India Faces a Costly Choice as US Targets Buyers of Russian Oil

Washington puts India’s Russian oil strategy under pressure

India’s decision to buy large volumes of discounted Russian crude is facing its biggest economic and diplomatic test since the war in Ukraine began. The US House of Representatives has passed legislation giving President Donald Trump broad powers to sanction Russia and impose tariffs of up to 100% on countries that purchase Russian oil and gas. The measure has already passed the Senate and is now awaiting the president’s signature.

India and China are the countries most exposed to the proposal. Both have become major customers for Russian energy since Western sanctions and corporate withdrawals pushed Moscow to redirect its crude exports away from Europe and other traditional markets. The bill is designed to pressure those buyers into reducing their purchases, with the stated aim of cutting revenue that supports Russia’s military campaign.

For New Delhi, the issue goes far beyond a dispute over trade policy. Russian crude has helped reduce the cost of one of India’s largest import bills, supported refinery activity and limited the effect of international oil shocks on consumers. A sharp US response could instead affect Indian exporters, the rupee, refinery profits and the country’s wider trade balance.

India’s government has said it is watching developments and remains committed to protecting energy security for its 1.4 billion people. Officials also say the matter has been discussed at senior levels with US representatives in recent months, with New Delhi warning that the legislation could affect both bilateral ties and international energy markets.

How dependent is India on Russian crude?

Russia supplied 30.3% of India’s crude oil imports in fiscal 2026, according to the Global Trade Research Initiative. That represented about $40.8 billion of a total crude import bill of $134.7 billion. In July, Russian oil made up more than half of India’s crude imports.

Other suppliers were far behind. The United Arab Emirates accounted for 10.8% of July imports, Saudi Arabia for 9.6%, Venezuela for 6.3%, Brazil for 5.5%, Oman for 5.3% and the United States for 2.9%. Russia alone supplied more crude than those six countries combined.

India imports more than 88% of the crude it consumes, leaving its economy highly exposed to prices, shipping costs and disruptions in overseas supply. More than 85% of its crude imports come from six countries, several of which are in politically unstable regions. Indian refineries can process a wide range of crude grades, yet switching quickly between suppliers is not always simple because each refinery is configured for particular blends.

The country’s energy exposure also extends to cooking fuel. India imports more than 60% of its liquefied petroleum gas, which is used by more than 330 million households. Its strategic petroleum reserves contain only about nine to 10 days of net oil imports. Refinery stocks provide an additional estimated 64 days, while Japan and South Korea maintain much larger reserves.

India’s shift toward Russian oil has produced major savings. The Council on Energy, Environment and Water estimates that the country saved about $12.6 billion by increasing purchases after 2022. Those savings helped cushion consumers and businesses from the price surge that followed Russia’s invasion of Ukraine.

Why is the discount becoming less valuable?

Russian oil initially attracted Indian refiners because it was sold at steep discounts after European buyers withdrew. Lower prices, available cargoes and the ability to refine the crude into fuels made the trade highly attractive.

The financial advantage has narrowed. Competition for Russian barrels has increased, while freight, insurance and compliance costs have risen. Shipping companies must also navigate sanctions rules and restrictions involving vessels, banks and insurers. Some cargoes require longer routes, adding time and expense before the crude reaches Indian ports.

Sumit Ritolia, an analyst at maritime intelligence firm Kpler, said the central issue is whether the market can supply enough replacement crude without pushing prices higher.

"The issue is not simply whether Russian barrels can be redirected to other buyers, but whether enough alternative crude is available to replace them without tightening the global market further," Ritolia said.

Potential suppliers such as Saudi Arabia, the UAE, Iraq, the United States, Brazil and West African producers could increase sales to India, yet spare capacity is limited and supply routes differ. Replacement oil may carry a higher purchase price, while longer voyages raise freight and insurance bills.

Indian refiners would also have to assess whether substitute crude can be processed efficiently in existing plants. A change in crude quality can affect yields, maintenance needs and the quantity of petrol, diesel and other products produced from each barrel.

What would a 100% tariff mean?

The proposed measure would not simply place a tax on Russian crude entering India. It would give the US president authority to impose tariffs on goods from countries that continue buying Russian oil and gas. The rate could reach 100%, making Indian exports to the American market far more expensive.

Under the legislation, countries would normally have 180 days to reduce Russian energy purchases or negotiate with Washington. The president could shorten that period. The bill also allows for waivers, which could give the administration room to bargain with individual countries.

The United States imported about $104 billion in goods from India in 2025. Two way trade in goods and services was about $240 billion, according to the US Trade Representative. Indian exports to the US include electronics, pharmaceuticals, machinery, jewellery, chemicals, textiles and refined petroleum products.

Electrical and electronic equipment accounted for about $25.8 billion of Indian exports to America in 2025. Pharmaceuticals contributed about $9.7 billion and machinery about $7.2 billion. A tariff aimed at Russian oil purchases could therefore reach industries with little direct connection to the energy trade.

Michael Kugelman, a senior fellow at the Atlantic Council, said the timing creates particular pressure because India and the United States are also discussing trade arrangements.

"Up to 100% tariffs from a critical export destination is real bad news, no matter how you slice it and even with successful hedging tactics," Kugelman said.

Can India replace Russian supplies?

India can find alternative crude, yet replacing Russian oil at current volumes would come at a cost. S&P Global has warned that alternative supplies could bring higher crude, freight and insurance expenses. A sudden move by India and China to compete for the same barrels could also lift international prices.

