The United States has accused India of cashing in on discounted Russian oil during the Ukraine war, alleging that New Delhi has been buying crude at knockdown prices and reselling refined products to sanctioning regions, a practice Washington has branded as "arbitrage".
Treasury Secretary Scott Bessent told CNBC's Squawk Box on Tuesday that India was "profiteering" from the conflict. "They are just profiteering. They are reselling," he said.
"This is what I would call the Indian arbitrage — buying cheap Russian oil, reselling it as product."
Bessent claimed that the move had lined the pockets of "some of the richest families in India," alleging they had made "$16 billion in excess profits."
Asked why Beijing had not faced similar penalties, Bessent intimated that China's continued imports were viewed as less problematic because it had been a major buyer even before Russia's invasion.
However, energy expert Bob McNally, president of Rapidan Energy and a former advisor to President George W Bush, said India's decision to lean on Russian oil were due to US' encouragement immediately after the invasion.
According to him, the Biden administration had asked India to buy Russian crude when other buyers walked away, to prevent a dramatic oil price spike that could have hit American motorists hard.
"India played a key role in the price cap sanction mechanism designed by the US and its European allies to ensure Russian oil still flowed while trying to crimp the revenue Moscow earned," McNally told CNBC.
According to oil market analyst Matt Smith at Kpler, in his comments to CNBC, India buys Russian crude at a discount due to sanctions, refines it into petrol and diesel, and then "sells the product back to regions that have sanctioned Moscow such as Europe."
India's imports of Russian oil have soared since Moscow launched its full-scale invasion of Ukraine in February 2022. Prior to that, New Delhi imported only a trickle of Russian crude. Now, India purchases 1.5 million barrels per day, making it Russia's largest client, according to Kpler data.
China is close behind at 1 million barrels per day.
Earlier this month, President Donald Trump doubled down by ordering an additional 25% tariff on Indian exports to the United States as punishment for buying Russian oil, a levy set to take effect next week.
Trump is also threatening "secondary tariffs" on Russian oil buyers like India in an effort to force the Kremlin into a negotiated settlement over Ukraine, though China has thus far been spared such measures.
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