India could soon find itself in Washington’s crosshairs over its continued purchase of Russian crude, with the Biden administration weighing fresh tariffs that could range from 25% to 50%. The move, which comes as US President Donald Trump expresses frustration over peace talks with Russian President Vladimir Putin, has left Indian policymakers and refiners scrambling for clarity. With an April 2 deadline for new US reciprocal tariffs also approaching, India’s hopes for concessions appear to be fading fast.
India’s Reliance on Russian Crude Grows
Russia has cemented itself as India’s top oil supplier, accounting for a dominant share of the country’s crude imports between April and December 2024, according to data from the Ministry of Commerce and Industry. The numbers are stark: India’s Russian oil imports have averaged 1.85 million barrels per day (bpd) in the first 21 days of March—well above February’s 1.47 million bpd and January’s 1.64 million bpd, per figures from commodity market analytics firm Kpler.
For India, Russian crude offers undeniable economic advantages. Moscow has consistently provided discounted barrels compared to Gulf suppliers, easing some of the pressure on India’s current account deficit and fuel prices. But Washington’s latest tariff threat could complicate this calculus, forcing Indian refiners to assess their exposure and weigh alternative supply strategies.
Uncertainty Over Scope of US Measures
What remains unclear is the exact nature of the US response. Will it be a blanket tariff on Russian oil imports? Or could it escalate into secondary sanctions that target financial transactions and shipping arrangements linked to Russian crude?
A senior executive from a major Indian refining company, speaking on condition of anonymity, underscored the industry’s concerns: “It is difficult to say how this will pan out. We need more clarity on what he (Trump) meant when he spoke about potential tariffs on buyers of Russian crude. Will it be limited to tariffs, or would it involve possible secondary sanctions on buyers? That is also a critical question.”
If Washington opts for a broad, punitive approach, Indian refiners—many of whom have already adapted to Western price caps and payment restrictions—could face fresh hurdles in securing supplies. Any financial or shipping sanctions would have ripple effects, not just for India but also for global oil markets.
Rising Oil Prices a Global Concern
The potential fallout extends well beyond India. If Russian crude is effectively priced out of global markets due to new tariffs or restrictions, the resulting supply crunch could push up international oil prices—an unwelcome development for economies already grappling with inflationary pressures.
- Brent crude, which is widely used as a global benchmark, has been trading above $85 per barrel in recent weeks.
- A supply shock from Russian oil disruptions could send prices soaring above $100 per barrel, analysts warn.
- Indian consumers could feel the pinch at the pump, with higher fuel costs feeding into inflation.
While India has diversified its crude supply sources, replacing Russian barrels in the short term would be costly and complicated. Gulf suppliers like Saudi Arabia and the UAE could step in, but at a steeper price.
India’s Trade Talks with US Hit a Wall
Adding to the uncertainty is India’s trade relationship with the US. The two nations recently concluded a four-day round of trade talks aimed at finalizing a broader economic agreement, but Trump’s blunt remarks aboard Air Force One suggest that India will not receive exemptions from the upcoming US reciprocal tariffs. These tariffs, set to take effect on April 2, are part of Washington’s broader push to reset trade imbalances.
Trump’s stance reflects a hardening of US trade policy, where strategic and economic interests are increasingly intertwined. For India, this presents a dilemma: balancing its deepening energy ties with Russia against the potential economic blowback from Washington.
What’s Next for India’s Energy Strategy?
With the US threat looming, India must now consider its next moves. Potential options include:
- Seeking Diplomatic Exemptions: New Delhi could push for waivers or negotiate softer enforcement measures with Washington.
- Exploring Alternative Suppliers: While Russian crude has been attractive due to its discounts, India could pivot more towards Middle Eastern producers.
- Increasing Domestic Production: Strengthening domestic refining capacity and tapping into alternative energy sources could be part of a long-term strategy.
Ultimately, India’s response will depend on how aggressively the US enforces these measures and whether Moscow adjusts its pricing strategies to keep its crude competitive despite potential tariffs. As global energy dynamics continue to shift, India finds itself at a crossroads—one where every decision carries significant economic and geopolitical consequences.
