The latest round of tariffs imposed by the US on Venezuela threatens India’s crude oil trade as domestic refiners have stopped procuring barrels from the crisis-hit South American country.
News agencies reported on Wednesday that Reliance Industries (RIL) has stopped buying Venezuelan crude oil. Last year, the US had allowed RIL to import crude from the heavily-sanctioned country. India’s largest privately-owned refiner is expected to take delivery of a cargo of Merey crude that’s currently en route from Venezuela, but additional buying has been put on hold, according to people familiar with the situation, who asked not to be identified.
Reliance secured waivers from the US last year to resume importing crude from Venezuela, and Kpler estimates the refiner has taken 6.5 million barrels since the start of the year. Trump’s executive order on Monday, however, will target any nation taking Venezuelan oil with “secondary” tariffs, effective April 2.
Last week, US President Donald Trump said the US will slap 25 per cent tariffs on countries buying Venezuelan crude, beginning next month, which will impact global markets and marginally lighted up international crude oil prices.
Wait and watch
An Indian government official said, “Like other countries, we are also in wait-and-watch mode over Venezuela. Latest tariffs have deeper implications. Domestic refiners are reviewing the situation, but have stopped seeking more cargoes from there for the time being.”
The official, however, said that if Venezuela is not able to sell crude oil, then these cargoes will be sold in the black market, which would mean high discounts. The official did not specify whether oil cargoes bound for India in Apri have been stopped.
Trade sources said that the major hit from the tariffs will be China, the major buyer of Venezuelan crude oil. India will also be impacted, albeit marginally as it imports less than 5 per cent of its requirement from Venezuela.
“Venezuelan oil could find its way into American refineries if Canada tariff war escalates further as refineries on the US Gulf of Mexico are designed for heavy crude oil from Canada, which is quite similar to Venezuela’s. These quantities are enormous, considering Canadian oil accounts for about one-fifth of the domestic US requirement,” said one of the sources.
India’s Merey buy
Until 2019, India was Venezuela’s third-largest purchaser, after the US and China, importing roughly 300,000 b/d on an average. India largely imports Merey, a heavy sour crude oil grade, from the South American country. During January and February, India imported around 65,000 b/d and 68,000 b/d of Merey, Kpler data showed.
Venezuela’s Merey sells at a higher discount, but only a few refineries in India can process the heavy sour grade. RIL refineries in Jamnagar and Indian Oil Corporation’s Paradip refinery are best suited to handle such grades.
The sanctions and now tariffs have led to heightened uncertainty on stuck dividend income from India’s investments in oil and gas projects in Venezuela. In September 2024, Oil Minister HS Puri met with US officials to push the proposal of ONGC Videsh’s (OVL) to extract oil from two oil blocks in Venezuela.
OVL owns 49 per cent stake in Venezuela’s operational San Cristobal project and 11 per cent in under-development Carabobo. Petróleos de Venezuela, SA (PDVSA), which operates both, had agreed to give oil to OVL instead of cash dividends; however, this is held up since US sanctions bar transactions involving PDVSA.