On October 22, 2025, U.S. President Donald Trump imposed sanctions on Russia’s two oil giants: Rosneft and Lukoil, and their subsidiaries. The decision came after his growing frustration over Moscow’s ongoing war in Ukraine.
India remains one of the most stable and significant clients for Russian oil—a relationship that has long benefited both sides. However, the latest sanctions introduce two major challenges. First, as a large portion of the India-Russia oil trade is denominated in U.S. dollars, payment mechanisms will become problematic. Second, India is an important partner to the U.S., with ongoing negotiations for a new India-U.S. Trade Agreement.
The current round of sanctions is more severe than previous measures. This is evident in the immediate five to six percent spike in global oil prices within days of their announcement. In India, the threat of secondary sanctions is likely to worry large oil corporations, leading to a reduction in Russian oil purchases.
Russia is the second-largest exporter of oil globally. Any decline in its supply will push prices higher, affecting not just India but all importing economies. If Indian refiners scale down Russian oil purchases, they will turn to other suppliers—further increasing global demand and prices, with ripple effects across markets, including the U.S.
High oil prices will aggravate the economic difficulties already faced by many developing countries, which are also becoming political problems. This has been evident in India’s neighbourhood, with two recent regime changes in Bangladesh and Nepal. If oil prices remain elevated for long, more instability is likely across the region.
The U.S.’s actions have both geopolitical and economic motives. The global oil market currently faces oversupply, with exporters such as Angola and Saudi Arabia struggling to balance their budgets. Meanwhile, the U.S. has become a net oil exporter in an already saturated market. The only way to gain ground is by reducing competition—removing one of the existing large suppliers, which in this case happens to be Russia. A similar pattern was seen in natural gas, where Russian supplies were cut off and much of that business shifted to U.S. gas companies.
The original four BRIC countries face some form of U.S. coercive action, whether sanctions or tariffs. These nations share a unique feature: among the world’s top 30 economies, they are among the few that neither host American military bases nor have treaty alliances with the U.S. As long as this independence persists, such countries are likely to remain targets of U.S. economic pressure.
The impact of sanctions will be felt by India, but in reality, it is Indian companies—not the government—that purchase the oil. India’s large and diverse private sector has its own commercial priorities, which do not always align with state objectives. Indian businesses have also overlooked key sectors such as technology, avoiding substantial investment in research and development, leaving them dependent on foreign technologies and vulnerable to disruptions. In many ways, Indian business has not behaved strategically.
In contrast, U.S. corporations often act in coordination with state policy, serving national strategic interests even while remaining privately owned. The Indian private sector, by comparison, operates independently and tends to seek government protection when confronted with external shocks.
The current sanctions on Russia illustrate this tension. Indian oil firms may have to scale back Russian imports and purchase costlier U.S. oil to avoid secondary sanctions. This move will safeguard corporate interests but undermine India’s strategic interest in energy diversification. The U.S. has learnt to exploit this dichotomy effectively by leveraging the gap between corporate and national priorities to advance its geopolitical and economic aims.
The effectiveness of the U.S. sanctions also lies in their control over global payment systems and financial infrastructure. To mitigate this vulnerability, India must develop alternatives across sectors—particularly in technology and logistics.
India should also recognise that most of its international trade is carried on non-Indian ships. Efforts need to be made to encourage domestic shipbuilding and ship ownership. Expanding such capabilities can help reduce long-term exposure to sanctions and external disruptions.
Amit Bhandari is Senior Fellow for Energy, Investment and Connectivity.
This article is based on insights shared at the Valdai Discussion Club session on “Sanctions against Russia: A Noticeable Escalation?”