A price tag

Russian oil is back at the centre of India-US ties

10 min read

Updated On: Nov 10 2026 | 4:20 AM IST

US Secretary of State Marco Rubio with Russian Foreign Minister Sergey Lavrov during a meeting in New York in September 2026 (PHOTO: REUTERS)

In early October, US President Donald Trump announced that he had struck a deal with his Russian counterpart, Vladimir Putin. Russia would supply more than 300,000 tonnes of diesel fuel to the American market, with millions more to follow. Within hours, the United States (US) treasury issued a temporary licence allowing Russian diesel to be supplied to the world.

The timing carries an irony, as it was just three weeks after Trump signed a law that points the other way. The Sanctioning Russia and Iran Act, named for the late Republican senator Lindsey Graham, allows the US to impose tariffs of up to 100 per cent on goods from the five biggest buyers of Russian oil and gas. India, which takes more Russian crude than any country except China, is one of them.

The law does not impose any tariff by itself. It begins counting new purchases of Russian oil from October 18, 30 days after it was signed. As of October 15, no tariff linked to Russia is in force on India.

On October 16, Trump signed an executive order waiving the tariffs and sanctions the law requires, two days before the 30-day deadline. The order waives duties under sections 112 and 113 of the act, which covered tariffs of up to 500 per cent on goods from Russia, 100 per cent on the five biggest importers of Russian oil and gas, and 100 per cent on the top five countries “facilitating Russian oil sanctions evasion”. It also waives most of the act’s sanctions provisions.

Section 115 allows the president to do this if he certifies to the US Congress that it is in national interest, and Trump said he had done so. The waivers stay in force until the US president or the US secretary of state decides that “further action is appropriate”. Sanctions imposed earlier by executive order are not affected.

Russia hopes US poll shake-up won't shift Trump's negotiations on Ukraine

The order directs the US Trade Representative on Russia, along with the state, treasury and energy secretaries, to monitor which countries buy Russian crude oil and natural gas and to tell the president of anything that might call for further action, including on the waivers. It does not name any country.

For four years, India has bought discounted Russian crude and still managed to keep its partnership with the US largely intact. Whether it can continue walking this tightrope is the question hanging over the next few weeks. The list may not stop at India and China, though, as US Senate aides also named Slovakia, Hungary and Azerbaijan in the current top five.

According to Daniel Fried, a former US state department sanctions coordinator and distinguished fellow at the Atlantic Council, early signs of whether the administration will enforce the law at present are mixed.

“Indians should take the Russia Sanctions Act seriously, but the law provides a good deal of flexibility in its application. India is not the bad guy. Russia is the aggressor. The law is intended to cut back Russian income from oil sales that it is using to finance its war.” Fried said.

“It would be foolish to simply impose 100 per cent tariffs on India, and it would be inconsistent, I think, with the intent of the law, which isn’t to say they won’t do it. It’s the Trump administration,” he added.

The trade talks between the two countries are, meanwhile, stalled. In October, Finance Minister Nirmala Sitharaman said the talks had reached a plateau, while US Trade Representative Jamieson Greer indicated that an agreement was not imminent.

“I would expect there would be calibrated pressure. The Act specifies a 100 per cent ceiling. But Trump is not obliged to use it,” Ajai Malhotra, former Indian ambassador to Russia and current senior advisor at The Energy and Resources Institute (TERI), said.

India has been here before. In August 2025, Trump imposed a 25 per cent punitive tariff on goods from India as it imported oil from Russia, making the combined tariff 50 per cent. Oil imports from Russia had dropped from about 1.24 million barrels per day in December to 1.04 million in February, according to Kpler, a data and intelligence platform located in Brussels.

India’s massive shift towards Russian crude oil came after Russia started offering steep discounts in response to western sanctions following its invasion of Ukraine in February, 2022.

“India relies heavily on oil imports to meet its demand, and Russian crude accounted for nearly half of those imports. For India, this isn’t just a price issue. Cutting off Russian barrels could sharply raise import costs, weaken the rupee, and widen the current account deficit,” Victoria Panova, head of the Brics Expert Council-Russia, said.

“On top of that, India faces additional hurdles: Not all refineries can easily switch to other crude grades, and the global market is already strained by supply disruptions in other regions,” she added.

In 2022, External Affairs Minister S Jaishankar said, “We have been very honest about our interests. I have a country with a per capita income of $2,000. These aren’t people who can afford higher energy prices. It is my moral duty to ensure that I get them the best deal I can.”

A strategic commodity

Oil as a strategic asset is dependent on three factors: who supplies it, how much it costs, and the currency it is paid in. The 1973 crisis showed the first two. Arab producers led by King Faisal of Saudi Arabia imposed an embargo on the US after the Yom Kippur War, and the price of oil quadrupled in the last months of 1973. In the years that followed, the Western countries targeted by the embargo took steps to reduce their dependence on imports from the Organisation of the Petroleum Exporting Countries and improve their energy security.

