US secondary sanctions and petroleum imports: Safeguard India’s energy security

The study has been authored by Hari Seshasayee
The US has since become India’s fourth-largest supplier of oil, and India is the US’s largest export market globally for crude oil.(REUTERS)
The US has since become India’s fourth-largest supplier of oil, and India is the US’s largest export market globally for crude oil.(REUTERS)
Published on Apr 24, 2022 12:58 PM IST
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ByHindustan Times

Over the past few years, India’s petroleum value chain has undergone a transformation. While remarkable, the change has received little attention from the country’s scholars of foreign policy. In 2016, Iran and Venezuela constituted 21.8 % of India’s total oil imports, as the third and fourth-largest suppliers of the country’s oil. India enjoyed a cordial relationship with both countries, and the oil ministers of the three made frequent visits to Tehran, Caracas, and New Delhi. 

 

The oil relationship went beyond trade to include strategic investments—for instance, India’s flagship national oil company, ONGC Videsh Limited (OVL), made investments in multiple oil projects in Iran and Venezuela. Yet, by 2021, India’s oil imports from both countries had slid to zero (see Figure 1). The reason for the complete halt was secondary sanctions by the United States (US). They present the latest disruptions to India’s petroleum value chain, at a time when the country is grappling to maintain its energy security. 

 

Perhaps even more crucial was the seemingly unintended consequence of these US sanctions: as India’s oil imports from Iran and Venezuela dropped to zero, the US quickly increased its crude oil exports to India. The US has since become India’s fourth-largest supplier of oil, and India is the US’s largest export market globally for crude oil.

Yet another dimension has been added to the disruption in India’s oil value chain: Western sanctions on Russia, following its invasion of Ukraine in late February. Although Russia accounted for only 0.5 % of India’s total oil imports from 2010 to 2020, the sanctions have had an indirect impact on global oil prices, which soared to $140 per barrel before stabilising at just over $100 at the time of writing this brief. To be sure, however, India continues to lift Russian oil, albeit in small quantities. 

 

This brief examines the disruptions to the petroleum value chain at a global scale, highlighting the case of US secondary sanctions and their impact on India’s petroleum imports. It offers specific recommendations to reduce the risk of future disruptions to India’s energy supply. 

 

The study can be accessed by clicking here

 

(The study has been authored by Hari Seshasayee)

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