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The $11 Billion Question: Will US Pressure Push India Away From Russian Oil?


 

• US Threatens New Tariffs

On August 4, 2025, U.S. President Donald Trump announced plans to “substantially raise” tariffs on goods imported from India. The move targets India’s purchase of Russian oil—Trump asserted India buys discounted crude, resells it for profit, and is effectively financing Russia's war effort in Ukraine.

This includes a 25% base tariff, slated to take effect on August 5–7, with possibilities for additional penalties beyond that.

• U.S. Officials Join the Pressure

Stephen Miller, former White House deputy chief of staff, echoed the criticism, accusing India of “financing” Russia’s war by continuing its oil imports—calling the policy “not acceptable”.

🇮🇳 India’s Response

India’s foreign ministry described the U.S. measures as “unjustified and unreasonable”, accusing the U.S. and EU of double standards—pointing out that other Western nations also import Russian energy without facing similar penalties.

Indian officials reaffirmed that energy procurement decisions are driven by economic necessity and sovereign interests, emphasizing a non‑aligned foreign policy in the face of global energy volatility.

Despite the threats, tankers carrying Russian crude have continued to discharge millions of barrels into Indian refineries over the weekend, showing no immediate reduction in the trade flow.

🌏 Background: India's Oil Trade & Trade Context

India’s imports of Russian oil surged sharply following the 2022 invasion of Ukraine. What was once just 1% of Indian crude imports in early 2022 has soared—today India accounts for over one-third, making it one of the top two global buyers, alongside China.

Trade negotiations with the U.S., including plans for a bilateral trade deal to double trade to $500 billion by 2030, have stalled. Trump has repeatedly criticized India as a trade "abuser", citing imbalanced tariffs and barriers.

⚠️ Risks and Global Trade Implications

Economic Risks for India

Analysts estimate that forced departure from Russian oil would increase India’s import bill by $9–11 billion, squeeze refinery margins, and potentially fuel domestic inflation.

Geopolitical & Trade Fallout

  • Potential retaliation via tariffs or policy measures by India.

  • Broader segmentation of global energy markets as countries shift trade partners.

  • Growing momentum toward de‑dollarization, especially between Russia and energy buyers like India, in line with efforts to consolidate trade in alternative currencies like the rupee or ruble.

Supply Chain and Market Volatility

Western secondary sanctions and tariff threats could destabilize global energy flows. That volatility, paired with India’s strategic defiance, may create ripple effects—including in global oil pricing, shipping logistics, and energy affordability.

📌 Summary Table

PartyPosition/ActionRisks & Implications
U.S.Announced 25% tariffs, threatens additional penalties; accusing India of war financing through Russian oil tradeCould provoke restructuring of trade alliances, risk rising energy prices
IndiaDefending continuation of Russian oil purchases as national interest; rejects threats as double standardsFaces higher import costs, inflation, diplomatic friction with U.S.
Global TradeHeightened friction could accelerate de-dollarization; carve new trade blocsDisrupt energy markets; complicate trade finance and partnerships

🔭 Why it matters globally

  • Strategic alliance shifts: A key U.S. partner (India) is choosing energy security over alignment with Western sanctions regimes.

  • Trade fragmentation: Tariffs and secondary sanctions threaten to splinter the global trading system, with ripple effects across supply chains.

  • Currency evolution: Moves toward bilateral trade in rupees, rubles, and other non-dollar currencies signal changes in how energy trade may operate post-dollar dominance.

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