By R. Suryamurthy
The most consequential question arising from Washington’s latest sanctions legislation is not whether the United States can impose a 100 percent tariff on countries buying Russian oil. It is whether India can continue to conduct an independent energy policy when access to its largest export market is increasingly being linked, directly or indirectly, to choices about where it buys crude.
That distinction matters. President Donald Trump’s signing of the Lindsey O. Graham Sanctioning Russia and Iran Act has given Washington the authority to impose tariffs of up to 100 percent on countries buying significant quantities of Russian energy, although the law does not itself impose such a tariff. India is among the countries potentially exposed. New Delhi has already told Washington that its energy security remains a priority and that it will continue to diversify supplies.
The timing could hardly be more awkward. India’s dependence on Russian crude is not a temporary aberration created by diplomatic affinity with Moscow; it is the product of an extraordinary restructuring of global energy markets after Russia’s invasion of Ukraine, when Western sanctions and the withdrawal of European buyers pushed Russian barrels towards Asian markets at discounted prices. Indian refiners took advantage of that market dislocation because the economics made sense.
By July, Russian crude accounted for 50.83 percent of India’s oil imports, or about 2.47 million barrels per day, according to trade-source data reported by Reuters. The share was not evidence of a sudden geopolitical realignment so much as evidence of how profoundly price, availability and refinery economics can reshape energy trade.
That is precisely why Washington’s tariff threat creates a problem that cannot be solved by simply telling Indian refiners to buy somewhere else. Oil is fungible in theory. Refinery economics are not.
Replacing Russian barrels with Saudi, Iraqi, Emirati, American, Brazilian or other crude is technically possible, but the economics depend on crude quality, refinery configuration, freight, insurance, payment arrangements and the relative price of competing grades. More importantly, India is not the only buyer in the market. If two of the world’s largest crude importers simultaneously seek to replace Russian supplies, the resulting demand shock could push up the price of alternative barrels.
The irony is difficult to miss: a policy intended to reduce Russia’s oil revenues could, under some circumstances, raise global oil prices sufficiently to increase the earnings of other producers while imposing higher import costs on countries such as India.
That is not an argument for shielding Russia from sanctions. It is an argument for recognising that sanctions imposed on a major commodity market do not stop at the border of the country being sanctioned. For India, the consequences would move rapidly from the oil terminal to the macroeconomy.
India already imports more than 90 percent of its crude requirements. A substantial increase in the price of replacement oil would enlarge the import bill, widen the current-account deficit and increase demand for dollars. The resulting pressure on the rupee would make imported crude even more expensive in domestic currency, creating a familiar but uncomfortable chain: higher oil prices, a larger dollar requirement, currency pressure, imported inflation and tighter monetary-policy constraints.
The current-account risk is not theoretical. Crisil has estimated that India’s current-account deficit could widen to 1.5 percent of GDP this fiscal year from 0.6 percent last year, with elevated oil and commodity prices among the principal pressures.
And then comes the second half of the problem. The United States is not merely another market for India. It is a crucial destination for Indian goods, including pharmaceuticals, engineering products, electronics, textiles, jewellery, chemicals and machinery. Indian goods exports to the United States reached $42.79 billion in April-August 2026, according to the data in the GTRI material.
India could therefore face the economic equivalent of being squeezed from both ends: more expensive energy entering the economy and more expensive access to a major export market. That possibility gives the Russian-oil issue a significance far beyond the immediate question of how many barrels Indian refiners purchase from Russia. It also changes the character of the India-U.S. trade negotiation.
GTRI founder Ajay Srivastava argues that Washington could use the threat of punitive tariffs to pressure India to reduce Russian oil purchases and accept broader trade concessions. That is an interpretation of the strategic intent behind the measure, rather than an established statement of U.S. policy. But it identifies a genuine negotiating problem: if market access becomes contingent on foreign-policy choices outside the conventional scope of trade negotiations, the boundaries of an economic partnership become considerably less predictable.
This is where New Delhi needs to distinguish between diversification and capitulation.
There is nothing strategically imprudent about reducing excessive dependence on any single supplier. In fact, the Russian-oil episode itself demonstrates the value of diversification. When Middle Eastern supplies were disrupted, Russian barrels provided Indian refiners with an alternative source at a time when replacing those supplies rapidly would have been difficult.
India should therefore continue expanding its supplier base. But diversification is a very different proposition from allowing an external tariff threat to determine the composition of India’s energy basket.
The distinction becomes even more important because the United States itself has an interest in stable energy markets. Jamie Dimon, chairman and CEO of JPMorgan Chase, has warned Washington against punishing India in a manner that could disrupt global oil markets, arguing that refiners cannot simply switch supplies without consequences.
The argument exposes an uncomfortable contradiction in the emerging sanctions strategy. Washington wants to reduce Russian energy revenues without creating a global oil shock; India wants to protect its energy security without jeopardising access to the American market; refiners want commercially viable crude; and global consumers want affordable fuel.
Those objectives do not naturally converge. China makes the equation still more complicated. The extension of the U.S.-China trade truce to January 10, 2027, provides Washington and Beijing additional room to negotiate their broader economic relationship. But it should not be interpreted as proof that China has been legally exempted from the Russian-oil provisions. The new U.S. law gives the administration considerable discretion, and China remains among the major Russian-energy buyers potentially implicated by the legislation.
For India, the lesson is therefore not that it should choose between Washington and Moscow. The lesson is that excessive dependence on any one external relationship — whether for energy, technology, exports, defence or finance — eventually reduces strategic room for manoeuvre.
India’s answer cannot be autarky. Nor can it be decoupling from the United States, Russia or China. The more practical strategy is to make dependence manageable by multiplying alternatives. That means more crude suppliers, more diversified export markets, deeper domestic refining and manufacturing capabilities, stronger trade relationships with Europe, West Asia and other emerging markets, and a policy framework capable of absorbing external tariff shocks without allowing them to destabilise the wider economy.
The temptation in New Delhi may be to treat the 100 percent tariff threat as principally a diplomatic confrontation. That would be too narrow. It is an economic stress test. The real vulnerability is not that India buys Russian oil. Nor is it that Washington has acquired the legal authority to impose a punitive tariff. The vulnerability lies in the interaction between the two: India’s dependence on imported energy, its growing reliance on the U.S. market, volatile global commodity prices and an increasingly transactional international trading system.
India cannot control Washington’s tariff decisions, Moscow’s oil strategy or the next disruption in the Gulf. It can, however, control the degree to which any one of them can destabilise its economy. That is ultimately what strategic autonomy should mean in an era of weaponised trade: not the illusion of independence from global markets, but the ability to absorb pressure from them without surrendering the policy choices that matter most. (IPA Service)
