India is facing a complex situation regarding its Russian crude oil imports following the imposition of additional tariffs by the United States. The decision by former US President Donald Trump to levy a 25% tariff on top of existing tariffs on goods imported from India, specifically targeting the nation's continued purchase of Russian oil, has placed New Delhi in a precarious position. This move is perceived as a penalty for India's continued trade with Russia, which the US alleges is "fuelling the war machine" in Ukraine.
The tariff, which takes effect 21 days after the executive order was issued, increases the total US tariffs on Indian goods to 50%, a figure exceeding those imposed on China and Pakistan. Trump had previously threatened tariffs of 100% unless a peace deal was signed by August 9th. The US administration has stated that India's imports of Russian crude undermine efforts to isolate Russia amid its ongoing conflict.
India's response has been firm, with a government spokesperson calling the US's targeting of India over Russian oil imports "unfair, unjustified, and unreasonable". New Delhi maintains that it, like other major economies, reserves the right to choose its trade partners and pursue economic cooperation that aligns with its national interests and economic security. Kremlin spokesman Dmitry Peskov echoed this sentiment, emphasizing the right of sovereign countries to independently determine their trade relationships.
The situation has forced Indian refiners to re-evaluate their reliance on Russian oil. While there has been no official directive, companies are considering diversifying their crude sources, potentially increasing imports from the US and the Middle East. This potential shift comes as discounts on Russian oil have diminished, and the impact of Western sanctions on Russian energy revenue is being assessed.
Indian Oil Corporation (IOC), the country's largest state-owned refiner, has already begun to increase its crude oil imports from the United States, Canada, and the Middle East. IOC recently secured 7 million barrels of crude for September delivery from these sources, including 4.5 million barrels from the US, 500,000 barrels from Canada, and 2 million barrels from Abu Dhabi in the UAE. This increased purchase volume is partly aimed at replacing Russian crude. Other refiners, including Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), have also reportedly halted Russian oil purchases.
India's long-term strategy involves diversifying its energy import sources to mitigate risks and enhance energy security. Russia remains a top supplier, followed by Iraq, Saudi Arabia, the UAE, and the USA. The government has also implemented measures to encourage the use of alternative fuels and increase ethanol blending in petrol. India has diversified its supply sources to around 40 countries and is also exploring new sources like shale gas and coal bed methane.
The European Union's ban on importing petroleum products made from Russian crude, effective January 2026, further complicates the situation for Indian refiners like Reliance Industries and Nayara Energy, who have been significant exporters of refined products to Europe.
To navigate these challenges, India has several options. It can reduce its dependence on Russian oil by reverting to traditional oil-importing routes, such as the Middle East, the US, Africa, and Latin America. Alternatively, India can identify alternative markets beyond the European Union for exporting refined oil products.
