Trump's India threats are hollow for crude market
President Donald Trump cited India's imports of Russian crude when imposing an additional 25% tariff on imports from India on Aug 6, which is due to take effect on Aug 28.
If the new tariff rate does come into place, it will take the rate for some Indian goods to as much as 50%, a level high enough to effectively end US imports from India, which totalled nearly US$87bil in 2024.
As with everything related to Trump, it pays to be cautious given his track record of backflips and pivots.
It's also not exactly clear what Trump is ultimately seeking, although it does seem that in the short term he wants to increase his leverage with Russian President Vladimir Putin ahead of their planned meeting in Alaska this week, and he's using India to achieve this.
Whether Trump follows through on his additional tariffs on India remains uncertain, although the chances of a peace deal in Ukraine seem remote, which means the best path for India to avoid the tariffs would be to acquiesce and stop buying Russian oil.
But this is an outcome that simply isn't being reflected in current crude oil prices.
Global benchmark Brent futures have weakened since Trump's announcement of higher tariffs on India, dropping as low as US$65.81 a barrel in early Asian trade yesterday, the lowest level in two months.
This is a price that entirely discounts any threat to global supplies, and assumes that India will either continue buying Russian crude at current volumes, or be able to easily source suitable replacements without tightening the global market.
Are these reasonable assumptions?
The track record of the crude oil market is somewhat remarkable in that it quickly adapts to new geopolitical realities and any price spikes tend to be shortlived.
The Russian invasion of Ukraine in February 2022 sent crude prices hurtling toward US$150 a barrel as European and other Western countries pulled back from buying Russian crude.
But within four months the price was back below where it was before Moscow's attack on its neighbour as the market simply re-routed the now discounted Russian oil to China and India.
In other words, the flow of oil around the globe was shifted, but the volumes available for importers remained much the same.
Different this time?
But what Trump is proposing now is somewhat different. It appears he wants to cut Russian barrels out of the market in order to put financial pressure on Moscow to cut a deal over Ukraine.
There are effectively only two major buyers for Russian crude, India and China.
China, the world's biggest crude importer, has more leverage with Trump given US and Western reliance on its refined critical and other minerals, and therefore is less able to be coerced into ending its imports of Russian oil.
India is in a less strong position, especially private refiners like Reliance Industries, which will want to keep business relationships and access to Western economies.
India imported about 1.8 million barrels per day of Russian crude in the first half of the year, or about 37% of its total, according to data compiled by commodity analysts Kpler.
About 90% of its Russian imports came from Russia's European ports and was mainly Urals grade.
This is a medium sour crude and it would raise challenges for Indian refiners if they sought to replace all their Urals imports with similar grades from other suppliers.
There are some Middle Eastern grades of similar quality, such as Saudi Arabia's Arab Light and Iraq's Basrah Light, but it would likely boost prices if India were to seek more of these crudes.
If Chinese refiners were able to take the bulk of Russian crude given up by India, it may allow for a reshuffling of flows, but that would not appear to be what Trump wants.
Trump and his advisers may believe there is enough spare crude production capacity in the United States and elsewhere to handle the loss of up to two million bpd of Russian supplies.
But testing that theory may well lead to higher prices, especially for certain types of medium crudes which would be in short supply.
It's simplistic to say that higher US output can supply India's refiners, as this would mean those refiners would have to be willing to accept a different mix of refined products, including producing less diesel, as US light crudes tend to make more products such as petrol.
For now the crude oil market is assuming that the Trump/India/Russia situation will end as another Taco, the acronym for Trump always chickens out.
