Indian fuel exports escape Trump's tariff net, no Russian penalty yet

Economic Times

4 days ago

Reuters Fuel prices (Image for representation)
India's exports of petroleum products like diesel and jet fuel to the US continue to be exempted from the levy of any import duty or tariff, and President Donald Trump has, for now, not indicated the penalty he plans to impose to deter New Delhi's energy trade with Russia. On Wednesday, Donald Trump had announced plans to impose a 25 per cent tariff on India, along with an additional penalty, citing concerns over the country's energy and defence ties with Russia, as well as existing trade barriers. However, the executive order he signed thereafter only gives effect to the 25 per cent tariff on Indian goods coming to the US. Even this has an exclusion list that includes finished pharmaceutical products (tablets, injectables and syrups), active pharmaceutical ingredients, electronics and ICT goods (semiconductors, smartphones, SSDs and computers), and petroleum products (crude oil, LNG, refined fuels, electricity and coal). The executive order also does not indicate any penalty that is to be levied for Russian trade. According to official data, India exported 4.86 million tonnes of petroleum products to the US in fiscal year 2024-25 (April 2024 to March 2025) for over USD 4 billion.
Reliance Industries Ltd is the biggest exporter of fuel to the US. With fuel exports continuing to be on the exemption list, it means business as usual for India and companies like Reliance, analysts said. Also, a relief would be if no penalty is imposed to punish India for its oil imports from Russia, they said, adding that for now, the US administration has not indicated any penalty. "For now, there is nothing but you never know," an analyst said. From just 0.2 per cent before the Russia-Ukraine war to now accounting for 35-40 per cent of total crude imports, India's reliance on Russian oil has surged -- drawing fresh scrutiny with Trump announcing a penalty on top of a 25 per cent tariff, or tax, on all goods going to the US. India historically bought most of its oil from the Middle East, including Iraq and Saudi Arabia. However, things changed when Russia invaded Ukraine in February 2022. India, the world's third-largest crude importer after China and the US, began snapping up Russian oil that was available at a discount after some in the West shunned it as a means to punish Moscow for its invasion of Ukraine. From a market share of just 0.2 per cent in India's import basket before the start of the Russia-Ukraine conflict, Russia overtook Iraq and Saudi Arabia to become India's No.1 supplier, with a share as high as 40 per cent at one point of time. This month, Russia supplied 36 per cent of all crude oil, which is converted into fuels like petrol and diesel, that India imported. Announcing the imposition of 25 per cent tariff or tax on all Indian goods going to the US, Trump had said New Delhi "always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of energy, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE." "India will therefore be paying a tariff of 25 per cent, plus a penalty for the above (Russian purchases), starting on August First," he said in a post on social media. India bought 68,000 barrels per day of crude oil from Russia in January 2022, according to global real-time data and analytics provider Kpler. That month, Indian imports from Iraq were 1.23 million bpd and 883,000 bpd from Saudi Arabia. In June 2022, Russia overtook Iraq to become India's largest oil supplier. That month, it supplied 1.12 million bpd as compared to 993,000 bpd that came from Iraq and 695,000 bpd from Saudi Arabia. Russian imports peaked to 2.15 million bpd in May 2023 and have varied since then, depending on the discount at which the oil was available. But the volumes never slipped below 1.4 million bpd, which is more than what India was buying from its top supplier Iraq before the Russia-Ukraine conflict. In July, imports from Russia averaged 1.8 million bpd, almost double of 950,000 bpd imports from Iraq. Saudi imports stood at 630,000 bpd, according to Kpler. After the Ukraine war, Western energy sanctions against Russia pushed it to cut prices for those buyers still willing to purchase its crude. The discounts on Russia's flagship Urals crude to Brent -- the world's most well-known benchmark -- were as high as USD 40 per barrel at one point but have been trimmed since to less than USD 3. G7 countries in December 2022 imposed a USD 60 per barrel price cap on Russian crude. Under the mechanism, European companies were permitted to transport and insure shipments of Russian oil to third countries as long as it is sold below the capped price -- an effort to limit the impact of the sanctions on global oil flows but ensure Russia earns less from the trade. Last month, the European Union decided to lower the price cap to USD 47.6 and introduced an automatic and dynamic mechanism for its review in the future. The idea is to keep the cap at 15 per cent lower than the average market price. In addition to stoking India's economy, cheap Russian oil gave refiners lucrative business -- refining that crude and exporting the products to deficit countries. These included the European Union, which had banned direct crude oil purchases from Russia.
This month, the European Union decided to ban the import of refined oil produced from Russian crude.