By K Raveendran
Donald Trump now possesses one of the most formidable economic weapons available to an American president against countries sustaining Russia’s energy revenues. Yet, the decision on how aggressively to wield it is complicated by a contradiction that Washington cannot easily escape: squeezing Russian oil out of the international market could also push crude prices sharply higher at precisely the moment when the United States is struggling with the inflationary consequences of an expanding Middle East conflict.
The Russia sanctions legislation signed by Trump has raised the stakes considerably. It empowers the administration to impose tariffs of up to 100 per cent on goods from the biggest purchasers of Russian oil and gas and gives the White House substantial discretion over implementation, including waivers in the American national interest. India and China are consequently exposed, but the legislation should not be read as mechanically imposing an immediate uniform 100 per cent tariff on every country buying Russian crude.
That distinction matters because Trump has gained leverage without losing room for manoeuvre. The law strengthens his ability to threaten secondary economic punishment while leaving him enough flexibility to consider the consequences for American consumers, trade relationships and energy markets.
India is at the centre of that calculation. New Delhi has become one of the largest destinations for Russian crude since Western restrictions transformed global petroleum trading after the invasion of Ukraine. Although Indian purchases have fallen from their July peak and September arrivals appear to be running below August levels, Russia remains an important supplier. That trade is not merely an India-Russia issue. It is embedded in the mechanism through which the international oil market has adjusted to sanctions.
The paradox of Western policy towards Russian oil has always been that Moscow’s revenues are supposed to be constrained without removing so much Russian crude from circulation that prices become politically intolerable elsewhere. India, China and other buyers have helped keep Russian barrels moving, often at discounts, preventing a potentially much larger supply shock. The importance of that buffer has grown dramatically because the Middle East is no longer providing a comfortable background against which Washington can tighten sanctions on Moscow.
Brent crude is trading above $100 a barrel as disruptions associated with the US-Iran conflict, attacks on Saudi energy infrastructure and continuing uncertainty over shipping through the Strait of Hormuz unsettle markets. American diesel prices have also risen sharply. Every additional threat to internationally traded crude therefore carries consequences far beyond Russia. Trump consequently faces two objectives that do not sit comfortably together. He wants to reduce the petroleum income financing Russia’s war in Ukraine. He also wants affordable energy, lower inflation and an American economy that does not enter the congressional midterm campaign burdened by another surge in fuel prices. Removing substantial Russian volumes from the market could advance the first objective while damaging the second.
India understands this vulnerability. New Delhi’s response has been to frame Russian crude purchases not as geopolitical alignment with Moscow but as an energy-security decision dictated by the requirements of a country dependent on imports for the overwhelming majority of its crude consumption. New Delhi has repeatedly indicated that availability, price and security of supply will determine sourcing decisions.
There is a certain symmetry in that argument because national security and national economic interest are concepts the Trump administration itself invokes repeatedly when defending tariffs, industrial policy and restrictions on foreign trade.
Washington can reject India’s reasoning, but it cannot easily dismiss the underlying economics. If Indian refiners were forced abruptly to abandon Russian crude, they would compete more aggressively for barrels from the Gulf, Africa, Latin America and the United States. China might absorb some displaced Russian supply, but Moscow could also be forced to reduce production if buyers became insufficient or sanctions made transportation and financing prohibitively difficult. Either outcome would reshuffle an already stressed petroleum market.
The bilateral trade relationship introduces another constraint. The United States and India announced an interim trade framework earlier this year, accompanied by tariff adjustments and commitments intended to move the relationship towards a broader bilateral trade agreement. The latest sanctions law therefore arrives not before trade engagement has begun, but while Washington and New Delhi are still attempting to deepen and stabilise it.
A punitive tariff escalation linked to Russian oil could place those negotiations under severe strain. The United States is one of India’s largest export markets, while Washington has been seeking greater Indian market access for American goods and stronger strategic economic cooperation. Turning Russian crude into the dominant issue in the relationship risks forcing both governments into politically difficult positions.
There is also the China problem. Any sanctions architecture that effectively shifts Russian barrels from India towards China could produce a strategically awkward result for Washington. America would have damaged trade relations with India while potentially increasing Beijing’s leverage over Moscow as one of the remaining large buyers of discounted Russian energy.
That does not mean the sanctions threat is hollow. Trump can use the legislation to demand reductions in Russian purchases, negotiate exemptions, target particular transactions or press India and others to diversify more rapidly. The power of the law may lie as much in the negotiations it triggers as in tariffs ultimately collected.
India, meanwhile, has already diversified some of its crude sourcing and its Russian purchases have declined from exceptional mid-year levels. That provides diplomatic room. A gradual reduction can be presented in Washington as evidence of pressure working and in New Delhi as a commercially driven adjustment rather than capitulation. The more dangerous option would be attempting to force the Russian supply system into abrupt contraction while Middle Eastern energy routes remain vulnerable.
Trump therefore has a compelling reason to enforce the new law, but also a compelling reason not to enforce it indiscriminately. Russian petroleum revenue remains a legitimate target of American pressure. Yet oil is a globally traded commodity, and sanctions powerful enough to hurt Moscow can also raise the price paid by motorists in Michigan, manufacturers in the Midwest and households across the United States.
That domestic connection may ultimately define Washington’s approach. The White House can afford to threaten buyers of Russian crude far more easily than it can afford another uncontrolled surge in the price of oil. (IPA Service)
