The US House of Representatives recently passed legislation granting President Donald Trump the authority to impose tariffs of up to 100% on countries, including India, that purchase Russian oil and gas. This development significantly complicates India's energy balancing act, as Russia supplied 30.3% of India's crude imports in fiscal year 2026, totaling $40.8 billion out of a $134.7 billion import bill. In July 2026, Russian crude accounted for over half of India's imports, making it a critical supplier, far exceeding the combined contributions of the UAE, Saudi Arabia, Venezuela, Brazil, Oman, and the US.
The new US law, known as the Lindsey O Graham Sanctioning Russia and Iran Act of 2026, is seen by analysts, such as Ajay Srivastava of the Global Trade Research Initiative (GTRI), as a tactic to pressure India into unfavorable bilateral trade agreements. While India has benefited from substantial discounts on Russian crude since 2022, saving an estimated $12.6 billion, the economics of this trade are shifting. Discounts are narrowing, competition for Russian barrels is intensifying, and shipping and insurance costs are rising, making the arrangement less attractive.
The potential tariffs would not directly tax Russian crude entering India but would instead target Indian exports to the US, impacting Indian exporters, refinery margins, and the rupee. This could lead to increased inflation and balance of payment issues for India, which imports over 88% of its crude oil. Analysts from the Bank of Baroda estimate that a $1 increase in crude prices could raise India's annual import bill by approximately ₹18,000 crore. The US had previously imposed a 25% tariff on India for buying Russian oil in August 2025, later reducing it to 18% in February 2026, suggesting a pattern of using tariffs as leverage.
India has strategic petroleum reserves for only 9-10 days of net oil imports, compared to around 200 days for Japan and 207 days for South Korea, highlighting its vulnerability. While India has the option to diversify its energy sources, replacing Russian crude at scale would incur higher costs for crude, freight, and insurance, potentially further exacerbating economic pressures. The situation is also complicated by the ongoing conflict in West Asia, which has pushed crude oil prices above $100 per barrel, contributing to India's retail inflation hitting a 20-month high of 4.82% in August.
The US move is also seen as an attempt to disrupt the global oil market and force out Russian supplies, which could further drive up global prices. Despite the risks, some experts like Kirit Parikh, former member of the Planning Commission, suggest India should not succumb to US pressure and continue to source oil from all available sources, including Russia, to maintain energy security. The ultimate impact will depend on the exact tariff rates, product coverage, and any potential exemptions or broader settlements between the US and India.
