India, the world’s third-biggest oil importer, agreed to stop buying Russian oil and to buy “much more” oil from the U.S. and potentially Venezuela. Trump aims to tighten pressure on Moscow by squeezing Russian crude out of Asia, one of Russia’s last major markets after Western sanctions were imposed on its exports that help to fund Russia’s war in Ukraine.
But despite Trump’s latest effort, Venezuelan crude is unlikely to play a dominant role in Asia’s refinery system any time soon – particularly India’s. Unless Venezuela sharply ramps up its output to the point that U.S. refiners cannot absorb the excess volumes, leading Venezuelan producers to offer larger discounts, Asia will likely remain a marginal market for Caracas. The bigger issue, however, is simple economics. Venezuelan oil was only attractive to Asian buyers because it was sanctioned – and thus sold at steep discounts.
Despite the trade deal, Russian flows to India are unlikely to disappear. Ultimately, economics should prevail. The U.S. may wield significant political and economic influence over partners such as India. But that doesn’t mean Trump can steer crude flows at will in a highly liquid, transparent global oil market. Price signals, not political directives, will determine where Russian and Venezuelan barrels end up. The price incentives are simply too powerful. Therefore, India is unlikely to be a major buyer of U.S. oil anytime soon.