Secondary tariffs on Russian oil buyers: A new shockwave for global energy markets
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In a bold geopolitical move, US President Donald Trump has reiterated his intent to impose secondary tariffs on countries that continue purchasing oil from Russia. This move, aimed at pressuring Moscow into a ceasefire in Ukraine, could significantly disrupt global oil markets, intensify geopolitical tensions, and reshape energy alliances.Secondary tariffs are punitive measures not imposed directly on Russia, but against third-party nations that engage in trade with Russia—particularly in oil, gas, and uranium. The proposed tariffs could be as high as500%, targeting imports from countries that violate US sanctions. This strategy is designed to isolate Russia economically by deterring its trading partners, but it risks collateral damage across global supply chains.As of mid-2025, global oil production stands at approximately 101 million barrels per day (bpd), with consumption closely matching at 100.5 million bpd, according to the International Energy Agency (IEA). The top producers include the United States (12.9 million bpd), Saudi Arabia (10.5 million bpd), and Russia (9.8 million bpd). Russia remains a critical supplier, especially to China, India, and parts of Eastern Europe, which have increased imports since the Ukraine war began.If Russian oil flows were completely banned, replacing its supply would be extremely challenging for global markets as it contributes roughly 10% of global supply. Even in an optimistic scenario, the world could replace 5–6 million bpd, leaving a shortfall of 3–5 million bpd.If secondary tariffs are enacted, they would likely lead to a sharp price increase, global inflation, energy rationing in vulnerable economies and accelerated investment in renewable energy and gas markets.Restricting Russian oil indirectly through its buyers could reduce global supply, especially if major importers like India and China face pressure to cut back. This supply shock could push Asian Brent crude prices to exorbitant highs, raising worries over inflation worldwide.Countries dependent on Russian oil may scramble for alternatives, increasing demand for Middle Eastern and U.S. oil. This could strain existing production capacities and lead to regional energy shortages, particularly in Asia and Eastern Europe.Meanwhile, the proposed tariffs are not just economic tools—they're geopolitical weapons. If President Trump enforces this tariff on China and India—two of Russia's largest energy customers—could face significant economic and strategic challenges. These tariffs would not only raise the cost of imports but also strain diplomatic ties with the US, forcing both countries to recalibrate their energy and trade policies.However, in such a high tariff environment, China and India may adopt a multi-pronged strategic approach as a response to the US. Both countries could accelerate deals with Middle Eastern supplies and may find new suppliers from Africa and Latin America. China may boost Yuan based trade to bypass dollar-based sanctions. In addition, diplomatic measures, enhancing renewable investments and boosting domestic production may also expected gradually.President Trump's proposed secondary tariffs represent a high-stakes gamble. While they aim to pressure Russia into peace talks, the global repercussions could be severe—fuelling inflation, disrupting energy markets, and reshaping geopolitical alliances. As the world watches, the decision could mark a turning point in both the Ukraine conflict and the future of global energy diplomacy.: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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India's annual oil import bill could rise by $9-11 billion if the country is compelled to move away from Russian crude in response to U.S. threats of additional tariffs or penalties on Indian exports, analysts said. India, the world's third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022. Russian oil, which accounted for less than 0.2% of India's imports before the war, now makes up 35-40% of the country's crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation. Editorial | Soured relations: On Trump's 25% tariff, 'penalty' The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including to countries that have imposed sanctions on direct imports from Russia. 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"Together, these measures sharply curtail India's crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty," he said. Last fiscal, India spent over $137 billion on import of crude oil, which is refined into fuels like petrol and diesel. For refiners like Reliance Industries Ltd and Nayara Energy — who collectively account for a bulk (more than 50% in 2025) of the 1.7–2.0 million barrels per day (bpd) of Russian crude imports into India - the challenge is acute. While Nayara is backed by Russian oil giant Rosneft and was sanctioned by the EU last month, Reliance has been a big fuel exporter to Europe. As one of the world's largest diesel exporters — and with total refined product exports to Europe averaging around 200,000 bpd in 2024 and 185,000 bpd so far in 2025 — Reliance has extensively utilised discounted Russian crude to boost refining margins over the past two years, according to Kpler. "The introduction of strict origin-tracking requirements now compels Reliance to either curtail its intake of Russian feedstock, potentially affecting cost competitiveness, or reroute Russian-linked products to non-EU markets," Mr. Ritolia said. However, Reliance's dual-refinery structure — a domestic-focused unit and an export-oriented complex — offers strategic flexibility. It can allocate non-Russian crude to its export-oriented refinery and continue meeting EU compliance standards, while processing Russian barrels at the domestic unit for other markets. Although redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally feasible, such a shift would involve narrower margins, longer voyage times, and increased demand variability, making it commercially less optimal, he said. Kpler data shows a notable decline in India's Russian crude imports in July (1.8 million bpd versus 2.1 million bpd in June), aligning with seasonal refinery maintenance and weaker monsoon-driven demand. However, the drop is more pronounced among state-run refiners, likely reflecting heightened compliance sensitivity amid mounting geopolitical risk. Private refiners, who account for over 50 per cent of Russian crude intake, have also begun reducing exposure, with fresh procurement diversification underway this week as concerns over US sanctions intensify. Mr. Ritolia said replacing Russian crude isn't plug-and-play. The Middle East is the logical fallback, but has constraints - contractual lock-in, pricing rigidity, and a mismatch in crude quality that affects product yield and refinery configuration. "The risk here is not just supply but profitability. Refiners will face higher feedstock costs, and in the case of complex units optimized for (Russian) Urals-like blends, even margins will be under pressure," he said. In the future course, Kpler believes India's complex private refiners — backed by robust trading arms and flexible configurations — are expected to pivot toward non-Russian barrels from the Middle East, West Africa, Latin America, or even the U.S., where economics permits. This shift, while operationally feasible, will be gradual and strategically aligned with evolving regulatory frameworks, contract structures, and margin dynamics. However, replacing Russian barrels in full is no easy feat — logistically daunting, economically painful, and geopolitically fraught. Supply substitution may be feasible on paper, but remains fraught in practice. "Financially, the implications are massive. Assuming a $5 per barrel discount lost across 1.8 million bpd, India could see its import bill swell by $9–11 billion annually. If global flat prices rise further due to reduced Russian availability, the cost could be higher," it said. This would increase fiscal strain, particularly if the government steps in to stabilize retail fuel prices. The cascading impact on inflation, currency, and monetary policy would be difficult to ignore.