But the reality is likely to be slightly more messy, as some Indian refiners pull back from importing from Russia, some Chinese refiners may buy more and once again the oil market goes on a geopolitical merry-go-round. — Reuters
Clyde Russell is an Asia commodities and energy columnist at Reuters. The views expressed here are the writer's own.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
4 hours ago
- The Star
PETRONAS sharpens its focus
KUALA LUMPUR: With Brent crude prices hovering around US$65 per barrel and expectations that this modest environment will linger, Petroliam Nasional Bhd (PETRONAS) is rethinking how it runs its business. For the national oil company, the challenge is as much about efficiency as it is about endurance – sustaining liquidity, funding long-term capital expenditure, and meeting hefty dividend commitments to the federal government. Executive vice-president and chief executive officer of upstream business Mohd Jukris Abdul Wahab made it clear that the company's survival and competitiveness depend on more than incremental changes. 'Looking at the outlook of the price today, it is hovering around US$64–US$65 per barrel. We expect the outlook could remain at this level for quite some time,' he said during an editors' briefing here yesterday. 'One of the things that we are currently doing is to review our operational efficiencies and cost efficiencies. The way we have done things over the past 50 years may not necessarily keep us competitive in the years ahead,' he added. That review is reaching into the very core of how PETRONAS operates. No stone is left unturned – from maintenance schedules and field operations to logistics, procurement, and the way offshore and onshore facilities are managed. 'Can we do this at a lower cost? Can we do this faster than what we did before? Can we cut the time by half?' These are the questions currently being asked, Mohd Jukris explained, signalling a willingness to dismantle decades-old processes if they no longer give the company a competitive edge. Global supply chain disruptions, exacerbated by tariff impositions, have added urgency to this exercise. 'We can't be telling people not to impose tariffs on us – it's impossible,' he said. 'The only thing that we can do is to respond internally... Some fundamental changes have to happen in terms of how we do things,' he added. Mohd Jukris pointed out that while PETRONAS remains a national oil company, it acts and competes like an international oil company (IOC). 'We have come a long way and can stand shoulder-to-shoulder with other IOCs. But to stay relevant, we must continue to review and reshape our portfolio, like other major players in the industry,' he said. For PETRONAS, every efficiency gained directly strengthens its financial resilience and its ability to invest for the future. Mohd Jukris added that PETRONAS regularly subjects its global assets to rigorous tests, requiring a break-even oil price of US$50 per barrel or less and a unit production cost below US$6. Assets that fail to meet these parameters face difficult questions about their place in the portfolio. This approach has already led to significant changes, including the sale of gas assets in Azerbaijan and the scaling back of operations in Mexico, where PETRONAS exited eight offshore exploration blocks. He emphasised that partnerships play a crucial role in this recalibration. 'Partnerships bring not only capital but also new operating philosophies and standards,' Mohd Jukris said. He said collaborating with operators who can manage certain assets more efficiently is one of the best ways to unlock value. 'We have to bring partners to collaborate with us. Make sure that the partners take some of the risk. In this industry, we can't operate in isolation.' He added that these strategic alliances not only help advance energy innovation but also strengthen PETRONAS' competitive edge while creating new growth opportunities for local energy players. 'With our CCS (carbon capture and storage) hubs gaining momentum, we are unlocking even greater potential for Malaysian businesses to lead in energy transition. 'This is how we are powering progress – building a sustainable energy ecosystem that benefits Malaysia and beyond.' Even as it trims and streamlines, PETRONAS is keeping an eye on strategic growth opportunities. Canada has become a central pillar in its liquefied natural gas (LNG) ambitions, with 50 trillion cu ft (TCF) of gas reserves. 'We are very keen on expanding our presence in Canada, as opposed to the news that we are leaving the country. 'With 50 TCF (of gas reserves), we can support several more LNG projects as the resource size is not the issue,' he added. PETRONAS is a major equity partner in LNG Canada, which has a US$40bil (RM169.38bil) LNG facility and is involved in the North Montney joint venture upstream gas project. He also noted good progress in Suriname and other markets. 'We have entered into joint study agreements in Indonesia, Vietnam, Turkmenistan and Oman. 'These are some of the work that we are currently doing to make sure that the funnel will always be filled by (new) exploration discoveries,' he explained. > TURN TO PAGE 2 For Mohd Jukris, the review exercise also aims to position PETRONAS for an energy market expected to be more complex, competitive and volatile by 2035. 'We have to be cognisant of what is happening around us, namely geopolitics, jurisdictional changes, shifting policies, and global conflicts,' he said. 'The future is going to be very complex and challenging. We need to ask ourselves how we want to position PETRONAS. 'We have to meet the targets that we set for ourselves over the next 10 years. It is then that the portfolio is going to be ready for transformation,' he added. Mohd Jukris shared that PETRONAS is embarking on an ambitious expansion that will grow its international portfolio by 60% over the next decade, building on its existing 40% to 50% global presence. He added that from its first platform in Kertih to its growing ventures in Canada and other international markets, this global network serves as a powerful engine for progress. 'Malaysia remains a core part of our investment portfolio and we are committed to this market. Our recent successful discoveries in Peninsular Malaysia further reinforce our long-term strategy and confidence in the region,' Mohd Jukris said.
