Trade : India, USA & Russia

11.07.2025

Trade : India, USA & Russia

Context

In mid-2025, a proposed bill by former US President Donald Trump aims to impose 500% tariffs on countries importing oil from Russia, which may deeply affect India’s energy imports and economic stability.

About the News

• Tariff proposal by the US: Aims to penalize countries buying Russian crude oil, with a steep 500% import tariff.
• India heavily dependent on oil imports: India imports More than 80 % of its total crude oil needs.
• Russia-India oil trade surged: Russia’s share in India’s oil imports jumped from 2% in 2022 to 35% in 2025.
• Impact on India’s economy: Tariffs may raise oil prices, inflate the import bill, and widen the current account deficit.

Current Trends

• Strategic imports from Russia: Since the Russia–Ukraine war, Russia offered discounted oil, increasing India’s imports.
• Global oil hierarchy: US, Saudi Arabia, and Russia are top producers; India is the third-largest consumer.
• Crude oil market volatility: Sanctions and tariffs create global price instability, affecting developing nations like India.
• Dependency risk: India’s high dependency on foreign oil makes it vulnerable to external geopolitical shocks.
• Price advantage under threat: Russian discounts helped India save billions, but US tariffs may reverse that benefit.
• Oil reserve limitations: India’s strategic petroleum reserves offer only temporary relief in case of price surges.

Major Challenges

• Rising import costs: Tariffs could force India to buy from costlier markets, worsening the trade deficit.
• Inflationary pressures: Increased fuel prices may lead to higher transportation and food costs, affecting the poor.
• Foreign policy balancing: India may struggle to balance ties with both the US and Russia, risking diplomatic friction.
• Energy security concerns: Heavy reliance on imports without diversification threatens long-term energy independence.
   

Way Forward

• Diversify energy suppliers: India must explore deals with Gulf nations, Africa, and other non-sanctioned countries.
• Boost domestic production: Strengthening ONGC and oil exploration can reduce dependency on external crude.
• Expand renewable capacity: Investing in solar, wind, and biofuels reduces future fossil fuel demand.
• Strengthen oil diplomacy: Use platforms like BRICS and SCO to negotiate stable long-term energy partnerships.
   

Conclusion

India's economic resilience is closely tied to its energy security. The proposed US tariff on Russian oil could trigger inflation, economic strain, and diplomatic challenges. India needs to act swiftly by diversifying energy sources, investing in renewables, and reinforcing strategic partnerships to secure its economic future.