India is now so big an economy and so heavily reliant on imported energy that its buying decisions have global implications. A little like the butterfly effect, a decision taken at an Indian port can have huge (though knowable) consequences on the other side of the world. Putin should fear what may happen because it could hurt his regime very badly indeed.
First a bit of background on India’s key role. The country is now a pivotal customer for Russian crude, importing nearly 1.6 million barrels per day (bpd), a staggering 1,000-fold increase from 2021. This arrangement has allowed Russia to cushion the blow of Western sanctions imposed after the 2022 all-out invasion of Ukraine, generating critical revenue despite a significant drop in exports to Europe.
India takes around 40% of all Russian oil exports. How much does that matter for the Russian budget? An awful lot. Oil (and gas) revenues were worth $108bn to the federal budget last year, a little less than half the total, so Indian sales are doing a lot of heavy lifting in the Kremlin’s search for funds.
India relies on foreign oil for more than 85% of its total demand. It accounts for a quarter of global crude use and is set to dethrone China as the world’s largest oil consumer. Russia has capitalized on Indian needs by offering steep discounts; in December, it signed its largest-ever deal for Russian oil, worth some $13bn at current prices.
A shift in India’s energy sourcing from Russia to the United States could have profound economic and geopolitical implications. If India were to redirect even 50% of its current Russian oil imports—approximately 800,000 bpd — to the US, it could deprive Russia of nearly $22bn annually, assuming an average oil price of $75 per barrel.
Such a loss would exacerbate the strain on Russia’s economy, which is projected to eventually feel this year the effect of ongoing sanctions. Additionally, a reduced cash flow might weaken Moscow’s ability to fund military operations and social programs, further destabilizing its internal and external positions.
The United States can meet India’s needs. It is now one of the world’s largest oil producers, with 2024 daily crude production surpassing 12.5 million bpd. Advances in shale oil extraction have positioned the US as a net exporter of petroleum since 2019, with exports of crude reaching over 4.2 million bpd in 2024, a 10-fold increase since the ban on exports was lifted in 2015. (India’s daily consumption last year was approximately 5.1 million bpd.)
For India, switching to US oil could provide several advantages beyond mere supply diversification. The US not only offers competitive pricing but also the potential for long-term energy security partnerships. American producers, for instance, could lock in stable supply agreements, shielding India from volatile spot markets. Moreover, the US could offer technology transfers and investment in India’s energy infrastructure, such as expanding refining capacity or supporting renewable energy projects. This would align with India’s broader goals under initiatives like “Make in India” and its commitment to achieving net-zero emissions by 2070.
True, this strategy is not without challenges. India’s energy policy prioritizes affordability, and Russia’s discounted oil remains highly attractive. To compete, the US may need to offer additional incentives, such as favorable payment terms or bundled deals that include liquefied natural gas (LNG) exports, which reached record levels of 11.6 billion cubic feet per day in 2024.
Furthermore, domestic opposition in the US could arise if increased exports lead to higher domestic fuel prices, especially as global oil markets are forecasted to tighten by mid-2025 due to OPEC+ production cuts.
But President Trump has indicated two key ideas that would help this program. The first is an enthusiasm to sell more US energy products abroad (with threats to apply tariffs to European allies who fail to do so) and second is that Russia will face more sanctions if it refuses to end its war against Ukraine.
The geopolitical stakes are very considerable. Losing India as a major oil customer would force Russia to find alternative buyers, likely at even steeper discounts, further eroding its revenue margins. This could compel Moscow to deepen its energy ties with China, which already imports 1.9 million bpd of Russian crude – a volume that is set to decline, however, given the breakneck pace of electric vehicle sales in China. Russia might turn to other emerging markets, such as Africa and Southeast Asia, although these regions lack the scale to meet India’s demand.
In contrast, a US-India oil deal would reinforce their partnership under frameworks like the Quad and solidify India’s role as a counterbalance to China in the Indo-Pacific. Economically, it could open new avenues for US investment in India, which received nearly $50bn in direct foreign investment from American companies in 2023 alone.
The window for such a deal is open. India’s crude oil demand is projected to grow at an annual rate of 4.5%. Washington could secure a long-term foothold in this critical market while depriving Russia of a significant revenue source.
There is an opportunity to help America and harm Russia without firing a single bullet.
Maciej Bukowski is a non-resident fellow with the Tech Policy Program at the Center for European Policy Analysis. He is a climate diplomacy and energy security expert, and a PhD candidate at the Institute of Political Science and International Relations at the Jagiellonian University in Cracow.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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