500% Russian oil tariff on India? There's more to Trump's latest declaration than meets the eye

Economic Times

11-07-2025

Two Sharp with ET: Viceroy calls Vedanta a 'Ponzi' & Trump slaps BRICS, copper with new tariffs
The Sanctioning Russia Act of 2025, proposed by Senators Graham and Blumenthal, introduces a 500% tariff on imports from nations like India and China that continue purchasing Russian energy. This bipartisan bill aims to penalize Moscow for the Ukraine war, but faces opposition from President Trump, who seeks greater control over its execution.
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The Sanctioning Russia Act of 2025, a bold and controversial bipartisan bill introduced by Senators Lindsey Graham (Republican) and Richard Blumenthal (Democrat), seeks to radically escalate US pressure on countries that continue to buy Russian oil and other energy products, mainly India and China. The bill's central feature is an eye-popping 500% tariff on all US imports from countries that purchase Russian oil, gas or uranium. Framed as a way to sever global dependence on Russian energy and punish Moscow for its war in Ukraine, the bill is already causing diplomatic tremors worldwide. India will be hit hard as it has benefited greatly from buying cheaper Russian oil since the Russia-Ukraine war broke out. Russian oil comprised about 35% of India's total crude imports in 2024, raising the stakes for what has become a crucial outlet for Moscow, especially if Trump increases pressure.The bill's fate and its real-world implications hinge not just on congressional debate, but on US President Donald Trump too, who is not pleased with the current form of the bill.At its core, the Sanctioning Russia Act of 2025 represents a radical departure from traditional economic sanctions. Instead of merely targeting Russian companies or banks, this bill seeks to coerce third-party countries by penalising their exports to the US if they continue buying energy from Russia. The bill entails mandatory 500% tariff on all imports into the US from countries that purchase Russian energy. It offers a waiver authority that allows the president to delay these tariffs for 180 days. A second waiver is potentially available, but with oversight from Congress.Trump has publicly flirted with supporting the bill. 'It's totally my option,' he told reporters recently, a typical Trump statement that highlights both interest and ambiguity. According to reports, Trump is ready to sign the bill if it gives him near-total control over its execution.The current language of the bill has strong congressional oversight built in. For instance, it includes a 'joint resolution of disapproval' clause that allows Congress to veto the president's waiver of the tariffs. The White House strongly opposes this clause, arguing that it undermines the president's constitutional authority to conduct foreign policy. The Wall Street Journal reported last month that Trump's team has lobbied to change the bill's language from 'shall' to 'may', giving the president discretion in applying tariffs, expand the waiver authority so it covers allies, essential goods and national security interests, and remove the congressional veto mechanism entirely. In short, Trump wants total control over the execution of sanctions.Trump's reluctance to be constrained isn't merely about presidential ego. His broader argument is that rigid, automatic sanctions can derail diplomacy. He has floated a vision of ending the Ukraine war through negotiation, where economic carrots and sticks are part of a grand bargain. To Trump, automatic sanctions rob him of the flexibility to offer concessions or build incentives for countries like India, Turkey or Brazil to shift away from Russian oil.By controlling the waiver process entirely, Trump could reward allies, or pressure them delicately, depending on the diplomatic context.If passed in its current form, the bill would have explosive implications for trade and diplomacy. The 500% tariff is so high that it would effectively block imports to US from countries like India, China, Turkey and several African nations that still purchase Russian oil. It would create trade chaos, driving up costs for American businesses and consumers.It also risks splintering US alliances. Many US partners, particularly in the Global South, view sanctions as Western overreach. Forcing them to choose between Russian energy and US trade may backfire. Alienated by Washington's pressure tactics, some countries may deepen ties with Beijing or Moscow.The redirected trade flows and retaliatory tariffs could drive inflation in the US, especially in sectors like electronics, textiles and pharmaceuticals.External Affairs Minister S Jaishankar said on Wednesday that the Indian embassy has been in touch with US Senator Lindsey Graham, the proponent of the bill. He added that India will cross that bridge when it comes to it, perhaps indicating the bill might not pass in its current form.Indian Oil Minister Hardeep Singh Puri has defended India's purchases of Russian oil, stating that 'India actually did the world a favour' by helping stabilise global oil prices. From India's perspective, access to discounted Russian oil was not just a financial decision but it was a strategic stabiliser for the global economy. If Russian oil was completely removed from the market and India had to buy its oil from elsewhere, it would have pushed up global oil prices, hurting most economies.According to an ANI report, Puri, who is in Vienna, highlighted Russia's significant role as a major crude oil producer, with an output exceeding 9 million barrels daily. He explained that a sudden removal of 9 million barrels from the global supply of approximately 97 million barrels would have necessitated an unfeasible worldwide consumption reduction of over 10%. Such a disruption would have resulted in oil prices escalating beyond $120-130 per barrel, as consumers worldwide would have competed for limited supplies, he claimed. "Imagine the chaos if this oil, amounting to about 10% of the global oil supply of around 97 million, vanished from the market," he said in Vienna."Russian oil was never under global sanctions. Sensible decision makers around the world were aware of the realities of global oil supply chains and how India was only helping the global markets by buying discounted oil under a price cap from wherever we could," he said, praising India's role in navigating the energy crisis.The Sanctioning Russia Act of 2025 is more than a sanctions bill. It is a litmus test for how far the US is willing to go to enforce its geopolitical red lines, and whether it can do so without alienating its partners or undermining global economic stability. Trump's involvement complicates the picture. While he may sign the bill, he wants to reshape it into a presidential power tool, not a congressional straitjacket. If the bill passes with full executive discretion for the president, Trump would hold an unprecedented lever over global trade -- the ability to punish or pardon entire economies with the stroke of a pen.