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Tariffs

India Faces Geopolitical Dilemma as US Imposes Tariffs Over Russian Oil Imports

Strategic Insights

— 2 min read

India buys about 90 per cent of its crude oil from overseas, with 2mn barrels a day coming from Russia. US President Donald Trump has imposed an additional 25 per cent tariff on India, citing its purchases of Russian oil. Indian Prime Minister Narendra Modi faces a difficult set of options, including swallowing the US tariffs, shifting from Russian oil to other suppliers, or trying to find a compromise with Trump.

Key Takeaways:

  • India imports about 5mn barrels of oil a day, with 2mn coming from Russia, making it the biggest market for Russian seaborne crude since 2023.
  • The distance between the US and India, compared to routes from Russia and the Middle East, and the technical challenge for Indian refineries of switching to different crude have limited the option of boosting US energy exports to India.
  • Analysts doubt India will make a "wholehearted effort to wean itself off Russian oil" because Modi would be reluctant to upend cordial relations with Moscow or appear to capitulate to Trump.
  • Indian refineries operated by the book, and Russian oil has never been the direct subject of sanctions, unlike that of Iran and Venezuela.
  • India's intake of US crude has grown to 225,000 b/d since May, nearly doubling, with room for adding a further 100,000 b/d in the near term.
  • Shifting from Russian oil to other suppliers would bring "a significant tightness into the market", potentially pushing the price of crude to more than $80 a barrel.
  • India exports about 1.4mn tonnes of refined oil per day, some of it containing the cheaper Russian crude, to destinations including Europe.
  • Indian purchases of Russian crude have already begun to fall, with Indian refiners' July volumes dropping more than 500,000 b/d from June to a five-month low of 1.58mn b/d.

Statistics:

  • India imports about 5mn barrels of oil a day, with 2mn coming from Russia.
  • Indian refineries' July volumes of Russian oil dropped more than 500,000 b/d from June to a five-month low of 1.58mn b/d.
  • India's intake of US crude has grown to 225,000 b/d since May, nearly doubling.
  • Room for adding a further 100,000 b/d of US crude in the near term.
  • A potential price increase of crude to more than $80 a barrel if India suddenly turned to other suppliers.
  • India exports about 1.4mn tonnes of refined oil per day, some of it containing the cheaper Russian crude.

Sources:

  • Kpler
  • Sumit Ritolia, lead Kpler analyst
  • Shilan Shah, Capital Economics
  • Premasish Das, head of analysis of oil markets in Asia at S&P Global Commodity Insights
  • DLN Sastri, director of oil refining and marketing at the Federation of Indian Petroleum Industry
  • Dhiraj Singh/Bloomberg
  • Tom Wilson, London correspondent

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