US secondary tariff threat may sour India’s love affair with Russian oil

NEW DELHI: The US threat to slap penal tariffs on countries buying Russian oil may sour India’s love affair with those barrels as the benefit of discounts would be far outweighed by the cost to its merchandise exports to America at a time both countries are discussing a trade deal.President Donald Trump on Tuesday announced 100% tariff on Russian exports, including oil, and an equivalent secondary tariff on countries importing Russian shipments to be imposed after a 50-day deadline for Moscow to end the war with Ukraine.The fine print of Trump’s plan and how it will pan out remain sketchy at this point. But the oil market took the announcement calmly as the long deadline dispelled worries over immediate supply disruption, leaving benchmark Brent crude below $70/barrel.Indian refiners have been lapping up Russian oil at discounts since February 2022 as others shunned those barrels due to Western sanctions on Moscow imposed after its invasion of Ukraine. Russia currently accounts for a third of India’s oil imports, against less than 1% before the war.Things may be different this time if Trump carries through with his threat. This is because, as reports in western media said, secondary tariff will apply to the country and affect all merchandise exports, unlike in the case where only the entities doing business with sanctioned Russian entities are penalised.

If that is the case, Indian refiners will have no other way than pivot towards its traditional West Asian and suppliers and new players such as Brazil to make up for lost Russian supplies. These new barrels will, however, come at a higher cost — ranging between $4-5/barrel.Arranging alternative supplies will not be difficult as “there is enough enrgy available in the world,” according to oil minister Hardeep Singh Puri. “Oil prices are still between $65 and $70,” he said on the sidelines of a seminar on education on Tuesday. The government had approached two major West Asian oil producers to examine additional supplies through their alternative evacuation routes if the fear of disruption in shipping through the Strait of Hormuz came true during the recent Israel-Iran war.Industry watchers said Indian refiners are likely to tank up on cheap Russian oil during the deadline period the way they had done during the srael-Iran conflict while tying up alternative supplies.