US tariff threats over Russian oil could force India to balance cheaper energy supplies against access to the crucial US export market.
Reducing Russian oil imports would require costly diversification, potentially increasing freight costs, crude prices, inflation and India’s current-account burden.
India’s middle path should involve gradually diversifying energy sources while seeking exemptions and preserving strategic autonomy and the broader India-US relationship.
President Trump’s decision to sign the Lindsey O. Graham Sanctioning Russia and Iran Act, empowering himself to impose tariffs of up to 100% on countries that continue to buy Russian oil, marks a turning point in U.S.-India relations. The legislation significantly expands the President’s tariff powers and converts what was already a difficult U.S. policy into an emerging strategic dilemma for India.
Responding to this strong-arm tactic requires weighing the current need for lower-cost Russian energy against the future cost of potentially losing access to the US market, a key destination for Indian exports. If the US forces India to adopt a course of action beyond what its strategic autonomy dictates, India could consider gradually restructuring an energy supply chain that has become heavily dependent on Russia.
Russia accounted for around 30% of India’s crude imports in FY2026 and was an even more important supplier than some others that faced disruptions.
India’s Energy Security Dilemma
Russia remains among the world’s largest oil producers: third in petroleum and other liquids production in 2025, according to the U.S. Energy Information Administration. Avoiding supplies from Moscow could take India back towards suppliers in West Asia, including Saudi Arabia, Iraq and the UAE.
These countries can increase supplies, although the cost and availability of particular grades of crude would matter. Heavy crude from some Gulf suppliers would not necessarily substitute for every Russian grade, while Russian Urals has offered Indian refiners significant price advantages at various points since 2022.
Further diversification would take Indian oil companies towards sweet crude from West Africa, Latin America and the United States. The longer shipping routes and associated freight costs from the Western Hemisphere could add to the burden on Indian refiners and, ultimately, consumers.
India has already been diversifying its sources and now imports from a much wider range of countries, but replacing Russian volumes quickly would be a challenging proposition.
The important question is: is taking a position in favour of continued Russian supplies worth India’s political and economic risk? Since the Ukraine war began in 2022, discounted Russian crude has provided substantial savings for India and helped shield the economy from some of the price shocks that followed the disruption of global energy markets. India’s gains from discounted Russian oil reached $17 billion at one point.
Any move away from Russian oil under pressure from Washington would call India’s strategic autonomy into question. Nevertheless, the economic balance is also overwhelming.
The US remains India’s single largest export market. A 100% tariff on Indian goods, if actually imposed, would severely affect the competitiveness of many Indian exports and could have consequences for employment and investment.
However, it is important to distinguish between goods and services: IT services are not directly subject to a conventional import tariff in the same way as physical goods, although the Indian IT sector could be affected indirectly through weaker US demand. Pharmaceuticals, textiles, engineering goods, electronics and other merchandise exports would face more direct exposure depending on the specific tariff measures.
The Cost Of Diversification
The US threat has an inbuilt contradiction. It seeks to squeeze Russian oil out of international markets, but Russian crude cannot simply disappear without consequences for the global energy supply chain. If major Russian oil importers such as India and China suddenly reduced purchases sharply, global supply could tighten.
Alternative suppliers have some spare capacity, but replacing large volumes quickly would put pressure on prices. When global energy markets are already strained, the irony is that forcing India away from Russian oil could raise international oil prices, leaving India to pay considerably more for non-Russian supplies. That would increase the current account burden and add to inflationary pressures.
Trump has been empowered by this Act, but if he imposes 100% tariffs on Indian goods, this could deliver a severe blow to the India-U.S. bilateral trade negotiations already hanging by a thread. Retaliation from India would become a serious possibility.
Reciprocal tariffs on US agricultural, industrial, and technology exports could have a trade impact, but the economic cleavage could spill into national security and foreign policy cooperation. Decades of bipartisan U.S. efforts to build strategic approaches through various frameworks, including the Quad, could suffer a trust deficit.
India could consequently look more actively towards alternative arrangements, including BRICS, to hedge against economic leverage. This is a weak argument, but the US may leave India no option but to adopt it.
Basically, such a high-stakes gamble by the U.S. shows how difficult it has become to maintain consistency in its policy towards India. The noise emanating from Washington is often rhetorical and hectoring.
What the US Ambassador in India presents is a much rosier picture, but he is almost always fighting a rearguard battle against the policy turbulence emanating from Washington. The US would eventually need to understand the limitations of economic coercion against its partners.
This legislation empowers the President to impose aggressive tariffs while retaining executive flexibility to waive or suspend measures in the national interest. This flexibility may become particularly important in dealing with China and other major buyers of Russian energy. A total rupture would benefit neither the U.S. nor India, nor indeed China.
The US would need to understand that an economic cleavage with a strategic partner has consequences far beyond trade. That argument does not seem always to hold in Washington, where the State Department’s hand often seems weaker than those of other departments and the presidency.
Preserving India’s Strategic Autonomy
India needs the middle path: a slow recalibration of its import sources, a search for energy-security exemptions and, as on other matters, perhaps a patient diplomatic effort to preserve both options.
The immediate objective should not be to abandon Russian oil overnight, nor to allow energy dependence to become a permanent vulnerability. It should be to widen India’s choices.
It is evident, however, that US policy towards India does not always appear to prioritise the broader strategic relationship and keeps putting hurdles in the way, forcing India to expend diplomatic capital overcoming obstacles created by the US itself.
Preserving access to cost-effective energy and access to the US market are both important for India’s economic development in the modern world. Trade and energy security cannot be separated, even though their strategic imperatives may be viewed more flexibly in Washington than in Asia.
Views expressed are personal.
