How Moscow would possibly reply 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 probably 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 worldwide provide. Different prime consumers are China and Turkey.

The Indian route is so necessary 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 massive 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 nations that purchase Russian oil except Moscow reaches a peace cope with 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 prime importer after Europe, Russia's former prime shopper, imposed a ban on Russian oil over its navy actions in Ukraine. Russia's oil large Rosneft has a serious stake in one in all India's largest oil refineries.

India is now 35% reliant on Russian oil imports price $50.2 billion within the 2024-25 fiscal yr, in response to India's authorities information.

"Chopping off this stream 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 response to LSEG information.

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

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

"Indian refiners will nonetheless wrestle to interchange the heavy high quality of Russian crude so they might 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 earnings is already underneath strain. Its oil and fuel income fell 33.7% year-on-year in June to its lowest since January 2023, finance ministry information confirmed. Revenues will fall 37% in July because of weaker international oil costs and a robust rouble, Reuters calculations present.

Russian corporations might want to retailer oil on tankers if India stops shopping for, paying more money for transport prices and being compelled to supply extensive reductions to new consumers, merchants mentioned.

A lack of 2 million bpd of exports may additionally step by step immediate Russia to start out lowering 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 probably 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 greater oil costs. Western oil corporations Exxon, Chevron, Shell, ENI and TotalEnergies ship as much as 1 million bpd through 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 worldwide 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.