Tariffs Override India’s Russian Oil Gains: What It Means for Investors and Businesses in the Energy Sector
India has saved billions of dollars by increasing its imports of discounted Russian oil following the outbreak of the war in Ukraine. However, the recent imposition of punitive tariffs by the United States, effective from Wednesday, threatens to erode these gains with limited solutions available.
Analysts estimate that India has saved at least $17 billion since early 2022 by sourcing more oil from Russia. Yet, the additional tariffs of up to 50% on Indian imports, imposed by former U.S. President Donald Trump, could reduce India’s exports by over 40%, amounting to nearly $37 billion in the current April-March fiscal year, according to the Global Trade Research Initiative (GTRI), a New Delhi think tank.
The impact of these tariffs is expected to be prolonged and could pose significant political challenges for Prime Minister Narendra Modi, placing thousands of jobs at risk in labor-intensive industries such as textiles, gems, and jewelry.
India’s forthcoming response could redefine its decades-old alliance with Russia and recalibrate its increasingly intricate relations with the U.S.—a relationship Washington considers crucial in counterbalancing China’s rising influence in the Indo-Pacific region.
Happymon Jacob, founder of Delhi’s Council for Strategic and Defence Research, emphasized the enduring importance of Russia to India, stating, “India needs Russia for defense equipment for several more years, affordable oil when available, geopolitical support in the continental space, and political backing on sensitive matters. That makes Russia an invaluable partner for India.”
He also highlighted the balancing act India must maintain: “Despite the difficulties between Delhi and Washington under Trump, the United States remains India’s most important strategic partner. India simply can’t afford to choose one over the other—at least not yet.”
According to two Indian government sources, New Delhi aims to mend relations with Washington and is open to increasing U.S. energy imports but is hesitant to completely stop Russian oil purchases. Discussions are ongoing; India’s foreign secretary confirmed virtual talks with U.S. officials addressing trade, energy security—including nuclear cooperation—and critical minerals exploration.
Russian crude now constitutes nearly 40% of India’s total oil imports, up from almost zero before the Ukraine conflict. Analysts warn that an abrupt halt would be economically unfeasible and signify surrender under external pressure.
Billionaire Mukesh Ambani’s Reliance Industries, operator of the world’s largest refining complex in Modi’s home state of Gujarat, leads India’s purchases of Russian oil.
Internal Indian government estimates reviewed by Reuters suggest that global crude prices could surge beyond $200 a barrel if India stopped buying Russian oil, which is currently sold at up to a 7% discount compared to global benchmarks.
In an unusually direct statement, India recently accused the U.S. of double standards for targeting its Russian oil imports while buying Russian uranium hexafluoride, palladium, and fertilizer themselves. New Delhi also points out that other nations like China, which have increased Russian oil purchases, face no similar penalties.
U.S. Treasury Secretary Scott Bessent criticized India’s increased purchases, accusing it of profiteering and deeming the behavior unacceptable. He noted that China’s imports increased modestly from 13% to 16%, contrasting India’s sharp rise.
India’s foreign ministry defended its crude imports from Russia as a necessity driven by global market realities to ensure affordable, predictable energy costs for its consumers.
New Delhi warns that ceasing Russian oil imports, which average about 2 million barrels per day, would disrupt the entire supply chain and cause domestic fuel prices to soar.
Reports indicate that the Biden administration previously supported India’s Russian oil imports to help stabilize global prices. Russia, meanwhile, expects India to maintain its oil purchases.
Prime Minister Modi has not directly commented on the tariffs but has consistently pledged support for India’s farmers—a key voting bloc—suggesting a subtle rebuttal to Trump’s demands for agricultural market liberalization. Modi also plans significant cuts to goods and services tax by October to stimulate domestic demand ahead of elections in the important rural state of Bihar.
In a surge of diplomatic activity aimed at promoting multipolarity, senior Indian officials have recently visited Russia, while Modi is set to visit China this month for the first time in over seven years. This visit follows a gradual thaw in India-China relations after a 2020 border clash.
Modi is expected to meet Chinese President Xi Jinping and Russian President Vladimir Putin at the upcoming Shanghai Cooperation Organisation summit. However, sources confirm India remains cautious about its ties with China and is not considering a trilateral summit at this stage, as Russia had hoped.
Experts note that other countries are watching India’s response to the U.S. tariffs closely. Jacob commented, “If India—an emerging major economic and military power—faces intense pressure from the U.S., other countries might have even less capacity to resist American pressure.”
Additionally, some interpret the current situation as hinting that China could emerge as a counterbalance to U.S. actions, especially given Trump’s unpredictable and aggressive policies.
International relations experts observe that these developments have pushed U.S.-India relations back to one of their lowest points since U.S. sanctions following India’s 1998 nuclear tests. Beyond trade, tensions could influence visa policies impacting Indian tech professionals and the offshoring of services.
Even if India manages to have some tariffs reversed over time, long-term consequences will persist in trade. GTRI founder Ajay Srivastava, a former Indian trade official, warned that competitors such as China, Vietnam, Mexico, Turkey—and even Pakistan, Nepal, Guatemala, and Kenya—stand to benefit, potentially excluding India from key markets well after any tariff rollback.
تحلیل ویژه از عمانت | بازار عمان را کشف کنید
The imposition of heavy U.S. tariffs on Indian imports in response to India’s increased purchases of discounted Russian oil highlights the fragility of global trade alliances amid geopolitical tensions. For Oman, this creates both ریسکها و فرصتها: risks from potential market realignments and disruptions in supply chains, but also opportunities to position itself as a stable alternative trade partner or energy supplier amidst shifting dynamics. Smart investors and entrepreneurs in Oman should closely monitor India-U.S.-Russia relations to anticipate market gaps and leverage emerging trade corridors within the Indo-Pacific region.
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