Asia’s richest man, Mukesh Ambani, faces a significant challenge as he navigates the complexities of global trade and geopolitics. The head of Reliance Industries, Ambani must decide whether to continue importing cheap Russian crude oil, which bolsters his company’s profits, or yield to international pressure to cease such imports due to their indirect support of Russia’s war efforts in Ukraine.
Reliance Industries, operating the world’s largest refinery in Jamnagar, India, announced plans to stop processing Russian crude at its Special Economic Zone (SEZ) refinery by December 1. A spokesperson confirmed that future exports from this facility would rely on non-Russian crude oil. This decision holds particular significance for Australia, as a substantial portion of its imported energy products, tainted with Russian oil, originates from this refinery.
The Global Impact of Reliance’s Decision
Australia’s Foreign Minister, Penny Wong, praised Reliance’s move during her recent visit to India, emphasizing the importance of businesses ensuring their supply chains do not inadvertently fund Russia’s conflict against Ukraine. However, the decision does not extend to Reliance’s domestic operations, which continue to supply the vast Indian market with Russian crude.
This situation presents a potential conflict with U.S. President Donald Trump, who has imposed hefty tariffs on India, citing its significant importation of Russian oil. The Indian government has criticized these tariffs as unfair, highlighting that other major importers, like China and Turkey, have not faced similar penalties.
Sanctions and Shifting Trade Dynamics
The situation is further complicated by new U.S. sanctions on Russian oil producers Rosneft and Lukoil, which take effect today. These sanctions follow similar measures by Australia in 2023. Analysts suggest that these sanctions could disrupt Indian refiners’ operations, forcing them to adopt more cautious trading practices to avoid exposure to U.S. penalties.
“These developments reflect evolving logistical tactics by Russian exporters navigating tightening Western sanctions,” said Sumit Ritolia, a senior analyst at Kpler.
Despite these challenges, other Russian entities like Surgutneftegas and Gazprom Neft remain unsanctioned, potentially allowing them to fill the gap left by Rosneft and Lukoil.
The Broader Context of India-Russia Relations
India’s reliance on Russian crude is partly due to its limited domestic oil production and the need to secure affordable energy for its 1.4 billion citizens. The International Energy Agency projects that India will be the largest source of global oil demand growth through 2030. This demand is facilitated by strong India-Russia ties, with both nations collaborating on various fronts, including space, technology, and defense.
Reliance’s decision could significantly influence U.S.-India trade negotiations and Russia’s ability to sustain its war efforts. The company’s next steps are closely watched, given its substantial role in the global oil market.
The Legacy of Mukesh Ambani and Reliance Industries
Mukesh Ambani’s journey from modest beginnings in Mumbai to leading one of the world’s most profitable conglomerates is a testament to his family’s entrepreneurial spirit. His father, Dhirubhai Ambani, transformed a small yarn-trading business into a publicly traded company by the late 1970s, setting the stage for Reliance’s expansion into telecommunications, retail, and sports.
Forbes estimates Mukesh Ambani’s net worth at approximately $113 billion, with the Jamnagar refinery being a significant contributor to this wealth. The refinery’s profitability has been enhanced by the availability of discounted Russian crude, which became a bargain for refiners following Russia’s invasion of Ukraine in 2022.
October figures from the Centre for Research on Energy and Clean Air showed India bought 38% of Russia’s crude oil exports, second only to China.
Future Implications and Strategic Choices
As global sanctions tighten, Reliance’s strategy will be pivotal in shaping India’s energy landscape. The company has a 10-year supply contract with Rosneft, and the impact of U.S. sanctions on this agreement remains uncertain. Meanwhile, the U.S. continues to purchase Russian energy indirectly, highlighting the complexities of global oil trade.
India’s sourcing strategy, as stated by government spokesman Randhir Jaiswal, focuses on providing affordable energy to its population. While alternatives exist, such as sourcing from the Middle East or Latin America, these options could reduce refiners’ margins and impact domestic energy prices.
“Discounted Russian barrels remain attractive for margins, and India’s energy policy continues to prioritize affordability and security over geopolitical pressure,” Ritolia noted.
As Mukesh Ambani navigates this intricate landscape, his decisions will not only affect Reliance’s future but also have broader implications for global trade and geopolitical dynamics.
