Price cap, not a ban: Donald Trump's tariff threats contradicts US 2022 sanctions policy on Russian oil

Mint

06-08-2025

In a pointed warning on 4 August, US president Donald Trump threatened to impose 'substantial' tariffs on India for 'profiting' from fuel exports refined from Russian crude. The Republican also imposed a 25% tariff on Indian defence and energy imports from Moscow—reigniting scrutiny over Washington's approach to Russian oil and the global energy market.
Yet experts and former diplomats argue Donald Trump's stance is at odds with the very framework of the US-led sanctions on Russian oil, introduced in December 2022—not a ban, but a price cap, designed to curb Kremlin revenues while keeping energy flowing to global markets.
Contrary to Donald Trump's sweeping rhetoric, the US and its G7 allies did not impose a blanket ban on Russian crude. Instead, they introduced a $60 per barrel price cap on seaborne Russian oil—only when transported using Western shipping or insurance services.
This cap aimed to squeeze Russian revenues without triggering a global energy shock.
The policy explicitly allows non-participating countries—such as India—to buy Russian crude at any price as long as they do not use Western maritime services.
The price cap was designed to ensure oil kept flowing into the global market, keeping inflation in check while still limiting Moscow's profits from the war in Ukraine.
As such, the sanctions regime does not prohibit India from purchasing Russian oil—nor does it justify punitive tariffs based solely on such trade.
However, as European and Western markets began phasing out Russian energy, Moscow started offering steep discounts on its crude.
Within months, Russia became India's top crude oil supplier, displacing West Asian exporters. Today, Russian crude accounts for roughly 35–40% of India's total oil imports by volume.
In May 2024, US Ambassador to India Eric Garcetti openly acknowledged that India's purchases aligned with Western strategy. 'Actually, they bought Russian oil because we wanted somebody to buy Russian oil at a price cap… That was the design of the policy,' Garcetti said.
In 2024, then US Treasury Assistant Secretary for Economic Policy Eric Van Nostrand had said that the objective of the sanctions and G7 price cap regime was not to push Russian crude out of the market, but to keep it flowing while limiting the Kremlin's revenue from oil exports, which in turn impaired Russia's ability to fund the war in Ukraine.
Donald Trump's latest threats and framing suggest that countries importing Russian oil are undermining Western efforts to end the war in Ukraine. But this overlooks the deliberately calibrated nature of the sanctions framework introduced by his own country's government.
The aim of the 2022 price cap wasn't to shut off Russian oil exports entirely—it was to maintain global supply while reducing Kremlin revenue.
Trump's claim that India is 'profiting' off the conflict ignores this policy nuance, and glosses over the fact that many countries, including the US itself, continue to import certain Russian goods—from uranium to fertilisers.
No, not under the current regime. India is not part of the G7 or the price cap coalition, and it does not use Western shipping or insurance for these purchases. Therefore, it is under no obligation to adhere to the $60 per barrel ceiling.
By promising tariffs on India's imports and exports linked to Russian oil, Donald Trump may be risking a diplomatic flashpoint with a key strategic partner. His position also conflicts with the nuanced sanctions policy still upheld by the US and its allies.
India, for its part, has defended its energy strategy, stating that its imports from Russia began only after traditional suppliers were diverted to European markets.
Donald Trump's latest salvo may appeal to his political base, but it fails to acknowledge the mechanics of global oil trade and the purposefully limited scope of the 2022 sanctions.
The US and its allies have tried to walk a fine line—penalising Russia without sparking an oil price crisis. India's energy diplomacy fits within that balance.