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 international crude costs to spike, business sources advised CNBC.
Trump has accused India of “fueling” Russia’s conflict machine and stated the nation is “directly or indirectly importing Russian Federation oil.” Because of this, the U.S. imposed an additional 25% tariff on India, bringing complete levies in opposition to the key U.S. buying and selling associate to 50%.
India was as soon as encouraged to purchase Russian crude by america, and, not like LNG, Russian crude is not sanctioned, however traded beneath a value cap to restrict Moscow’s skill to revenue from its sale. India is without doubt one of the greatest consumers of Russian oil, in response to knowledge 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 should be “confusion,” Bob McNally, president of Rapidan Power Group and former White Home power advisor to former President George W. Bush, advised 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 advised 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 had been to cease shopping for Russian oil, a plan should 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 possible would attempt to discover various barrels from the Center East, as they used to depend on these barrels till 2022. Seemingly different consumers wouldn’t step in,” Giovanni Staunovo, a commodity analyst at UBS advised CNBC.
Russia is the third largest international crude producer, after the U.S. and Saudi Arabia. Moscow produces almost 11 million barrels of oil per day, in response to the U.S. Energy Information Administration. India’s Russian crude oil imports was 38% in each 2023 and 2024 and is at the moment 36% in 2025. Whole Indian crude imports are rising 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 had been to cease shopping for Russian crude oil right this moment, international crude costs may soar to over $200 per barrel for all international shoppers,” an business supply advised CNBC.
“Very close to time period, there’s a threat of a pop in brent costs to $80 or above,” McNally advised CNBC, signaling that the influence of further tariffs and a possible minimize to Russian oil imports can be considerably much less catastrophic.
U-turn
“After they did not need India to purchase one thing, they advised 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 now 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 advised CNBC’s Dan Murphy: “The value of oil would have gone as much as 130 {dollars} a barrel. That was a state of affairs during which we had been suggested, together with by our pals in america, to please purchase Russian oil, however inside the value cap.”
Sara Vakhshouri, the founder and president of SVB Power Worldwide, advised 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 carefully 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 beneath a value cap by the European Union since Moscow’s 2022 invasion of Ukraine. That value cap, set at $60 per barrel, permits Russia to export its crude, however at a value decrease than the commodity usually trades. The intention is to restrict Moscow’s income from oil exports, constricting the nation’s skill to finance its conflict in Ukraine. The coverage was carried out by G7 nations, hoping to take care of a secure provide of Russian oil available on the market.
Sources inside the Indian petroleum sector advised 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 beneath US secondary sanctions, Europe nonetheless buys fuel from Russia through pipelines and LNG. Just some Russian LNG export terminals (e.g. Artic LNG 2) are beneath sanctions, however not all LNG exports,” UBS’ Staunovo, advised CNBC.
In 2021, Russia was the most important 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 knowledge 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 based mostly 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, totally 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 value cap aimed “to scale back the revenues of the Russian authorities by permitting Russian oil to stay within the markets and to stop an oil value spike,” Staunovo added, noting that these selections had 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 a further 25% tariff on India on Wednesday, he advised CNBC that India “hasn’t been buying and selling associate.”
It implies that U.S. ties with New Delhi, a key safety and protection associate, may very well 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. help.