Trade war: India's Russian oil imports set to rise; move comes after US slaps 50% tariff

NEW DELHI: India is set to increase its imports of Russian oil in September, dealers told Reuters, as President Donald Trump-led US government on Wednesday doubled tariffs on Indian exports to 50%, citing New Delhi's continued reliance Moscow's crude.Despite the pressure, Indian refiners are expected to raise purchases by 10-20% from August levels, or about 150,000–300,000 barrels per day, Reuters reported, citing preliminary trade data.Trump had first imposed 25% reciprocal tariffs on August 7, alongside similar measures on nearly 70 countries, but later raised the levy to 50% citing India’s continued purchases of Russian crude.Despite the squeeze, India’s government has signaled it is seeking diplomatic solutions while avoiding any sharp cut to oil imports.

India turns to cheaper Russian oil

India has emerged as one of the largest buyers of Russian crude since Western sanctions cut Moscow off from many markets after its 2022 invasion of Ukraine. This shift has helped Indian refiners secure cheaper supplies. By mid-2024, India was importing around 1.5-1.6 million barrels per day of Russian oil, meeting nearly 40% of its crude needs.Data from Vortexa shows imports averaged 1.5 million bpd in the first 20 days of August, unchanged from July but slightly below earlier peaksTraders noted Russia has more oil available for export in September due to refinery outages limiting its domestic fuel production.

“The tariffs are part of a broader trade discussion between India and the US , and given India’s increasing refinery runs amid discounted Russian barrels, we don’t see India scuppering its Russian imports in meaningful volumes,” BNP Paribas noted in a report. Reliance Industries and Nayara Energy, India’s two biggest buyers of Russian oil, have yet to comment on their September plans, the agency reported.The more favorable pricing makes Russian oil especially attractive to Indian refiners, even as global markets remain volatile.

What is New Delhi’s stand?

India is seeking dialogue to resolve the tariff standoff with Washington, even as Prime Minister Narendra Modi continues diplomatic outreach, including a meeting with Russian President Vladimir Putin, Reuters reported.US officials have accused New Delhi of “profiteering” from discounted Russian crude, but Indian officials counter that the West itself continues to buy Russian goods worth billions."The tariffs are part of a broader trade discussion between India and the US , and given India’s increasing domestic refinery runs amid discounted Russian barrels, we don’t see India scuppering its Russian imports in meaningful volumes," BNP Paribas said in a note.Trump had initially announced 25% tariffs on Indian goods from August 7, alongside similar duties on about 70 countries. He later doubled the rate to 50%, citing India’s Russian crude purchases, though allowing a 21-day window for talks. The higher tariff came into effect on August 27.

India likely to continue buying?

Over the past two years, India’s reliance on discounted Russian crude has come at the cost of more expensive supplies from OPEC, though the cartel’s share of Indian imports saw a modest rebound in 2024 after an eight-year decline.Russian exporters are now offering September-loading Urals crude at discounts of $2–$3 per barrel to benchmark dated Brent, wider than August’s $1.50 discount—the narrowest since 2022."Unless India issues a clear policy directive or trade economics shift significantly, Russian crude will likely remain a core part of its supply mix," Sumit Ritolia from Kpler told the agency.Brokerage CLSA also argued there is only a “limited chance” of India halting Russian imports unless a global ban is enforced.CLSA added that a sudden halt to India’s purchases could wipe about 1 million barrels per day from global supply, triggering a sharp short-term spike in prices to nearly $100 a barrel.

What if India stops buying Russian oil?

Analysts caution that if India were to significantly scale back its Russian crude imports, global oil supplies could shrink by nearly 1 million barrels per day, potentially driving prices close to $100 a barrel.Such a move would also hit Moscow hard, as India’s demand has become crucial for sustaining Russia’s export volumes and wartime revenues.

What traders say?

Market participants say the real impact of US tariffs and European sanctions may only become clear with cargoes scheduled to arrive in India in October, as those shipments are just beginning to trade. Meanwhile, the European Union has tightened enforcement of its oil price cap, complicating Russian sales further and potentially reshaping the flow of crude later this year.