Threat of US secondary tariffs may sour India's love for Russian oil
NEW DELHI: The US threat to slap penal tariff on countries buying Russian oil may sour India's love affair with those barrels as the benefit of discounts would outweigh the cost to its merchandise exports to America at a time when both nations are discussing a trade deal.
President Donald Trump on Monday announced 100 per cent tariff on Russian exports, including oil, and an equivalent secondary tariffs on countries importing Russian shipments to be imposed after a 50-day deadline for Moscow to end the war with Ukraine.
Details of Trump's plan and how it will pan out remain sketchy. The oil market took the announcement calmly as the distant deadline dispelled worries over immediate supply disruption, leaving the benchmark Brent crude below $70/barrel.
Indian refiners have been lapping up Russian oil at discounts since February 2022 as others shunned those barrels due to Western sanctions on Moscow after its Ukraine invasion.
One-third of country's oil is imported from Russia
Russia accounts for a third of India's oil imports, against less than 1% before the war. Things may be different this time if Trump carries through with his threat. This is because, as reports in western media said, secondary tariffs will apply to the country and affect all merchandise exports, unlike the scenario where only the entities doing business with sanctioned Russian entities are penalised.
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If that is the case, Indian refiners will have no other way than pivot towards its traditional West Asian suppliers and new players such as Brazil to make up for lost Russian supplies. These new barrels will, however, come at a higher cost, ranging around $4-5/barrel.
Arranging alternative supplies will not be difficult, as 'there is enough energy available in the world,' according to oil minister Hardeep Singh Puri. 'Oil prices are still between $65 and $70,' he said on the sidelines of a seminar on education on Tuesday. Govt had approached the two major West Asian countries to ensure supplies through their alternative evacuation routes when apprehension mounted over disruption in shipping through the Strait of Hormuz during the recent Israel-Iran war.
Industry watchers said Indian refiners are likely to tank up on cheap Russian oil during the run-up to the deadline, the way they had done during the Israel-Iran conflict, while tying up alternative supplies.
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