As the impact of western sanctions intensifies, Russia is actively seeking strategies to maintain its crude oil exports to India, the world's second-largest purchaser of Russian crude. Despite increasing pressure from the U.S. and the threat of significant tariffs, India insists that its purchase of Russian oil is a matter of sovereign policy.

Since the war in Ukraine began, India has dramatically increased its imports of discounted Russian crude. However, new U.S. sanctions targeting companies and refineries that purchase oil from Rosneft and Lukoil, Russia's top oil exporters and key suppliers to India, have raised concerns about potential disruptions. These sanctions have already had an initial impact, with India's imports of Russian oil dropping from 1.7 million barrels a day.

To circumvent these challenges, Russia is reportedly exploring alternative mechanisms to ensure continued oil flow to India. These strategies may include using alternative currencies like the Chinese yuan and the UAE's dirham to settle payments. Also, India's Reliance Industries has resumed purchases of discounted Russian crude oil from non-sanctioned suppliers and routing it to its domestic-focused refinery in Gujarat.

The U.S. has expressed its displeasure with India's continued reliance on Russian oil, with the Trump administration imposing a 25% tariff on imports from India in August. Furthermore, threats of 500% tariffs and withdrawal from India-led global initiatives have been made. The "Sanctioning Russia Act 2025" could authorize tariffs of up to 500% on imports from countries that continue to buy Russian oil. This act aims to restrict Russia's revenue streams, particularly from energy exports, by penalizing third-party nations.

Despite the potential risks, India has shown a willingness to navigate the complexities of the sanctions regime. India has historically not recognized U.S. sanctions on a third country. Some experts suggest that the U.S. is hesitant to impose significant sanctions on India due to its economic interests and strategic importance as a counterweight to China.

The situation remains dynamic, and the long-term impact of the sanctions and circumvention efforts on India-Russia trade relations remains to be seen. India may need to diversify its crude oil sources to mitigate risks and maintain energy security. Experts suggest that India has adequate alternative supply options, with West Asian grades able to replace volumes relatively quickly, if purchases of Russian crude were to be curtailed significantly.