The effect would depend on several factors, including the size of any Russian discount, the world oil price, shipping rates, insurance conditions and the tariff rate finally imposed. Exemptions or a wider agreement between Washington and New Delhi could reduce the damage.

India’s refining industry adds another layer to the issue. The country buys crude, turns it into fuels and then exports some of those products. This creates a legal and commercial distinction between buying Russian oil and selling refined fuel to third countries, yet Washington could still view the activity as part of Moscow’s energy trade.

Russia’s own fuel market has been disrupted by Ukrainian attacks on refineries. According to the Centre for Research on Energy and Clean Air, Russian fuel imports reached a record 172,000 tonnes in August, more than seven times the previous monthly high. India supplied about 120,000 tonnes, or roughly 70%, much of it petrol refined from Russian crude at a refinery in Gujarat. The shipments were worth about 78 million euros.

This trade shows why Indian refineries matter to both sides. India provides Moscow with a market for crude and can also supply finished fuels when Russian refining capacity is under pressure. Cutting the relationship could therefore affect fuel flows beyond India’s borders.

Why China and India face different pressure

China accounted for about half of Russia’s crude exports between December 2022 and August 2026, while India accounted for 37%, according to the Centre for Research on Energy and Clean Air. Turkey and the European Union each represented about 5%.

Chinese Foreign Ministry spokesperson Guo Jiakun rejected the use of tariffs to interfere with energy purchases. He said Beijing’s trade with other countries is based on equality and mutual benefit, and opposed unilateral sanctions that lack authorisation from the United Nations Security Council.

"China opposes long arm jurisdiction and unilateral sanctions that have no basis in international law and lack UN Security Council mandate," Guo said.

China may have greater capacity to withstand US pressure because of its large role in manufacturing and critical supply chains. Beijing also buys much of its Russian energy through pipelines across its land border, reducing exposure to shipping and marine insurance restrictions.

India has less economic leverage over the United States. Its trade relationship is large and growing, yet Indian exporters may be more exposed to a sudden loss of access to the American market. The difference could shape how Washington negotiates with each country.

The legislation also arrives as Trump and Chinese President Xi Jinping prepare for talks on trade, artificial intelligence and semiconductors. That timing gives the bill a wider diplomatic role, since it could serve as pressure on Beijing as well as a measure directed at Russia.

Delhi’s difficult calculation

Ajay Srivastava, a former Indian trade official who leads the Global Trade Research Initiative, argues that India buys Russian oil to secure affordable energy rather than to support the war.

"India buys Russian oil to secure affordable energy for 1.4 billion people, not to finance war, and these purchases have helped stabilise global supplies and prices," Srivastava said.

He has warned that Washington could initially threaten the maximum tariff and later offer a lower rate if India cuts Russian purchases or accepts concessions in a trade agreement. Srivastava has urged Delhi to keep buying Russian oil while it remains commercially competitive and to resist allowing US pressure to dictate national energy policy.

Indian officials face a practical calculation. Continuing to buy Russian crude may preserve energy savings but expose exporters to punitive US tariffs. Cutting purchases could reduce the risk to trade ties, yet it may increase fuel costs and leave the country more dependent on suppliers in politically sensitive regions.

The decision will also affect the rupee. Higher oil import costs usually increase demand for dollars and place pressure on the Indian currency. A weaker rupee raises the local price of crude and can make imported machinery, gas and other commodities more expensive.

Exporters could face a separate shock if US tariffs reduce orders. Companies may try to redirect goods to Europe, the Middle East, Africa and Asia, where India has expanded trade ties, yet new markets cannot always absorb large volumes quickly or at similar prices.

What happens next?

Trump’s signature would give the administration a powerful negotiating tool, although it would not guarantee that a 100% tariff would take effect immediately. The White House could set conditions, grant waivers or create different deadlines for different countries.

New Delhi is likely to seek clarity on how the law would apply to crude purchases, refined fuel exports, shipping arrangements and transactions involving Indian banks or insurers. It may also press for exemptions while continuing to negotiate a bilateral trade agreement.

India has already tried to reduce its exposure through trade deals and stronger commercial ties with the European Union and China. Those links can provide some protection, yet they cannot fully replace the scale of the US market in the short term.

The dispute could also push India to diversify crude sources, expand domestic refining flexibility and strengthen its emergency reserves. Those measures would take time and investment. A sudden policy shift would be harder to manage than a gradual reduction in dependence.

For global markets, the key risk is a forced reorganisation of Russian energy flows. If India and China must compete more aggressively for alternative crude, prices could rise. If Russian oil is sold to other buyers at deeper discounts, Moscow’s revenue may fall without removing its crude from the world market.

Key Points

• The US Congress has passed legislation allowing tariffs of up to 100% on countries that buy Russian oil and gas.
• India received 30.3% of its crude imports from Russia in fiscal 2026, while July’s share exceeded 50%.
• India saved an estimated $12.6 billion after shifting toward discounted Russian crude.
• Replacing Russian supplies could raise crude, shipping and insurance costs and may tighten global markets.
• US tariffs could affect Indian electronics, medicines, machinery, textiles and other exports.
• China has rejected unilateral US pressure and says normal energy trade should not be disrupted.
• India must balance cheaper energy against the risk of damage to its US trade relationship.