Fuel folly
Washington's new tariff plan for those who buy Russian oil is hypocritical & will hurt US too
After insulting Zelenskyy in Feb, pausing intelligence sharing with Kyiv in March, and weapons supplies in March and May, Trump finally has a plan to stop Putin. He's going to hit Russia and its trade partners with 'very serious tariffs'. Not immediately – Putin gets 50 days to finish the business he started in 2022. But as a big buyer of Russian oil, India should take note. Trump's threatened to impose 100% tariff on countries that buy Russian goods after the expiry of his deadline, and if he doesn't waver, or forget – neither unlikely – the concessions won through a trade deal could be lost.
Will tariffs work? Not directly, because Russia and US have never been more decoupled economically since the collapse of the Soviet Union. US bought goods worth just $3bn from Russia last year, and sold $500mn worth, down from $29bn and $6bn, respectively, before the start of the war in 2022. That's why Putin must be checkmated through secondary tariffs on his major oil buyers like China, India and Brazil.
Fossil fuels are a very big part of Russia's GDP (16%), and make up over half of its exports (55%). By the third anniversary of the war, Russia had earned about $1tn from fossil fuel exports. India, which used to buy just 1% of its oil from Russia before the war, now sources 40%, so the threat of 100% tariff on exports could make it pivot again. And China, which buys 20% of its oil from Russia, might also find 100% tariff discouraging.
Russia could be hurt, but at what cost? Plugging the Russian pipeline is bound to drive up oil prices, which could increase inflation in most places, including US. Add to that the US-specific price rise resulting from 100% tariff on China, India and other US trade partners, and the political risk might be too much for Trump's Republicans.
Above all, Trump's threat – backed by Nato secretary-general Mark Rutte – smacks of hypocrisy. After ordering the world not to buy Russian oil, US continued buying enriched uranium from Russia for its nuclear plants. Even when it announced a ban on Russian uranium imports from 2027, it gave a waiver to its largest operator of reactors. Likewise, Rutte's Europe is still buying gas from Russia, and won't stop till the end of 2027. So, Trump and Rutte's threat is less about conviction than convenience. India must play by the same rule.
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This piece appeared as an editorial opinion in the print edition of The Times of India.
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