US Tariff Threat Over Russian Oil: India May Stay Calm

A revised bill introduced by a bipartisan group of US senators, proposing 100% tariffs on five countries, including India and China, for continuing to purchase Russian oil, may not be a major concern for India. This is not the first attempt by the US to penalize countries purchasing Russian oil; last year, Washington imposed an additional 25% tariff on India, which was later reversed.

The bill contains a provision allowing US President Donald Trump to waive the sanctions if he determines it is in American national interest. The legislation excludes 15 European countries that continue to import Russian gas, citing that Russian supplies account for a small share of their overall gas requirements and they are taking measures to reduce dependence.

According to Sumit Ritolia, an analyst at Kpler, Russian crude has served as a stabilizing factor for the global oil market. If 100% tariffs were implemented to materially reduce purchases of Russian crude, the market would face the challenge of finding replacement barrels, which would be difficult without a sharp increase in oil prices given limited spare production capacity and alternative supplies.

For India, Russian crude has become a crucial safeguard for energy security, especially following disruptions in the Strait of Hormuz. Supplies from Russia have enabled Indian refiners to maintain high utilization rates and avoid supply disruptions. India's imports from Russia increased to around 2.6 million barrels per day in June, accounting for over 50% of its total crude imports. Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), suggests India has little reason for concern, as the original bill remained in the Senate for over 15 months without action, indicating limited congressional support for such broad tariff powers.