Will Cheap Russian Oil Cost India Dearly in Western Markets? 

India is once again caught at a critical juncture in its foreign policy. The provocation? A renewed threat of punitive tariffs from Donald Trump, targeting India’s continued imports of Russian crude. Trump’s latest attacks may have largely come via social media, but their implications are anything but trivial. At stake is not just $31 billion of India’s export relationship with the US, but a broader question of whether New Delhi’s assertive economic sovereignty can withstand pressure from a re-assertive West. 

India’s oil trade with Russia, intensified after the Ukraine conflict, has long been a quiet source of Western unease. Now it’s under glaring scrutiny. Washington’s ire stems from the view that India is helping Russia circumvent sanctions by refining and exporting oil products derived from Russian crude. Yet this trade isn’t simply a backchannel to help Moscow. In a fragile global energy landscape, it’s also a stabiliser. 

Russia produces roughly 12% of the world’s oil supply. Cutting it off from the market would send shockwaves across the global energy markets, significantly driving prices higher. India’s purchase of discounted Russian crude oil has helped cushion that risk. 

In short, India isn’t just buying oil. It’s buying time for the world economy. 

But Trump, true to form, is unmoved by nuance. