India cautious as West makes new plan for economic sanctions on Russia

US, EU could be moving to make it difficult for Russia to sell not only crude but other products

As the year begins, Russian oil tankers are finding it difficult to offload their cargo in India for reasons related to two significant developments in December.

In early December, the European Union (EU) sent David O'Sullivan, the bloc’s envoy for sanctions, to India. The talks O'Sullivan had with Indian officials of various ministries had a clear agenda: What will it take for India to reduce purchasing Russian crude and instead buy its needs from West Asia and the United States (US).

The other development was an executive order signed by US President Biden on  Russia's seafood trade. It contained a new paragraph allowing the “Treasury [department] to prohibit the importation of products that have been processed or substantially transformed in third countries”.

India is one of the largest exporters of marine products, mostly sea fish, globally. Indian exporters are trying to tap Russia as demand from EU dims. In turn, Russia is keen to increase its whitefish exports to India. These are therefore new challenges for New Delhi.

As Indian officials told O'Sullivan they will not take steps to upset the domestic oil economy because of the Russia-Ukraine war, they expressed their concern about the new language in the US order.

O'Sullivan’s visit and Biden’s order therefore, according to New Delhi, are part of a pattern: Make it difficult for Russia to sell not only crude but other products to India, China and other Asian markets.

The pressure is being applied when the impact of the first sanctions, namely the cap on prices at which Russia could sell its crude, has been violated.

India and other countries will wish to wait a bit more to see the fine print. “This is more like a guessing game,” said one Indian official involved in negotiations with the West. The US and the EU will be reluctant to name products that will come under new sanctions, hoping that countries will be cautious anyway.

India, for instance, will not wish its banking system to be impacted by the sanctions from dealing with the EU and the USA. Like in 2022 and 2023, New Delhi has decided to be cautious in understanding the implications of the sanctions and move accordingly.