By R. Sasankan

There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat;
And we must take the current when it serves,
Or lose our ventures.
-William Shakespeare, Julius Caesar

The past few months have been deeply unsettling for the Indian refineries. Just when the price discounts on Russian crude started to tumble, outgoing US President Joe Biden ratcheted up pressure on Russia by slapping a new set of sanctions that make it harder for Indian refineries to keep the supply of cheap crude flowing.

The Indian refiners, which had made windfall profits between 2022 and mid-2024, have started to see their profit margins crimp.

The big question is whether that big ride to profits is now starting to stutter. And if it is, how will they work their way through a trying and uncertain period when the oil industry shows signs of returning to a semblance of normality - or at least nudging close to the situation that prevailed before the outbreak of the Ukraine crisis.

Let us first recapitulate how the dramatic surge in Russian crude flows to India played out. Back in 2022, Russian crude accounted for a mere 2% share in India's imports. But by May 2024, Russia accounted for 41 per cent of India's 4.8 mmbd in crude imports, and the quantity remained more or less at the same level till the end of 2024. According to ICRA, the rating agency, India saved $ 13 billion by importing crude oil from Russia over the past two years: FY2023 and FY 2024.

The future looks very dicey for Russian crude's share in India's import basket from here on. The sweeping sanctions unleashed by the Biden administration in its dying days can take Russian crude's share in India's imports back to 2 per cent if they aren't lifted.

The Biden administration resorted to sweeping sanctions as part of its commitment to drain Russian revenues from its energy resources that was funding its war machine. It blocked two major Russian oil producers and imposed sanctions on an unprecedented number of oil-carrying vessels -- many of which are part of the "shadow fleet" -- opaque traders of Russian oil, Russia-based oilfield service providers, and Russian energy officials.

The Modi government simply cannot afford to let this situation prevail if it is keen to obtain Russian oil. The US administration has been soft on India and did not try to block the flow of oil to the local refineries mainly because of the strong relations between the two countries. So, what was President Biden's provocation for acting so swiftly when he was about to leave the White House?

India benefitted hugely from cheap Russian crude mainly on account of the discounted price. The discount has been shrinking but it is still cheaper than the market rate. Indian refineries are obviously worried about the emerging scenario.

What are the options before the Indian government? The Trump administration cannot make an exception for India alone. Russia has to sell its crude, which is its main source of revenue. As there is no shortage of crude in the market, India can buy it from anywhere. Its trade relations with the neighbouring Middle East, its traditional source for crude oil, are excellent. But India is a deeply price-sensitive nation. It is also faced with a situation where its energy demand is surging while domestic crude production is shrinking. India now ranks as the second largest crude importer in the world.

India will be pinning all its hopes on President Trump. But realistically, nothing will happen in a jiffy. Trump is seen to be close to Russian President Vladimir Putin, which probably prompted President Biden to act before Trump's second coming.

President Trump is also perceived to be personally close to Indian Prime Minister Narendra Modi. But then undoing an anti-Russian initiative isn't going to be easy as it needs the support of other western powers that are united against Russia on the Ukraine issue.

President Trump is committed to end the war in Ukraine. Russian President Putin cannot be averse to such a move. But the latter will not settle for any agreement that undermines Russia's interests. At the same time, Ukraine is not in a position to defy the US and cannot carry out a war against Russia without US support. A settlement in the Ukraine crisis will have a significant impact on the oil market. The US sanctions against Russian oil trade will be lifted.

However, will India benefit if the sanctions against Russia are lifted? An end to the Ukraine war can have a negative impact on India once the US-led sanctions are lifted. Russia will re-enter the crude market as a full-fledged trader with a burning desire to win back its lucrative markets in Europe. At that time, it will not be prepared to offer the price discounts to Indian refiners. As India cannot afford the high transportation costs involved in bringing Russian crude to ports on the west coast, there is a strong possibility that the share of Russian crude will sink once again to 2 per cent.

Such a situation can be averted if the political leadership of both the countries act imaginatively. For Russia, India is a dependable customer which needs crude in large quantities. As President Putin has a good equation with India's leadership, both countries should explore the possibility of striking a long-term arrangement for Russian crude. The quantity of crude imports will have to be large so that both countries can benefit from the deal.