U.S. President Donald Trump has asserted that the tariffs imposed on India for its imports of Russian oil have dealt a "big blow" to Moscow's economy. Trump, referring to India as potentially Russia's "largest or second largest oil buyer," claimed that these tariffs are significantly impacting Russia's economic stability.
Addressing a press conference at the White House, Trump stated that Russia's economy is struggling due to global pressures and the tariffs imposed by the United States on various countries. He suggested that these tariffs on India, specifically for purchasing Russian oil, have served as a major setback for Russia. Trump has imposed a 25% reciprocal tariff on India, along with an additional 25% levy on Russian oil purchases, resulting in total duties of 50%. These measures are designed to pressure India to reduce its reliance on Russian oil.
Trump is scheduled to meet with Russian President Vladimir Putin in Alaska on Friday, where he anticipates "constructive conversations". He also mentioned plans to engage with Ukrainian President Volodymyr Zelenskyy.
India's Response and Dependence on Russian Oil
India has criticized the U.S. and the European Union for what it perceives as selectively targeting its Russian oil imports while continuing their own trade with Russia. The Ministry of External Affairs has stated that the U.S. actions are unfair and has vowed to protect national interests.
India's imports of Russian oil have surged since the onset of the Ukraine war in 2022. By mid-2023, Russia was supplying over 35% of India's crude oil, making it the country's largest supplier. This reliance has allowed Indian companies to benefit from discounted Russian crude, resulting in billions of dollars in savings annually. Investments have also deepened economic ties between Indian firms and Russian oil production and refining sectors.
Impact on India and Potential Repercussions
Energy analytics firm Kpler has warned that while Indian refiners possess the technical capability to operate without Russian crude, a shift away would involve significant economic and strategic trade-offs. Russian oil currently constitutes approximately 38% of India's refinery feedstock, valued for its high diesel and jet fuel yields, competitive pricing, and reliable supply. A sudden shift could squeeze refining margins, alter product output, and increase annual crude import costs by billions of dollars.
Nobel laureate Abhijit Banerjee has advised India to reconsider importing inexpensive Russian oil following the Trump administration's imposition of the additional tariffs. He suggested that India should assess whether Russian oil imports are worth the cost and then negotiate with the U.S. to potentially remove the tariffs if India ceases importing Russian oil.
Alternatives and Challenges
Replacing Russian oil would not only elevate feedstock costs and freight charges but also misalign product yields, creating commercial challenges. Kpler estimates that replacing 1.8 million barrels per day of Russian crude with non-Russian crude could cost an additional $3–5 billion annually, considering that non-Russian crude costs approximately $5 more per barrel. In a stressed market scenario, these costs could surge to $7–11 billion, particularly if substitution relies on premium-priced supplies from the Gulf and Atlantic Basin.
Despite these challenges, India has been diversifying its oil sources. Minister of Petroleum and Natural Gas Hardeep Singh Puri noted that India sources oil from about 40 countries and that more supply is entering the market from Guyana, Brazil, and Canada.
The imposition of tariffs and the ongoing trade dispute have added urgency to the debate on India's crude sourcing strategy. The move could potentially impact around USD 27 billion of non-exempt exports to the US.
