Trump’s tariffs wipe out India’s gains from Russian oil, but it’s not going away
28 August 2025 09:40
The economic consequences of the new U.S. sanctions exceed all of India’s previous benefits from cheap Russian oil. Despite this, India is not going to give up Russian oil, "Komersant Ukrainian" reports, citing Reuters.
The economic blow exceeds the benefits
India has saved at least $17 billion through increased imports of cheap Russian oil since the start of 2022. But new U.S. duties of 50% on Indian goods, which went into effect on Wednesday, could cut India’s exports to the U.S. by $37 billion this fiscal year alone.
Russian oil now accounts for nearly 40% of India’s total oil purchases, compared to virtually zero before the war. India imports about 2 million barrels of Russian oil a day, receiving a discount of up to 7% over world prices. According to internal Indian government estimates, if India stops buying Russian oil, world oil prices could triple to $200 a barrel.
The new duties will affect labor-intensive industries – textiles, gems and jewelry – the most. Thousands of jobs would be jeopardized, which could become politically dangerous for Prime Minister Narendra Modi.
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India is trying to balance
India is trying to balance between Russia and the US. New Delhi needs Russia for defense equipment, cheap oil and geopolitical support, but at the same time, the U.S. remains a critical strategic partner to counter Chinese influence in the Indo-Pacific.
Indian officials have indicated a willingness to increase U.S. energy purchases, but have refused to completely halt Russian oil imports. Talks with the U.S. on trade, energy security and nuclear cooperation continue. India has sharply criticized the U.S. for double standards as America continues to buy Russian uranium hexafluoride, palladium and fertilizer.
Amid tensions with the U.S., Modi plans to visit China for the first time in seven years and meet Xi Jinping and Putin at the Shanghai Cooperation Organization summit. This could signal a reorientation of Indian foreign policy.
Global implications
Experts warn that India’s reaction to the US duties could signal a signal to other countries. If even India as a major economic power cannot withstand American pressure, smaller countries may look for alternatives in the form of cooperation with China.
Even if the duties are lifted, their effects will remain – India’s competitors could occupy its niches in key markets, effectively blocking the return of Indian goods even after the restrictions are lifted.
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How to hurt Russia over oil
Trump is demanding that India stop buying Russian oil because he believes it will hurt Russia and push it to stop its war with Ukraine. It is known that Russia is critically dependent on its energy exports. First of all, on oil exports. In 2024, Russia’s federal budget revenues from oil sales amounted to 9.19 trillion rubles (approximately $89.4 billion). Total budget revenues for this period amounted to 36.71 trillion rubles. Thus, the share of oil revenues in the total structure of Russia’s budget revenues in 2024 was approximately 25%
This shows that despite international sanctions and attempts to diversify revenue sources, oil remains a key source of financing for the Russian budget.
Russian Urals oil is traditionally sold cheaper than Brent and WTI grades, and it is also under pressure from additional factors not experienced by crude from other countries, namely Western sanctions. However, during the three years of full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
The federal budget of the Russian Federation for 2025 included an oil price of $70. However, according to the Ministry of Finance, on August 26, the price of Russian Urals was $63.56 per barrel. Against this background, the deficit of the Russian state budget has already amounted to 4.88 trillion rubles, or 2.2% of GDP, of which more than a trillion has accrued over the past month. This hole in the treasury is almost 4.5 times higher than in the same period of 2024, when the deficit amounted to 1.1 trillion rubles, or 0.5% of GDP.
So far, the forecasts of market analysts do not promise Russia serious problems related to the price of oil, because it still has a very large backlash to sell. According to economic expert Oleg Pendzin, even the price of 50 dollars per barrel is still acceptable for Russia.
“Now the direct cost of production of Russian oil is about 37-38 dollars per barrel. This is the direct cost of production. The critical figure for rf is the figure of sales at the level of 45 dollars.”
– explained the economist exclusively for .
Therefore, the more likely way to hurt Russia over oil is still strengthening sanctions, including secondary sanctions against its buyers. The point of this move is to make it physically impossible for Russia to sell large volumes of oil and get funds from it to continue waging an aggressive war of conquest.
