Geopolitical Report (Special)
US President Donald Trump said on Monday he would raise tariffs on India "substantially" for continuing to buy Russian oil, as Indian leaders resisted US pressure amid a rapid deterioration in relations between Washington and New Delhi. Trump wrote on social media: "India not only buys massive amounts of Russian oil, but sells a large portion of that oil on the open market for big profits. "They don't care how many people are being killed in Ukraine by the Russian war machine.
Although India is not a direct buyer and seller of Russian crude oil, the country's refineries buy Russian crude oil at relatively low prices due to Western pressure, and some refineries, including Reliance and Nayara, have exported derivative products such as diesel and jet fuel to the global market at market prices, boosting their profits.
Trump did not specify the amount of tariffs to be imposed on Indian exports to the US. Last week, he said he would impose 25 percent tariffs on Indian goods starting August 8, a blow to trade negotiations between New Delhi and Washington. Trump also confirmed that he would impose an additional unspecified "sanction" on India for its imports of Russian crude oil and its purchase of weapons from Russia.
The Indian Ministry of External Affairs responded sharply, noting that this is American hypocrisy; the United States trades with Russia in uranium, palladium and fertilizers, and the European Union continues to trade energy with Moscow.
"India's targeting by the US is unjustified and unreasonable. Like any large economy, India will take all necessary measures to protect its national interests and economic security." The statement added: "India's imports are aimed at ensuring predictable and affordable energy costs for the Indian consumer."
Trump has threatened to impose so-called "secondary" tariffs on Russian energy importers, including major crude oil importers such as India, China and Brazil, which the US and its Western allies believe are helping to finance Russia's war in Ukraine.
These threats have escalated in recent days ahead of Trump's accelerated deadline of August 8 for Moscow to agree to a ceasefire and enter peace talks with Ukraine, or face a new round of direct sanctions. U.S. envoy Steve Witkoff is scheduled to travel to Russia on Wednesday or Thursday, according to the president, ahead of the deadline.
Trump had previously set a ceasefire deadline of early September, but he brought the date forward amid escalating Russian missile attacks and marches on Ukraine.
Indian refineries in a state of suspense
Russia accounted for about 40% of India's crude oil supplies in the past three years, as Indian refineries took advantage of discounted Russian crude following Russia's full-scale invasion of Ukraine in early 2022 and subsequent Western sanctions.
So far this year, India has imported about 1.7 million barrels per day of Russian crude, according to Kepler data.
Most of India's purchases of Russian oil have been made with the tacit approval of the United States and its European allies, whose sanctions policies have been aimed at redirecting crude flows and hitting Russian energy revenues while keeping oil markets stable. This policy is now showing signs of changing.
Indian refineries have already been hit by sanctions announced by the EU in July that directly target the 400,000 bpd Nayara refinery in Vadenar, India, operated by Russian state-owned Rosneft. The EU measures ban imports of fuel products made from Russian crude from January 2026, in an attempt to close a loophole that proponents of tougher sanctions on Russia have long called for. However, it is unclear how the EU will enforce this ban.
Trump told reporters on Friday that he had "heard" that India would no longer buy crude oil from Russia, apparently referring to reports that Indian refineries had slowed or halted their purchases of Russian crude until Trump's comments were clear.
"I don't know if it's true or not, but it's a good step."
The stoppage could affect Russian crude shipments in September as contracts to secure volumes for a month in advance are usually concluded in this period, according to sources in the refining sector. The sources said refiners were already planning to reduce their purchases of Russian crude due to geopolitical uncertainty and declining margins for processing Ural medium-sour crude.
Discounts on Russian crude delivered to India, calculated from Brent on a delivered basis, have shrunk to record lows of around $2/bbl, less than half of last year's discounts and a fraction of the $15/bbl they received in early 2023, just after the G7 announced a $60/bbl price ceiling for Russian crude. These weak discounts may prompt refiners to cut back on their purchases from Russia.
Conclusions
- Globally: India's retreat from Russian oil will redraw the map of crude exports, with large amounts of demand shifting to Middle Eastern and Asian producers such as Iraq, Saudi Arabia and the UAE; this shift will increase price volatility and strengthen the role of spot markets, and may prompt buyers to rapidly diversify into alternatives such as LNG or renewables to minimize geopolitical risks.
- For Iraq: This context represents an opportunity to increase crude exports and boost its market share in Asia, allowing it to renegotiate long-term export contracts on more competitive terms and with greater price flexibility.
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