India’s Russian crude strategy faces a fresh challenge, with US senators proposing tariffs of up to 100% on major buyers of Moscow’s oil at a time when Russian supplies have surged to 2.6 million barrels per day, accounting for more than half of India’s crude imports.
The revised bill scales back an earlier 500% blanket tariff threat, but narrows its focus to the world’s five largest buyers of Russian oil or natural gas, placing India and China directly in its crosshairs and raising risks for refinery operations, fuel security and replacement crude costs.
Geopolitical Friction
For India, the proposal threatens a supply source that has emerged as its strongest energy-security hedge amid disruptions in the Strait of Hormuz. Russian crude imports rose to around 2.6 million barrels per day in June, accounting for more than 50% of India’s total crude imports, according to Kpler.
July arrivals are also tracking at healthy levels and could match or exceed June volumes, reflecting a steady rise in Russian supplies since March.
“The proposed US tariffs on countries buying Russian crude should be viewed in the context of today’s exceptionally volatile global oil market,” said Sumit Ritolia, lead analyst for refining supply and modelling at Kpler.
“From India’s perspective, Russian crude has become the country’s strongest energy security hedge, particularly since the Strait of Hormuz disruptions,” he said.
Russian barrels have enabled Indian refiners to maintain high refinery run rates, ensure uninterrupted domestic fuel supplies and avoid the disruptions experienced by several other Asian refining systems, excluding China.
Global Market Paradox
The tariff threat comes when alternative crude supplies remain constrained. India would need to replace a large part of the 2.6 million bpd sourced from Russia if the proposed measure materially discourages purchases.
Ritolia said Russian crude has also acted as a stabilising force for the global market. The original sanctions framework was redesigned to keep Russian oil flowing because removing millions of barrels per day would significantly tighten global crude balances and push prices higher, an outcome the US would not want.
“If secondary tariffs of 100%, or any number, were implemented in a way that materially reduced purchases of Russian crude, the market would first need to answer a simple question: where would the replacement barrels come from?” Ritolia said.
“With spare production capacity limited, Strait of Hormuz risks still elevated, and alternative supplies constrained, replacing Russian volumes at scale would be extremely challenging without triggering a sharp increase in oil prices,” he added.
Any disruption to Russian supplies would therefore confront India with both higher crude costs and limited replacement options, even as refiners seek to preserve high operating rates and uninterrupted fuel availability.