Saturday, 28 Feb, 2026
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New Delhi’s energy security now depends less on supply diversity than political risk. Cheaper Russian oil has cut import costs, but increased exposure to sanctions and shipping constraints
For decades, oil markets were shaped by geology. Countries with the largest reserves mattered most. That logic is steadily breaking down. Today, geopolitics, sanctions and logistics increasingly determine who can sell oil, at what price, and to whom.
Venezuela illustrates this shift starkly. It holds the world’s largest proven crude oil reserves — about 303 billion barrels, or roughly 17 per cent of the global total. Yet its presence in global trade is marginal. In 2023, Venezuela’s crude exports were worth just $4 billion, a fraction of what major exporters earn despite holding smaller reserves.
Russia, for instance, exported oil worth $122 billion in the same year while holding barely a quarter of Venezuela’s reserves. Saudi Arabia, with slightly lower reserves, exported more than $180 billion. The difference is not oil in the ground, but the ability to extract, finance, insure and transport it.
India’s import data makes the point more clearly than any theory. In FY15, Venezuela accounted for 8.45 per cent of India’s crude and petroleum imports. By the first eight months of FY26, that share had collapsed to 0.28 per cent. This was not driven by market forces but by US sanctions, which made Venezuelan barrels commercially and legally risky for Indian refiners.
India did not import less oil. It simply replaced Venezuelan supplies with alternatives — primarily from Russia, West Asia and the US. The shift underscores a crucial policy reality: India’s energy security depends less on where reserves are located and more on which suppliers remain geopolitically accessible.
Venezuela’s structural decline
The Trump administration’s military action against Venezuela’s Nicolás Maduro regime is expected to reshape the country’s oil economics, but with limited implications for global supply. Venezuela no longer has the production capacity, investment pipeline or institutional flexibility to respond to price signals or geopolitical shocks. Years of sanctions, underinvestment and operational decay have rendered much of its vast oil reserves economically stranded, curbing its ability to influence markets even amid rising geopolitical risk.
The rise of a two-tier oil market
Venezuela’s marginalisation fits into a broader global pattern. Oil markets are fragmenting into “clean” barrels that move freely and sanctioned barrels that trade at discounts through complex channels.
Russia remains the central pressure point. Before the Ukraine war, it exported about 7.5 million bpd of crude and refined products. While volumes have proved resilient, enforcement has tightened around shipping, insurance and payments.
Iran presents a quieter but persistent risk. Output has risen to around 3.2–3.4 million bpd, with exports estimated at 1.3–1.5 million bpd, largely flowing to China. US actions against traders and tankers increase uncertainty. Even modest disruptions could tighten Asian markets — where India sources most of its crude.
Nigeria shows the spillover effects. Though not sanctioned, it competes in the same Atlantic Basin. As refiners avoid Russian and Iranian barrels, demand for West African crude has become more volatile. Nigeria’s own production, officially capped near 1.7 million bpd but often lower due to theft and outages, remains fragile. Price swings have intensified fiscal stress, reinforcing supply instability.
What this means for India
For India, the lesson is clear. Energy security is no longer about diversifying reserves; it is about diversifying political risk. The rise of discounted Russian oil has lowered India’s import bill in recent years, but it has also increased exposure to sanctions risk and shipping constraints.
India’s policy response is therefore shifting—quietly but decisively. Refiners are investing in crude flexibility, strategic reserves are being expanded, and supply sources are being widened to include the US, Brazil and Guyana. The aim is not cheapest oil at any cost, but oil that can be reliably delivered and paid for.
Plenty of oil, growing fragility
Globally, oil supply is not scarce. Non-OPEC producers led by the US, Brazil and Guyana are expected to add more than 1.5 million bpd annually through the mid-2020s. OPEC+ retains spare capacity, largely in the Gulf.
Yet the market is increasingly brittle. Barrels exist, but politics decides whether they can flow.
Venezuela’s vast reserves are a reminder that in today’s oil economy, what matters is not how much oil a country has, but how usable it is. For importers like India, navigating that reality has become as important as securing the oil itself.