The Sun
5 hours ago
- The Sun
Asian Firms Divided on Insolvency Outlook Amid Ongoing Trade Challenges
HONG KONG SAR - Media OutReach Newswire - 11 August 2025 - The 2025 edition of the Atradius Payment Practices Barometer survey for Asia reveals a nearly even split between businesses expecting stable payment behaviour from their customers and those foreseeing a deterioration in payment risk in the coming months. The survey, conducted in the second half of Q2 2025 across China, Hong Kong, India, Indonesia, Japan, Singapore, Taiwan, and Vietnam, highlights regional resilience amid rising financial vulnerabilities driven by global trade policy uncertainty, liquidity constraints, and worsening B2B payment behavior. Late payments affect 44% of B2B credit sales, with bad debts averaging 5%—a seemingly modest figure that nonetheless significantly impacts profitability. Businesses cite customer liquidity issues, delays in customers' payment processes, invoice disputes and supply chain disruptions as the top reasons for late payments. The survey also found that three in five Asian companies (60%) have expanded trade credit offerings but kept payment terms steady to limit exposure to payment risks while maintaining customer loyalty and encouraging sales. Furthermore, the survey shows, 54% of all B2B sales are transacted on credit with 48-day average payment terms, highlighting the central role credit plays in financing trade across Asia. Bank loans, invoice financing and internal funds have served as the other key sources of funding over the past 12 months. Looking ahead, the survey's findings depict a region also divided on considerations such as inventory turnover and days sales outstanding (DSO) - the time taken to collect payments - but united in acknowledging and anticipating macro challenges, such as the influence of increased trade uncertainties, growing regulatory compliance burdens and the pressures to adopt sustainable practices to address environmental concerns. At the same time, projections of sales and profitability across Asia remain cautiously optimistic as indicated by companies' plans to manage payment risk. In this scenario, balancing the dual needs of liquidity and risk management will be pivotal for success in the months ahead, the survey concludes. 'The latest findings from our Payment Practices Barometer for Asia reveal critical insights into the operational challenges faced by businesses. Issues like increasing bad debts, trade policy uncertainties, compliance pressures, and sustainability initiatives are prominent. However, there is also cautious optimism as companies acknowledge these challenges and explore solutions,' stated Eric den Boogert, Managing Director of Atradius in Asia. 'This includes adapting to market changes and ensuring optimal liquidity while effectively managing risk through strategies like outsourcing credit risk management to enhance traditional internal measures.' The 2025 Atradius Payment Practices Barometer for Asia report can be found here.
The Star
5 hours ago
- The Star
Trump says Ukraine, Russia will have to swap some land for peace
U.S. President Donald Trump speaks to the press about deploying federal law enforcement agents in Washington to bolster the local police presence, in the Press Briefing Room at the White House, in Washington D.C., U.S., August 11, 2025. REUTERS/Jonathan Ernst WASHINGTON (Reuters) -U.S. President Donald Trump said on Monday that both Ukraine and Russia would have to cede land to each other to end the war and that his talks with Russian President Vladimir Putin would be aimed at taking the temperature on a possible deal. Trump told a White House press conference that his talks on Friday with Putin in Alaska would be a "feel-out meeting" to determine whether Putin was willing to make a deal. He said he could know within two minutes whether progress was possible. "So I'm going in to speak to Vladimir Putin, and I'm going to be telling him, you've got to end this war. You've got to end it," Trump told reporters. Trump also said a future meeting could include Ukrainian President Volodymyr Zelenskiy and could end up being a three-way session including himself and Putin. He said he would speak to European leaders soon after his talks with Putin and that his goal was a speedy ceasefire in the bloody conflict. Trump has in the past talked about land swaps but neither Russia nor Ukraine have been interested in ceding land to each other as part of a peace deal. Europeans worry that major concessions to Russia could create security problems for the West in the future. Ukraine has sought to push back Russian invaders ever since the largest and deadliest war in Europe since World War Two began in February 2022. Russia justifies the war on the grounds of what it calls threats to its security from a Ukrainian pivot towards the West. Kyiv and its Western allies say the invasion is an imperial-style land grab. Russia currently occupies about a fifth of Ukrainian territory, while Ukraine holds barely any Russian territory. Trump said: "There'll be some land swapping going on." "I know that through Russia and through conversations with everybody, to the good of Ukraine," he said. He said Russia had occupied some "very prime territory" but that "we're going to try to get some of that territory back". (Reporting by Trevor Hunnicutt, Nandita Bose and Steve Holland in Washington; Editing by Mark Porter)
