Chennai: In the first five months of this fiscal, India bought $3.6 billion worth of oil from Venezuela. If purchases continue at this rate, India will end up buying more than $15 billion worth of oil from Venezuela, finds GTRI. Considering the past experience of investing in the Venezuelan oil sector, the Indian government and companies should be cautious and not act upon pressure from the US, said Ajay Srivastava, founder of GTRI.
Ajay Srivastava, founder of GTRI.
The Trump administration has been pressuring India to cut its purchases of Russian crude, accusing India of financing the Ukraine war. Yet, the US has entered into a diesel deal with Russia. What does this contradiction tell us about the use of economic sanctions to serve American interests?
The chronology is interesting. The US has been arguing that India is helping Russia finance its war by buying its oil. Last year, it imposed an additional 25% tariff on India specifically because of its Russian oil purchases. On September 18 this year, the Graham Bill was passed, giving President Donald Trump the authority to impose tariffs of up to 100% on countries buying Russian oil.
However, American diesel prices rose by around 40% over six months. With the November 3 midterm elections approaching, the US became concerned about rising fuel prices. On October 9, it entered into an agreement with Russia for diesel supplies, while offering sanctions waivers that allow Russia to sell its energy products globally until April next year.
The US then issued a temporary waiver for countries buying Russian oil, although the timeline was not clearly defined. Subsequently, Secretary of State Marco Rubio indicated that the Trump administration was evaluating a 60-day window to decide whether to impose higher tariffs on countries purchasing Russian oil.
The contradiction is clear. America wants to punish India for buying Russian oil but is itself buying Russian energy. China is also a major buyer of Russian energy, but Washington is reluctant to threaten it with similar tariffs. The US is effectively targeting India while protecting its own interests.
India is being asked to reduce Russian oil purchases and buy more American and Venezuelan crude. Has India become collateral damage in Washington’s changing energy priorities? Who ultimately bears the cost?
India imports around 90% of the oil it consumes, making energy security critical. Before the Ukraine war, Russia accounted for less than 15% of India’s oil imports. We traditionally bought around 55–60% of our oil from Gulf countries, but disruptions reduced their share to less than 30%.
India therefore turned to Russia, which offered substantial supplies and discounted prices. Russian oil accounted for 51% of India’s imports in July, but its share fell to 45% in August as imports from the US and Venezuela increased under American pressure.
The shift towards Venezuela has been particularly dramatic. India imported just $255 million worth of Venezuelan oil between April 2025 and March 2026. In the first five months of the current fiscal, from April to August 2026, imports rose to $3.6 billion. If this pace continues, purchases could exceed $15 billion for the full year, potentially making Venezuela India’s second-largest supplier after Russia.
India must evaluate whether these changes serve its own interests or primarily those of the US. The costs could ultimately fall on refiners, consumers and taxpayers.
Marco Rubio has indicated that Washington wants India to buy more Venezuelan crude and invest in its oil sector. Given India’s past experience, what are the risks of investing in Venezuela?
India has already invested heavily in Venezuelan oil fields. Between 2010 and 2015, ONGC Videsh collaborated with Venezuela’s state-owned oil company. However, the US subsequently sanctioned the Venezuelan company, resulting in losses for Indian investments. Billions of dollars invested by ONGC were affected. Several private-sector companies, including Reliance, also lost money because of US sanctions.
Now, the US wants Indian companies to buy Venezuelan oil and potentially invest in its oil fields again. These are two very different propositions. Buying oil from a supplier is one thing; committing billions of dollars to develop oil fields is another.
Venezuelan oil is heavy and of relatively low quality. It requires more processing and chemicals, and the yield can be lower. The country’s oil fields are also in poor condition, with production estimated at only about one-third of their potential.
According to some estimates, restoring the sector could require around $100 billion in investment and take seven to ten years. Moreover, companies such as Reliance may operate some of the world’s best refineries, but they are not primarily oil exploration and production companies. Any investment decision must therefore be made after carefully assessing the risks and commercial returns.
Venezuelan oil is cheaper than oil from some other suppliers. Is it economically viable for India once refining costs and product yields are taken into account?
It must be economically viable for India to buy Venezuelan oil, which is why we are buying it. Between April and August, oil imported from Saudi Arabia cost around $820 per tonne. Venezuelan oil was about 25% cheaper.
However, the purchase price alone does not determine profitability. Venezuelan crude requires more processing, and the cost of refining it must be considered alongside the yield. Ultimately, petrol and diesel are standard commodities, and refiners must assess the total cost of producing them.
Not every Indian refinery can process Venezuelan crude efficiently. Reliance’s Jamnagar and Sikka refineries and some HPCL refineries, including those based in Visakhapatnam, have the required capabilities.
India should buy oil wherever it is available at a competitive price and sell its products in the markets offering the best returns. Oil is a globally traded commodity. We should not tie ourselves to a particular country through arrangements that restrict our choices.
Given the uncertainty surrounding US policy and India’s past losses in Venezuela, how can New Delhi protect its energy security without compromising its commercial interests?
India must be clear-headed. We are a large economy and should not take decisions under pressure from any country. Energy security is paramount because we depend heavily on imported energy, making long-term supply contracts important.
The US has disrupted several of India’s traditional supply options. Gulf countries remain crucial, but their share has fallen. India has increased purchases from Russia, which Washington now wants us to reduce. Other suppliers, including the US, Venezuela, Nigeria and Brazil, cannot easily replace the volumes available from Russia and the Gulf.
India should not compromise its energy policy under American pressure. Oil purchased from the US can be considerably more expensive than Russian oil, and the difference ultimately affects the Indian economy and taxpayers.
We must consider prices, quality, processing costs and reliability before making decisions. The US frequently changes its policies, and India should not make long-term commitments without accounting for this uncertainty. Our national interests must come first.
Should India separate its energy purchasing decisions from the proposed trade deal with the US, given the continuing uncertainty over American policy?
Yes. India should not link decisions on oil purchases to negotiations over a trade agreement. These are separate issues, and both countries should negotiate them independently. In the present situation, American demands appear to impose conditions on India in both areas.
There is also considerable uncertainty about the trade deal itself. Officials have repeatedly indicated that negotiations are nearly complete and that only legal scrutiny remains. However, the central question is what the US is actually offering India in terms of tariff reductions.
India’s commitments were outlined in the February 6 joint statement, but the US had indicated that it would reduce its reciprocal tariffs from 25% to 18%. The US Supreme Court subsequently held the reciprocal tariffs invalid, removing the basis of that particular offer. It is therefore unclear what tariff concessions Washington will provide.
For example, exporters from India and several other major trading partners face a combined 22% tariff on shirts entering the US, comprising the regular 12% tariff and an additional 10% levy. Even after trade agreements, countries such as the European Union, Japan and South Korea continue to face this burden.
India needs clarity on whether a trade deal will actually reduce tariffs and whether the US might impose new ones later. Until these questions are resolved, the benefits of an agreement remain uncertain. India should negotiate firmly and protect its interests rather than accept commitments without knowing what it will receive in return.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: deccanchronicle.com
