The geopolitics of oil: sanctions, outrage and India’s hard choice
By Sanjeev Oak
U.S. sanctions on Russia’s oil majors have rattled global markets and drawn Moscow’s wrath, calling it an “act of war.” Beyond the rhetoric, the crisis reveals a harsh truth — energy is no longer mere commerce but a weapon of power, challenging India’s strategic balance.
In a single, seismic move, the United States has placed Russia’s two biggest oil companies under sweeping sanctions. Moscow answered with furious rhetoric — describing the step as tantamount to “an act of war” and accusing Washington of abandoning diplomacy for coercion. The immediate market reaction was predictable: crude prices spiked, shipping risk premia rose, and traders scrambled for alternatives. But the deeper story is not simply about today’s price chart. This episode exposes a structural truth of our times: energy is once again an instrument of statecraft, and countries that treat oil as only an economic commodity risk being forced into strategic choices they did not intend to make.
“Sanctions are not punishment in a vacuum; they are tools deployed in a geopolitical campaign.”
— The core of the crisis is that oil has resumed its role as a lever of power.
This is a geopolitical earthquake with three interlinked faultlines — the immediate economic shock, the diplomatic rupture, and the strategic dilemma for third-party consumers such as India. Each faultline has effects that will persist long after the headlines subside.
The economics of coercion
Sanctioning the largest producers in a major exporting country is more than symbolism. It strips state coffers of revenue, complicates contracts, and disrupts established logistical networks. When large producers are targeted, the market senses scarcity even before physical barrels are affected — because buyers, insurers, shipowners and financiers all reassess legal and reputational risk. That reassessment translates quickly into higher freight rates, insurance surcharges and, yes, higher spot prices.
Pragmatically, nations and refineries that had relied on discounted supplies face an accounting problem: the nominal benefit of cheaper oil is offset by increased operational friction. Vessels may be denied insurance, banks may shun transactions, and ports or service providers may refuse to touch sanctioned cargoes. The result is not merely higher prices but a scramble to redesign supply chains.
“Cheap oil bought at the wrong price — that is, a price paid in strategic vulnerability — is no bargain.”
— The real calculus must include risk and resilience, not just per-barrel cost.
The rhetoric of rupture
Moscow’s denunciation of the sanctions as an assault on diplomacy is, in part, rhetorical posture. But there is also substance. Treating energy companies as extensions of state policy erodes the firewall between commerce and geopolitics. When states weaponize trade and finance openly, the predictable response is reciprocal securitization: states will try to insulate critical supplies, build alternative settlement arrangements, and seek partners who will tolerate risk for political reasons.
That dynamic accelerates polarization. Countries that once navigated a multi-vector foreign policy will find manoeuvre space shrinking. When energy becomes politicised, normal market behaviours — hedging, long-term contracting, and portfolio sourcing — are replaced by expedited diplomacy, emergency procurements and political bargaining. All of this diminishes the predictability that markets and planners rely upon.
India’s predicament: pragmatism versus principle
For India, the arithmetic is difficult and immediate. Rapid economic growth and rising mobility mean a sustained, rising demand for crude. Discounted Russian barrels have been a practical way to reconcile growing demand with fiscal constraints. But the sanctions change the incentive structure. Continuing to purchase from entities that are explicitly targeted risks exposure to secondary sanctions, banking restrictions, and logistical blockage — even if India itself is not the immediate target.
India’s longstanding claim of “strategic autonomy” — staying equidistant from great-power rivalries — faces a stress test. Strategic autonomy presumes the freedom to make national choices without coercion. But when major powers link commercial access to political alignment, autonomy becomes harder to sustain. The question is not merely moral: it is operational. Can India secure affordable, reliable energy without being drawn into the diplomatic dispute that has erupted?
“There is no neutral way to be dependent on contested supplies.”
— Dependence imposes choices, whether a country wants them or not.
Practical policy choices
India must treat this crisis as a policy inflection point. Three broad moves should be considered simultaneously.
1. Accelerate diversification and contractual security. Diversification is not a slogan; it is logistics and legal architecture. India should broaden long-term supply contracts with the Gulf, West Africa and other producers; invest in freight and insurance mechanisms that reduce reliance on vulnerable shipping; and consider cooperative arrangements with partners for shared reserves or swap lines.
2. Harden resilience at home. Strategic petroleum reserves are an obvious buffer. So too are investments in refining flexibility — the ability to process a wider slate of crude grades — and in infrastructural chokepoints such as pipelines and storage that reduce immediate exposure to maritime bottlenecks. Energy security requires physical options as much as diplomatic assurances.
3. Recalibrate diplomacy with candour. India’s diplomatic posture should shift from ambiguity to strategic clarity. That does not mean choosing a camp; it means being explicit about constraints and red lines. Washington must understand India’s energy imperatives; Moscow must be told that transactional energy ties cannot be a substitute for predictable, lawful commerce. India should also engage other major consumers to push for pragmatic enforcement frameworks that limit collateral damage to neutral buyers.
The global consequence: fragmentation of markets
If the sanctions persist and enforcement tightens, markets may fragment. Parallel trading systems, alternative insurance pools, and bilateral payment mechanisms could proliferate. That fragmentation raises costs over time and increases the chance of supply shocks. In the longer run, geopoliticised energy markets will accelerate investment in alternatives — renewables, storage, and efficiency — partly driven by political risk rather than purely by technology or economics.
This is a mixed blessing. Faster renewable deployment is desirable; unpredictable energy geopolitics is not. Policymakers should not romanticise disruption; they should use it as an incentive to speed structural transitions prudently.
“A global market beset by political fences will raise the premium on flexibility and foresight.”
— The winners will be those who plan, invest and diversify before the next crisis hits.
Final arithmetic: short pain, long gain
India’s immediate objective must be to avoid panic and preserve options. That means dealing with the commercial fallout — contract renegotiations, insurance workarounds, contingency shipments — while hardening the strategic stance. Medium term, it means financing storage, diversifying suppliers and accelerating the low-carbon transition. Long term, it means building a foreign policy that acknowledges the renewed salience of commodities in great-power politics.
The paradox is stark: a nation that aspires to influence global affairs cannot afford to be strategically brittle about the very commodity that fuels its rise. The stamps of diplomacy now include tanker manifests and insurance certificates. If India treats this episode as another market blip, it will pay for that complacency. If it treats it as a wake-up call — to secure supplies, fortify logistics and statecraft, and accelerate energy transition — it may convert short-term pain into a longer-term strategic dividend. In geopolitics, as in energy, the margin between freedom and coercion is often narrowly measured. India must widen that margin — before the next shock narrows it for good.