Trump's tariffs for India spoil Modi's calculations on Russian oil: Bloomberg clarified the situation
Kyiv • UNN
The US is doubling tariffs on Indian goods as punishment for purchases of Russian oil. This creates a dilemma for India, which has long-standing relations with Moscow.
The US decision to double tariffs on goods from India as punishment for ongoing purchases of Russian oil puts the third largest oil consumer in a difficult position and plunges its refineries into chaos, but this step is unlikely to prompt a radical rethinking of the situation in New Delhi, Bloomberg reports, writes UNN.
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For Indian Prime Minister Narendra Modi, the publication writes, this is a dilemma that has drawn attention to the uncomfortably large oil import bill, as well as the danger of walking a geopolitical tightrope in an era of exceptional volatility.
If New Delhi succumbs to this threat, the publication notes, it could jeopardize long-standing relations with Moscow that extend beyond energy, and lose a strategic advantage that provides vital fiscal space. If Modi allows refiners to continue purchases, as his defiant response and domestic pressure demand, he will instead cause a direct blow to the economy and spoil relations with the country's largest trading partner, risking much more than he could gain, the publication notes.
According to the rating agency ICRA, India saved a modest $3.8 billion in the year ending in March on oil purchases, as discounts on Russian oil decreased. However, in 2024, India exported goods worth about $87 billion to the US.
A well-supplied oil market, as well as less attractive discounts on Moscow's flagship Urals oil, mean that in theory Modi has the opportunity to completely abandon Russian oil, reducing imports that have sharply increased since 2022. However, in practice, everything may turn out to be completely different, as his main opponent and party members unanimously criticize US policy, fueling nationalist sentiments, the publication writes.
"It is very, very unlikely that India's oil imports from Russia will come to naught," said Vandana Hari, founder of the consulting company Vanda Insights. "Everyone understands that Trump's goal is to put pressure on Putin, but doing it with India's shoulder to the wheel is not welcomed in New Delhi."
US President Donald Trump, who seeks to reduce the US trade deficit with India and at the same time succeed in negotiations with the Kremlin leader Vladimir Putin on ending the war in Ukraine, demanded that India stop "fueling the war machine" with discounted Russian barrels. Earlier this week, he threatened to impose punitive tariffs beyond the planned 25% that will take effect later this week. Washington confirmed that an additional 25% will be added within 21 days.
In the absence of official guidance, Indian refinery executives expect an increase in purchases from the US as negotiations continue, but have also expressed caution. State refiners, who typically purchase Russian oil on spot contracts, are already refraining from participating, sources directly familiar with their purchasing plans report.
Refining companies such as Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. entered the spot market last week to buy various grades of oil from alternative suppliers, including the US, Nigeria, and the UAE, in search of prompt delivery cargoes.
As for long-term supplies, Asian traders expect Indian refiners to turn to Middle Eastern producers such as Saudi Arabia and Iraq. Since annual contracts are usually concluded closer to the end of the Indian financial year, which ends in March, buyers will likely be able to seek small additional volume adjustments from companies like Saudi Arabian Oil Co., known as Aramco.
However, in the absence of full-scale sanctions on Russian oil, no one in the industry has yet announced any official or large-scale changes, the publication notes.
"The economic cost of switching from Russian suppliers is not actually that great," said Shilan Shah of Capital Economics. "This decision is more political than economic. India does not want to be seen as giving in to Trump's demands. India and Russia have quite long-standing trade relations, which I think India would be interested in maintaining."
Assuming that the full tariff is indeed introduced, the publication writes, the long-term headache here could be for Russian producers, who will have to find other buyers for the approximately 1.8 million barrels per day purchased by India. China has shown a willingness to accept sanctioned oil, but has also long demonstrated its desire to maintain diversified supplies to ensure energy security. It is not eager to depend on Russian oil, however cheap it may be, the publication points out.
Nevertheless, China may buy enough oil to at least soften the blow to global oil markets, as India scales back its operations, leaving no other major buyers capable of filling the resulting deficit, the publication writes.
"China will be very, very careful about absorbing all the Russian oil that is being diverted from India," said Hari of Vanda Insights. "The oil will likely be offered at deep discounts. But if China absorbs a significant volume, guess where Trump's gaze will turn next?"
Trump announced possible new tariffs against China07.08.25, 02:14 • 15120 views