Technicians stand subsequent to an oil rig which is manufactured by Megha Engineering and Infrastructures Restricted (MEIL) at an Oil and Pure Gasoline Corp (ONGC) plant, throughout a media tour of the plant in Dhamasna village within the western state of Gujarat, India, August 26, 2021.
Amit Dave | Reuters
U.S. President Donald Trump added additional stress to India on Wednesday by bumping up tariffs to 50% — however requires India to right away cease shopping for Russian oil may trigger world crude costs to spike, business sources instructed CNBC.
Trump has accused India of “fueling” Russia’s conflict machine and stated the nation is “straight or not directly importing Russian Federation oil.” Because of this, the U.S. imposed an extra 25% tariff on India, bringing complete levies in opposition to the foremost U.S. buying and selling accomplice to 50%.
India was as soon as inspired to purchase Russian crude by the USA, and, not like LNG, Russian crude is not sanctioned, however traded below a worth cap to restrict Moscow’s capacity to revenue from its sale. India is likely one of the greatest patrons of Russian oil, in response to information from Kpler which exhibits complete Russian crude exports quantity to round 3.35 million barrels per day, of which India takes about 1.7 million and China 1.1 million.
In New Delhi, there have to be “confusion,” Bob McNally, president of Rapidan Power Group and former White Home power advisor to former President George W. Bush, instructed CNBC.
“Joe Biden went to India after the invasion of Ukraine and begged them to take Russian oil, the Indians hardly imported any Russian oil, they usually begged India, ‘please take the oil,’ in order that crude costs would stay low, they usually did. Now we’re flipping round and saying, ‘why are you taking all this oil,'” McNally added.
Trade sources within the Indian petroleum sector instructed CNBC the nation has abided by all worldwide sanctions, and that India is doing the worldwide economic system a “favor” by shopping for Russian oil which in flip, stabilizes costs. The sources didn’t want to be recognized because of the sensitivity of the matter.
India has argued that it if it have been to cease shopping for Russian oil, a plan have to be put in place to stabilize power markets, together with a contingency to fill the shortfall in provide if Russian barrels are taken off the market.
“In case India decides to chop Russian oil imports, the refineries doubtless would attempt to discover different barrels from the Center East, as they used to depend on these barrels till 2022. Seemingly different patrons wouldn’t step in,” Giovanni Staunovo, a commodity analyst at UBS instructed CNBC.
Russia is the third largest world crude producer, after the U.S. and Saudi Arabia. Moscow produces practically 11 million barrels of oil per day, in response to the U.S. Power Info Administration. India’s Russian crude oil imports was 38% in each 2023 and 2024 and is at present 36% in 2025. Whole Indian crude imports are growing annually with rising demand, and consequently, imports of Russian crude in 2025 are their strongest annual tempo but.
If this provide was to be faraway from the market, costs would skyrocket, in response to the business sources within the Indian petroleum sector. “If India have been to cease shopping for Russian crude oil as we speak, world crude costs may soar to over $200 per barrel for all world shoppers,” an business supply instructed CNBC.
“Very close to time period, there’s a threat of a pop in brent costs to $80 or above,” McNally instructed CNBC, signaling that the impression of extra tariffs and a possible lower to Russian oil imports could be considerably much less catastrophic.
U-turn
“Once they did not need India to purchase one thing, they instructed us,” an business supply within the Indian petroleum sector stated. This was certainly the case when India was as soon as buying Iranian crude, which New Delhi not buys and is now sanctioned as Washington doubles down on its most stress marketing campaign in opposition to the Islamic Republic.
Hardeep Singh Puri, India’s petroleum minister, final month instructed CNBC’s Dan Murphy: “The worth of oil would have gone as much as 130 {dollars} a barrel. That was a scenario through which we have been suggested, together with by our pals in the USA, to please purchase Russian oil, however throughout the worth cap.”
Sara Vakhshouri, the founder and president of SVB Power Worldwide, instructed CNBC the hefty duties introduced by Trump are a “negotiation tactic,” geared toward “reclaiming misplaced U.S. oil market share in India and oil export declines since 2022, and securing equal export of different commodity to India.”
“India has at all times coordinated intently on US oil coverage, together with sanctions on Iranian oil. On the identical time, for the Trump administration, power safety, affordability, and reliability are priorities” Vakhshouri added.
Russian crude has been positioned below a worth cap by the European Union since Moscow’s 2022 invasion of Ukraine. That worth cap, set at $60 per barrel, permits Russia to export its crude, however at a worth decrease than the commodity usually trades. The purpose is to restrict Moscow’s income from oil exports, constricting the nation’s capacity to finance its conflict in Ukraine. The coverage was applied by G7 nations, hoping to take care of a secure provide of Russian oil available on the market.
Sources throughout the Indian petroleum sector instructed CNBC “the value cap is a $1 to $2 distinction” and insists New Delhi is just not shopping for Russian crude at a serious low cost per barrel.
Even Russian LNG is just not “fully below US secondary sanctions, Europe nonetheless buys gasoline from Russia by way of pipelines and LNG. Just some Russian LNG export terminals (e.g. Artic LNG 2) are below sanctions, however not all LNG exports,” UBS’ Staunovo, instructed CNBC.
In 2021, Russia was the biggest provider of petroleum to the European Union. After the bloc’s ban on seaborne imports of Russian crude, the share of imports from Moscow fell from 29% to 2% within the 2025. The EU nonetheless imports 19% of its LNG from Russia, in response to information from the primary quarter of 2025 from Eurostat.
Russia is a member of OPEC plus, established alongside Saudi Arabia in 2016. The group works to stabilize oil costs, adjusting output primarily based on market fundamentals and tendencies in provide and demand. A bunch of eight producers simply moved days in the past to boost output in September, absolutely unwinding cuts and serving to calm fears of Russian provide considerations.
“Whereas OPEC+ international locations maintain spare capability to deal with provide disruptions, a full drop in Russian crude manufacturing/exports would see that spare capability fully dwindling. The Biden administration was conscious of this,” UBS’ Staunovo stated.
The Russian worth cap aimed “to scale back the revenues of the Russian authorities by permitting Russian oil to stay within the markets and to forestall an oil worth spike,” Staunovo added, noting that these selections have been made within the run as much as a presidential election within the U.S.
Now, after successful that very election, Trump means enterprise. Earlier than slapping an extra 25% tariff on India on Wednesday, he instructed CNBC that India “hasn’t been a superb buying and selling accomplice.”
It implies that U.S. ties with New Delhi, a key safety and protection accomplice, might be in danger. India responded sharply to Trump’s criticism on Wednesday, saying it was “unjustified and unreasonable” and that it purchased Russian oil with U.S. assist.
