What the US shock move in Venezuela means for India

While a potential easing of sanctions after the US intervention could eventually restore India's access to the world’s largest oil reserves and $600 million in unpaid dividends, experts warn that immediate market volatility, infrastructure decay, and Venezuelan hyperinflation pose significant risks to its energy security and import bill. India's state-run companies have invested $2.5 billion in Venezuela before it came under stiff US sanctions in 2020.

India used to be a major buyer of Venezuelan heavy crude, importing more than 400,000 barrels per day at peak levels, until the US sanctioned the country to curb what it calls narco-terrorism. India on Sunday expressed "deep concern" over the developments in Venezuela, reaffirming its support for the well-being and safety of the Venezuelan people.

The turn of events in Caracas will determine the fate of India's multi-billion dollar investments and hefty dividends.

Indian investments in Venezuela have been stuck, said an official with an official with a state-run firm with major stakes in the country. "Volatility brings in concern, but we will have to watch out for the way forward. An opening-up of the market may allow more supplies," the official said on the condition of anonymity.

ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corp. Ltd (ONGC) has cause for concern—and hope. It owns a 40% stake in Venezuela's San Cristobal oilfield since 2008, with Venezuela's state-owned PDVSA holding the rest. The US sanctions squeezed production at San Cristobal and torpedoed the repatriation of dividends from the businesses. New Delhi's efforts to secure a sanctions waiver or receive oil in lieu of dollars have failed so far. Separately, OVL has also partnered with Indian Oil Corp. Ltd and Oil India Ltd to invest $2.2 billion in Carabobo-1 project where, again, production has suffered after the US sanctions.

In a post-midnight swoop on Saturday, the US bombed multiple facilities in Caracas, captured president Nicolás Maduro and flew him to the US, in a shocking culmination of years of sparring over alleged drug smuggling and electoral subversion. US president Donald Trump said forces had conducted a “large-scale strike" and captured Maduro and his wife, Cilia Flores.

Prashant Vasisht, senior vice-president and co-group head, corporate ratings, ICRA Ltd said the Venezuela affair may impact India in two different ways. "First, it may provide some support to prices in the short term due to immediate supply worries. However, in case there is a transition which is globally accepted, sanctions may be lifted, which would help India source from Venezuela. Several Indian refineries are now capable of refining the viscous Venezuelan oil. So, supplies coming from there may help ensure energy security."

Queries mailed to OVL, ministry of petroleum and natural gas, Indian Oil Corp and Oil India Ltd on Sunday afternoon were not immediately answered.

Volatility in the global oil markets holds major significance for India as the country imports about 88% of its crude oil requirement, which forms about 25% of its overall import bill. Further, a $1 hike in oil prices may lead to an increase of about ₹13,000 crore in the overall oil import bill on an annualized basis. India imported crude worth $161 billion last fiscal year. Lower crude prices have so far lowered the oil import bill in the current fiscal to $80.9 billion as of November compared with 92 billion a year earlier.

Deepak Mahurkar, partner, oil & gas at PwC assesses Venezuelan inflation at between 200% and 600%. "The combination of years of sanctions-induced decay and the sudden decapitation of the government has created a vacuum where the potential for long-term recovery (via US investment) is currently overshadowed by immediate humanitarian and inflationary crises. The ability to export oil is challenged due to damage to infrastructure. The impact on India's oil imports is not expected to be significant. The global investments in the country are hard to flow in despite the US efforts. The incumbent investors will further face uncertainty," Mahurkar added.

Experts said that any easing of sanctions on Venezuela after the US intervention may help India, the world's third-largest oil buyer.

"Although Venezuela has the largest reserves, its production is very low, at around 1 million barrels per day. So, the current volatility is unlikely to impact global oil markets," said Debasish Mishra, chief growth officer at Deloitte South Asia.

Policy thinktank Global Trade Research Initiative (GTRI) said India is unlikely to face any economic or energy fallout from the Venezuela shock, as trade between the two countries has shrunk to negligible levels due to prolonged US sanctions.

In FY25, India’s total imports from Venezuela stood at just $364.5 million, with crude oil accounting for $255.3 million, marking an 81.3% fall from $1.4 billion in crude imports in FY24, GTRI said. India’s exports to Venezuela were modest at $95.3 million, led mainly by pharmaceutical shipments worth $41.4 million. Given the low trade volumes, existing sanctions regime and geographical distance, GTRI said that the current developments are not expected to have any meaningful impact on India’s economy or energy security.

However, oil prices are expected to be volatile when commodity markets reopen on Monday. The February contract of Brent on the Intercontinental Exchange ended at $60.75 per barrel on Friday, lower by 0.16% from its previous close.

N.R. Bhanumurthy, director at Madras School of Economics was of the view that the instability in the Latin American country, will impact the global commodity markets, including oil and the foreign exchange rates, affecting India's current account deficit.

"It depends on how smoothly things would play out. It will have implications on the oil market and exchange rate as the dollar is already strengthening vis-a-vis rupee and other BRICS currencies. Given this kind of uncertainty, the commodity market will also react. Further depreciation of rupee will impact both import and export since we will widen the current account deficit," he said.

"If transition becomes dicey and volatile. It will have a negative impact," Bhanumurthy added.

The development comes at a time when the global market is witnessing supply woes across several oil producing nations including sanctions-hit Iran and Russia.

To be sure, OVL and other oil and gas PSUs have faced issues related to dividends and investments in Russia's Sakhalin 1 and Vankor fields. Recently, construction resumed at the $20 billion Mozambique LNG project, where OVL, BPCL and Oil India hold 30% stake. The project was under force majeure from 2021, after attacks by Islamic State terrorists.

OVL was earlier in talks with PDVSA to secure oil cargoes in lieu of unpaid dividends, but that yielded no results as the US reimposed sanctions on its oil trading activities in 2024 after a six-month relaxation. In 2024, OVL sought a 'specific licence' similar to one granted to Chevron, which would allow the Indian company to operate in the heavily sanctioned South American nation, but the US Office of Foreign Assets Control (OFAC) has not granted it yet.