President Trump has been slowly ratcheting up pressure on Russia to end the war in Ukraine. Because we’re not buying much of anything at this point from Russia, the only way to further up the ante of sanctions against Russia is to put in place what are called secondary sanctions. The idea is simple. We can’t sanction Russia any more than we are but we can sanction countries that are trading with Russia and keeping their economy afloat. Chief among those countries is India which has been buying up a lot of the excess Russian oil at discounted prices.
As Ed described here last week, President Trump was essentially presenting India with a choice. You can have access to our markets or you can continue buying oil from Russia but not both. He specifically threatened a new tariff of 25% on India, plus an unspecified penalty. Trump even suggested Friday that he’d heard India was planning to back away from Russian oil. And as of Friday there were reports that India was backing away from Russian crude.
At least four tankers carrying Russian crude are idling off India’s western coast as mounting sanctions and warnings of steep U.S. tariffs disrupt oil flows, the Indian business outlet NDTV Profit reported…
In response to growing pressure from Washington, Bloomberg reported that Indian authorities have instructed state-run refiners to draw up contingency plans and explore alternative crude suppliers, including Middle Eastern and West African producers.
The warning appears to have had a swift impact. Four major Indian state-owned oil companies, together accounting for over 60% of the country’s refining capacity, have already suspended purchases of Russian crude.
So on Friday Trump seemed encouraged that India was taking steps to avoid his sanctions threat, but by Saturday Indian officials had denied that was happening.
On Friday, [Trump] appeared to echo reports of a recent dip in the arrival of Russian oil to India.
“I understand that India is no longer going to be buying oil from Russia,” he told reporters. “That’s what I heard. I don’t know if that’s right or not. That is a good step. We will see what happens.”
On Saturday, two senior Indian officials said there had been no change in policy. One official said the government had “not given any direction to oil companies” to cut back imports from Russia…
India has drastically increased its purchases of Russian oil since the Kremlin invaded Ukraine. Russia is now the source of more than one-third of India’s oil imports — up from less than 1 percent before the war. It brings in about two million barrels of crude oil a day, making it the second largest importer of Russian oil, after China.
Part of the Indian reluctance to cut off the oil supply from Russia is simply that India imports 90% of its oil. Russian oil is cheap right now which benefits their economy. Buying the oil at a cheap price was actually seen as complying with sanctions designed to keep the price low under the previous Biden administration. However, the other complaint from India is that China is also buying Russian oil and it’s unfair for the US to target India with sanctions and not target China.
They have a point but as of this morning it seems clear President Trump doesn’t want to hear it. He said he would be “substantially” increasing tariffs on India.
So what does this mean? Last week Trump said India would face a tariff of 25% plus a penalty, now we’re substantially increasing that. So far it’s anyone’s guess but India has responded to Trump’s threat, calling the sanctions unjustified.
India’s foreign ministry on Monday responded to a declaration from President Trump on social media that he would be applying additional tariffs on the country by calling the targeting of New Delhi “unjustified and unreasonable.”
In a statement late on Monday night local time, the ministry said the country “will take all necessary measures to safeguard its national interests and economic security.” It said India had expanded its imports of Russian oil after “traditional supplies were diverted to Europe” following the full-scale Russian invasion of Ukraine in 2022, adding: “The United States at that time actively encouraged such imports by India for strengthening global energy markets stability.”…
India is now struggling to make sense of the sudden pressure from Mr. Trump on an issue that it considered settled. It is the latest irritant in a rapid unraveling of Prime Minister Narendra Modi’s much-touted close relationship with Mr. Trump. Some officials and analysts saw the threat of an additional penalty as a manifestation of Mr. Trump’s frustration with the lack of progress on Ukraine. Others said it could be a pressure tactic for negotiations between the United States and India over a bilateral trade agreement.
Another factor could be an issue that has caused annoyance in New Delhi in recent months: Mr. Trump’s claims that he ended a military escalation between India and Pakistan and is not getting proper credit for it.
Whatever the motivation, it looks like India is not interested in going along with Trump’s secondary sanctions at the moment. Expect to hear more about this in the coming week.
