Venezuela’s curse or India’s purse?

The US President Donald Trump confidently announced that the US would “run” Venezuela, and American oil giants would rebuild the South American nation’s “battered” oil sector. In an unexpected fashion, this may prove to be a boon to India, and may offer an alternative supplier to Russia’s oil. This is because Russian imports continued in December 2025, and Trump stated after the Venezuelan raid that Washington could further increase the tariffs on Indian imports if New Delhi continued to buy oil from Russia. Venezuela may be able to replace Russia as a prominent supplier in the future.

One of the reasons why Trump is angry with India is because the latter buys huge quantities from Russia, but fails to import from America. The US president wants the opposite. Once the Americans take over the oilfields in Venezuela, India can import from the latter, rather than from America. This may please Trump, whose only interest lies in the profits earned by the American oil giants. At present, due to the American sanctions on Venezuela, India imports a mere 30,000 barrels per day (bpd) from Venezuela. China, which has defied the US, is the largest buyer with 4,00,000 bpd in 2025.

In March 2025, Trump issued an executive order that ordered his administration to identify nations that imported oil from Venezuela, and should attract additional tariffs. “On or after April 2, 2025, a tariff of 25 per cent may be imposed on all goods imported into the United States from any country that imports Venezuelan oil, whether directly from Venezuela, or indirectly through third parties,” stated the order. India fell in line with this, although it did not give up on Russia oil due to business and diplomatic factors. The current crisis will remove this, and allow nations to import Venezuelan oil.

Although Venezuela has the world’s largest reserves of oil, it accounts for less than one per cent of global supplies. The primary reasons are Venezuela’s incapacity to attract investments, and technology, largely due to the American sanctions. With the entry of American players over the next few months, oil supplies will go up. The supplies will gush out once the Americans spend billions of dollars to rejuvenate, and revive the oil sector there. Thus, New Delhi will have the benefit to approach another supplier, which will have Trump’s blessings. In the recent past, India has diversified its energy sources, although Russian oil continues to flow in.

However, India will need to contend with several crucial factors. The first is the speed with which Venezuelan oil flows into the global market. It may take months to augment production, or even years. Hence, New Delhi will need to calculate and recalibrate its options. In addition, India buys most of the oil through long-term contracts, and rarely in the spot markets. It will take time and effort to ink such deals with the American oil firms that enter Venezuela. The trick will lie in slowly relying less on Russia, and hiking the purchases from Venezuela. This is not an easy task.

Second, most experts feel that refining Venezuelan oil is tricky, and expensive. One will need to assess if the Indian refiners, both state-owned and private players, are willing to take additional risks, especially if the Venezuelan oil, which was available at discounts (like the Russian oil), is sold at market prices by the American firms. Refiners will need to establish if they have the technology to use Venezuelan oil. Of course, most of the refineries in India are world-class, and can handle oil from different sources. But the refiners will wish to look at costs, revenues, and refining margins.

According to a media report, “India was once a major processor of Venezuelan heavy crude, importing more than 4,00,000 bpd at peak levels, until sweeping US sanctions and rising compliance risks forcibly shut down purchases in 2020.” In fact, the state-owned ONGC jointly operates an oilfield in Venezuela, but the operations were severely hit due to the lack of technology and equipment. These may be revived if the Americans enter Venezuela, and help ONGC. Logically, India’s imports from there will go up. The reserves are estimated to be commercially viable, but “effectively stranded.”

Third, there is always the Trump factor. One is not sure what irks the US president, what pleases him, and what angers him. There is the possibility that he wants to boost American exports, and will not be pleased with India’s purchase of Venezuelan oil. This is because India enjoys a huge trade surplus with the US, which means that India sells more goods compared to what it imports. Trump will essentially wish to change the bilateral trade dynamics and, hence, demand that India buys more American goods, including oil. The Venezuelan oil will provide leverage against China, which is the largest importer of oil from that nation. In addition, it will be a counter to Saudi Arabia, which rules the oil market. Analysts feel that Trump’s action will send a strong message to the Middle East. In this grand scheme of things, India may not fit in.

Finally, India’s foreign exchange earnings will go up due to the American intervention in Venezuela. According to reports, the latter owes $1 billion to ONGC as dividends over the past 11 years. ONGC owns 40 per cent in one of the Venezuelan oil fields. Due to the refusal to conduct audits, which will determine the payments to the Indian firm, the settlement of the claims was frozen. If the Americans manage to boost oil production in Venezuela, and ONGC manages to boost the operations there, this money will be released. According to sources, production from ONGC’s oilfield can go up 10-15 times.

“If sanctions are eased, as seen in the previous geopolitical episodes, such as Panama in 1990, when aid and trade restrictions were lifted shortly after the removal of General Manuel Noreiga, trade flows can resume rapidly. Under such circumstances, Venezuelan barrels could again return to Indian refineries, wrote Nikhil Dubey, a senior research analyst at Kpler, in a recent blog. He agrees that while this will diversify the Indian oil basket, it will reduce the dependence on Russian oil, and add “flexibility to Indian refiners.” Before 2019, Venezuela produced more than 700 million barrels a year, and India and China together absorbed more than a third of the output.