In 1974, the US and Saudi Arabia signed a broad agreement on military and economic cooperation, and Saudi Arabia and other regional producers affirmed a commitment to price oil in dollars and invest their earnings in the US assets. This came to be known as the petrodollar system. It means any country that wants to import oil must first acquire dollars to pay for it.

On February 2 this year, the US and India announced an agreement. Reciprocal tariffs came down to 18 per cent, and the US withdrew the penalty with effect from February 7, citing steps India had taken on Russian oil. Trump said Indian Prime Minister Narendra Modi had agreed to stop buying it. India has not confirmed the commitment.

But the executive order signed on February 6 also warned of further action if India resumed Russian oil purchases. The issue was never really resolved. The US sees an Indian pledge as a condition of the deal. India has never described it that way in public.

By early March, the US-Israeli war on Iran had led to the Strait of Hormuz being blocked. The strait carries about 40 per cent of India’s crude supply. As Gulf cargoes were delayed, Indian refiners had to turn to Russian purchases.

On March 5, the US Treasury Department granted a 30-day exemption to allow Indian refineries to purchase Russian crude oil already on tankers. This was also done to stabilise the oil market. US Treasury Secretary Scott Bessent referred to the move as a “short-term one” and said that it won’t provide Russia any financial gain.

Imports soared. It stood at 1 million barrels per day in February and rose to about 1.9 million by the end of March. In July, it reached a peak of about 2.82 million barrels per day. Oil supplied from Russia comprised roughly 56 percent of India’s crude imports which fell to about 35 per cent in September after the new law came into effect.

“Earlier there was an economic logic that was very clear. You had discounted barrels at a time of market stress. You’re getting a 20-30 per cent discount, and obviously for the government, they have to go wherever it’s cheaper. The Americans aren’t saying, ‘If you don’t buy that, I’ll give you oil a little cheaper.’ They’re just putting pressure on you not to buy that (Russian oil). And that means you’ll have to buy it at a higher cost.” Malhotra said.

US sanctions against Russia and impact on India

Cutting down on Russian oil also carries commercial logic: China’s imports of Russian crude have risen over the past few months, creating competition for barrels that would otherwise go to Indian refiners.

India, meanwhile, has started diversifying its suppliers. The most evident shift is Iraq. Iraq became India’s second-largest supplier behind Russia in September, for the first time since the Iran war began. However, Iraq exports its crude to India via the Basra terminal, which is subject to disruptions in the Strait of Hormuz.

In July, Indian Oil abandoned plans to load a supertanker at Basra, and Mangalore Refinery in India halted Iraqi purchases as tankers were being struck. In September, Saudi Arabia said drones launched from Iraq had struck its east-west oil pipeline, also known as Petroline, one of the main alternatives to Hormuz route.

Malhotra argues diversification is necessary but cannot be done overnight. “You cannot replace Russian or any crude overnight.”

Many refineries on India’s western coast were built for Gulf crude, and switching crude grades takes time and money. Gulf oil flows excluding those from Iran have recovered to more than 81 per cent of pre-war levels in September, but the situation remains fragile.

How one sees the other

Experts believe that the tariff episode between the two countries (US and India) during Trump’s tumultuous presidency will fundamentally change the way both sides look at each other.

“We have agreed to describe our countries as comprehensive global strategic partners. So, how can you say we are a comprehensive global strategic partner? Because that is not someone you threaten,” Malhotra said.

An analysis published by the Observer Research Foundation argued that stopping under duress would be read as surrendering a measure of strategic autonomy and that India could end up giving up Russian oil and receiving nothing in return.

“Trump has already walked beyond all possible lines when targeting India. Thus, such a hardline approach aimed at pressuring Russia could backfire, as countries mindful of their independence would be getting closer to each other to withstand such pressure,” Panova said.

“The US Congress is not interested in punishing India. They’re interested in punishing Russia for its war of aggression, and remember that China is a far greater problem. Not only is China buying a lot of Russian oil, but China is providing Russia with technology and equipment that it uses to prosecute its wars.” Fried said.

That is one reading of how the US sees India, as a friend and partner in the Indo-Pacific, whose oil purchases are an irritant to be negotiated.

“If I were in the administration, I would make no decision whatsoever about any tariffs on India unless I had had a prior conversation about what the Indian intentions were, and if it were possible to create an understanding

that results in insignificant tariffs or no tariffs at all, which is one of the options provided under the law, I would do it.” Fried said.

India may well halt much of its Russian oil purchases, but the harder question is whether it can maintain its balancing act with both countries while safeguarding its strategic autonomy.

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