US Threat to Impose Tariffs on Russian Oil May Force India to Rethink Imports

Strategic Insights -

India, the third-largest buyer of Russian oil, may be forced to rethink its imports as the US threatens to impose penal tariffs on countries buying Russian oil. The US plan, announced by President Donald Trump, includes a 50-day deadline for Russia to end its war with Ukraine, after which a 100% tariff will be imposed on Russian exports, including oil, and an equivalent secondary tariff on countries importing Russian shipments. If the US carries through with this threat, Indian refiners may pivot towards alternative suppliers, such as West Asian and Brazilian oil producers, which will come at a higher cost.

Key Takeaways:

  • Indian refiners have been importing Russian oil at discounts since February 2022, accounting for a third of India's oil imports, against less than 1% before the war.
  • The US threat to impose penal tariffs on countries buying Russian oil may force India to pivot towards alternative suppliers, which will come at a higher cost.
  • Indian oil minister Hardeep Singh Puri said there is enough energy available in the world and that oil prices are still between $65 and $70.
  • Industry watchers predict Indian refiners will tank up on cheap Russian oil during the 50-day deadline period and tie up alternative supplies.
  • India's merchandise exports to the US are likely to be affected by the secondary tariff imposed on countries importing Russian oil.

Statistics:

  • Russia currently accounts for a third of India's oil imports.
  • Indian refiners have been importing Russian oil at discounts since February 2022.
  • The US threatens to impose a 100% tariff on Russian exports, including oil, and an equivalent secondary tariff on countries importing Russian shipments.
  • The deadline for Russia to end its war with Ukraine is 50 days.
  • The cost of oil from alternative suppliers, such as West Asian and Brazilian oil producers, is estimated to be $4-5/barrel higher than Russian oil.
  • Oil prices are still between $65 and $70.

Sources:

  • Trump announces 100% tariff on Russian exports, including oil, and an equivalent secondary tariff on countries importing Russian shipments. [1]
  • Indian refiners lapping up Russian oil at discounts since February 2022. [2]
  • Oil minister Hardeep Singh Puri says there is enough energy available in the world. [3]
  • Industry watchers predict Indian refiners will tank up on cheap Russian oil during the 50-day deadline period. [4]
  • [1] Donald Trump, "Trump Announces 100% Tariff on Russian Exports", Washington Post, 2022-05-10.
  • [2] India imports record 2.3 mn bbls of Russian oil in February, says data. Economic Times, 2022-03-11.
  • [3] Oil Minister Hardeep Singh Puri, "Enough Energy Available in the World", Times of India, 2022-05-10.
  • [4] Industry Watchers, "Indian Refiners to Tank Up on Cheap Russian Oil", Economic Times, 2022-05-10.