MOSCOW, July 31 (Reuters) - U.S. President Donald

Trump's demand on India to halt Russian oil imports could

threaten billions in Russian revenues, prompt Moscow to

retaliate by stopping a major U.S.-led oil pipeline and

potentially lead to a new global supply crisis.

India, the world's third largest oil importer, has become

the biggest buyer of Russian oil since 2022, purchasing up to 2

million barrels per day of oil accounting for 2% of global

supply. Other top buyers are China and Turkey.

The Indian route is so important for the Kremlin that if

disrupted it could prompt it to retaliate by closing the CPC

pipeline from Kazakhstan, where U.S. oil majors Chevron ( CVX ) and

Exxon hold big stakes, analysts at JP Morgan said this week.

"Russia is not without leverage," the U.S. bank said.

Trump has threatened to slap tariffs of up to 100% on

countries that buy Russian oil unless Moscow reaches a peace

deal with Ukraine by August 7-9. A 25% tariff on all U.S. goods

imports from India starts on Friday.

Reuters reported on Thursday that Indian state refineries

had paused purchases of Russian oil this week amid Trump's

threats.

REALIGNMENT

India only began buying large quantities of oil from Russia,

the world's second largest oil exporter, since 2022. It became a

top importer after Europe, Russia's former top client, imposed a

ban on Russian oil over its military actions in Ukraine.

Russia's oil giant Rosneft has a major stake in one of India's

biggest oil refineries.

India is now 35% reliant on Russian oil imports worth

$50.2 billion in the 2024-25 fiscal year, according to India's

government data.

"Cutting off this flow would require a massive

realignment of trade flows," said Aldo Spanjer from BNP Paribas,

adding that the global supply was already stretched.

India buys all varieties and grades of Russian oil -

including Urals from Western ports, ESPO and Sokol from the

Pacific and some grades from the Arctic, according to LSEG data.

Urals would be hit hardest if India stops buying as it

purchases up to 70% of Russia's biggest export grade by volume.

India's oil minister said the country can find alternative

supply.

India would need to raise imports of U.S. and Middle Eastern

crude or cut refining runs, leading to a spike in diesel prices,

especially in Europe, which imports fuel from India.

"Indian refiners will still struggle to replace the heavy

quality of Russian crude so they may end up paring runs," said

Neil Crosby from Sparta Commodities.

FALLING INCOME

Russia has managed to continue selling oil since 2022

despite international sanctions, although it sells it at

discounts to global prices.

Falling global prices mean Russia's income is already under

pressure. Its oil and gas revenue fell 33.7% year-on-year in

June to its lowest since January 2023, finance ministry data

showed. Revenues will fall 37% in July due to weaker global oil

prices and a strong rouble, Reuters calculations show.

Russian firms will need to store oil on tankers if India

stops buying, paying extra money for shipping charges and being

forced to offer wide discounts to new buyers, traders said.

A loss of 2 million bpd of exports might also gradually

prompt Russia to start reducing oil production from the current

levels of 9 million bpd, traders said. Russia's current

production is regulated by OPEC+ quotas.

HOW CAN RUSSIA RESPOND?

Russia could potentially divert some 0.8 million bpd of oil

to Egypt, Malaysia, Pakistan, Peru, Brunei, South Africa and

Indonesia, JP Morgan said.

Moscow could also disrupt the CPC pipeline to make sure the

West feels the pain from higher oil prices. Western oil firms

Exxon, Chevron ( CVX ), Shell, ENI and TotalEnergies ship up to 1

million bpd via CPC, which has total capacity of 1.7 million

bpd.

"If we get a visible and substantial difficulty in clearing

Russian crude and Putin shuts off CPC, oil prices might get well

over $80 per barrel, possibly a lot more," said Crosby.

The CPC pipeline crosses Russian territory and the

consortium has clashed with Moscow, which ordered it to suspend

operations for several days in 2022 and 2025 citing

environmental and tanker regulations.

A combined stoppage of CPC and Russian flows to India would

create a disruption of 3.5 million bpd or 3.5% of global supply.

"The Trump administration, like its predecessors, will

likely find sanctioning the world's second-largest oil exporter

unfeasible without spiking oil prices," JP Morgan said.