For decades, the oil market has worked on an unwritten rule: no matter how complex the geopolitics, barrels will find a home. Price solves most problems. Cut it far enough and someone, somewhere, will take the cargo. That belief is now under pressure.

India, which takes roughly 2m b/d of Russian seaborne crude and has been one of a handful of major buyers since the start of the Ukraine war, is beginning to pull back. It is not a trickle. That flow represents about two-thirds of Russia’s seaborne exports, a cornerstone of Moscow’s post-Ukraine energy lifeline. If it falters, the effects will not stay in one region; they will ripple across shipping routes, price spreads, and supply balances from the Middle East to Europe.

The shift has not come through a formal prohibition. It is being driven by the shadow of US de facto sanctions and the fear of getting caught on the wrong side of them. Washington’s latest measures include a 21-day window before an extra 25% tariff on India-US trade kicks in. Technically, that grace period means business can continue, but sentiment has changed. Indian refiners have been buying more legitimate spot cargoes in recent days. Whether this marks a short-term hedging move or the start of a deeper reset is still unclear.

If Indian demand shrinks, there is only one buyer with the scale and the geopolitical leverage to take significant extra volumes: China. That is where the easy part ends. China’s trade negotiations with the US complicate the picture, making every incremental Russian barrel a potential diplomatic bargaining chip.

Refiners in China could find space for some of the oil by easing back on other purchases. There is evidence they are already doing so. Saudi Arabia will reduce its term supplies to Chinese buyers for September, which could be a signal that Beijing is ready to take more discounted Russian cargoes.

The calculation is whether the economic reward outweighs the political risk. Additional Russian flows would come cheap but could disrupt broader trade talks. Elsewhere, the options are thin. Some smaller refiners in Southeast Asia or the Middle East might be able to handle the grades, but the same sanction pressure may end up being directed at them, and few governments will be willing to take that risk. Even core OPEC producers such as Saudi Arabia and the UAE are unlikely to process and re-export Russian crude in the way Indian refiners have.

That leaves a narrowing funnel for Russian exports. A smaller pool of buyers increases their leverage on price, a short-term win for China but a long-term vulnerability for Moscow. Dependence on a single customer brings its own set of risks, especially when that customer’s priorities may change overnight.

If as much as half a million barrels a day are displaced from India’s intake, the Middle Eastern spot market will tighten quickly. Sour crude grades linked to Dubai pricing would be bid up, narrowing the Brent-Dubai spread. Refiners looking to replace Russian barrels would compete for similar types of oil, intensifying pressure on prices.

The freight market would feel it almost immediately. More tonne-miles for legitimate cargoes would push rates higher, while dark fleet tankers carrying Russian supply would have to travel further to reach their limited destinations. That increases voyage times and costs, straining an already fragmented logistics chain.

Should China delay in taking the surplus, the warning signs will show up offshore. Cargoes will sail without a declared destination, or float on the water, turning into floating storage by default. This is not a hypothetical. In the early months after the Ukraine invasion, Russian crude spent weeks at sea in search of buyers. If history repeats, Russian export terminals could soon become congested, leading to short-term production shut-ins. Those interruptions are costly, not just in lost revenue, but in the technical difficulties of restarting wells.

The regional picture would be far from uniform. Turkey, currently taking around 300,000b/d of Russian crude, could step up legitimate spot crude purchases, tightening the Mediterranean market. Products would be caught in the crossfire. Russia is a key exporter of fuel oil to India and diesel to Turkey; disruption to either could squeeze European supply and push the east-west diesel spread wider.

The idea of a unified global crude market is already fading. Sanctioned Russian oil trades in its ecosystem, with a limited and well-known set of buyers. A sharp cut in Indian demand would further shrink that group, concentrating power in the hands of Chinese refiners. They could name their price.

A concentrated customer base could also reshape freight flows. If almost all sanctioned crude is heading to a single geography, shipping patterns become more predictable. That could lower costs for the buyer, but it makes the system more fragile if any chokepoint or political dispute interrupts the route. For Russia, it amplifies the risk that a single change in Chinese policy could leave cargoes stranded.

The long-term consequences for Russia’s upstream sector are equally stark. Without enough end-markets, production must eventually fall. After sanctions were first imposed in 2022, many forecast steep drops in Russian output. Those declines never came, mainly because India absorbed the volumes. Remove that outlet, and the calculus changes. Wells might be shut in, investment deferred, and capacity lost over time.

Right now, the clearest indicator is Indian buying activity. Analysts are counting every barrel— whether it comes from the US Gulf, the Caspian, or the Middle East—to see how the mix is shifting. If purchases from Russia continue to decline, the market will likely view it as the beginning of a trend rather than a temporary pause.

Two other signs will matter: One is how Chinese term allocations from major suppliers, particularly Saudi Arabia, adjust in the coming months. A significant cut would indicate room for more Russian oil. The other is the reappearance of undelivered Russian cargoes loitering at sea, a visible red flag that buyers are in short supply.

If the pullback does stick, the consequences will be felt well beyond Moscow’s balance sheet. The global oil system depends on the frictionless redirection of flows. Remove a buyer of India’s scale, and that friction rises sharply. Freight rates jump. Regional price spreads swing wider. Refining margins shift, favouring some markets while hurting others. Oil flat price would rise.

In a world already unsettled by geopolitical shocks, such a disruption could speed the emergence of distinct, politically aligned trading blocs. In one, sanctioned barrels move at steep discounts within a closed loop of willing buyers. In the other, unsanctioned crude circulates through the mainstream market at prices determined more by fundamentals than foreign policy.

This moment is not just another twist in the Russia-India trade story. It could be a turning point in the way global oil moves, is priced, and is controlled. If India walks away for good, the impact will reach far beyond the ports and pipelines of the two countries. It will touch every refinery, every shipping lane, and every trader with a stake in the world’s most vital commodity.

Neil Crosby is AVP of oil analytics at Sparta.