President Donald Trump's demand on India to halt Russian oil imports may threaten billions in Russian revenues, immediate Moscow to retaliate by stopping a serious U.S.-led oil pipeline and doubtlessly result in a brand new international provide disaster.

India, the world's third largest oil importer, has turn into the most important purchaser of Russian oil since 2022, buying as much as 2 million barrels per day of oil accounting for two% of world provide. Different high patrons are China and Turkey.

The Indian route is so vital for the Kremlin that if disrupted it may immediate it to retaliate by closing the CPC pipeline from Kazakhstan, the place U.S. oil majors Chevron and Exxon maintain large stakes, analysts at JP Morgan mentioned this week.

"Russia just isn't with out leverage," the U.S. financial institution mentioned.

Trump has threatened to slap tariffs of as much as 100% on international locations that purchase Russian oil except Moscow reaches a peace take care of Ukraine by August 7-9. A 25% tariff on all U.S. items imports from India begins on Friday.

Reuters reported on Thursday that Indian state refineries had paused purchases of Russian oil this week amid Trump's threats.

REALIGNMENT

India solely started shopping for massive portions of oil from Russia, the world's second largest oil exporter, since 2022. It turned a high importer after Europe, Russia's former high shopper, imposed a ban on Russian oil over its army actions in Ukraine. Russia's oil big Rosneft has a serious stake in considered one of India's greatest oil refineries.

India is now 35% reliant on Russian oil imports value $50.2 billion within the 2024-25 fiscal yr, in line with India's authorities knowledge.

"Chopping off this movement would require an enormous realignment of commerce flows," mentioned Aldo Spanjer from BNP Paribas, including that the worldwide provide was already stretched.

India buys all varieties and grades of Russian oil - together with Urals from Western ports, ESPO and Sokol from the Pacific and a few grades from the Arctic, in line with LSEG knowledge.

Urals can be hit hardest if India stops shopping for because it purchases as much as 70% of Russia's greatest export grade by quantity. India's oil minister mentioned the nation can discover different provide.

India would want to lift imports of U.S. and Center Jap crude or minimize refining runs, resulting in a spike in diesel costs, particularly in Europe, which imports gasoline from India.

"Indian refiners will nonetheless battle to switch the heavy high quality of Russian crude so they could find yourself paring runs," mentioned Neil Crosby from Sparta Commodities.

FALLING INCOME

Russia has managed to proceed promoting oil since 2022 regardless of worldwide sanctions, though it sells it at reductions to international costs.

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Falling international costs imply Russia's revenue is already below strain. Its oil and gasoline income fell 33.7% year-on-year in June to its lowest since January 2023, finance ministry knowledge confirmed. Revenues will fall 37% in July attributable to weaker international oil costs and a robust rouble, Reuters calculations present.

Russian companies might want to retailer oil on tankers if India stops shopping for, paying extra cash for transport expenses and being compelled to supply broad reductions to new patrons, merchants mentioned.

A lack of 2 million bpd of exports may also regularly immediate Russia to begin decreasing oil manufacturing from the present ranges of 9 million bpd, merchants mentioned. Russia's present manufacturing is regulated by OPEC+ quotas.

HOW CAN RUSSIA RESPOND?

Russia may doubtlessly divert some 0.8 million bpd of oil to Egypt, Malaysia, Pakistan, Peru, Brunei, South Africa and Indonesia, JP Morgan mentioned.

Moscow may additionally disrupt the CPC pipeline to ensure the West feels the ache from larger oil costs. Western oil companies Exxon, Chevron, Shell, ENI and TotalEnergies ship as much as 1 million bpd by way of CPC, which has whole capability of 1.7 million bpd.

"If we get a visual and substantial problem in clearing Russian crude and Putin shuts off CPC, oil costs would possibly get properly over $80 per barrel, probably much more," mentioned Crosby.

The CPC pipeline crosses Russian territory and the consortium has clashed with Moscow, which ordered it to droop operations for a number of days in 2022 and 2025 citing environmental and tanker laws.

A mixed stoppage of CPC and Russian flows to India would create a disruption of three.5 million bpd or 3.5% of world provide.

"The Trump administration, like its predecessors, will seemingly discover sanctioning the world’s second-largest oil exporter unfeasible with out spiking oil costs," JP Morgan mentioned.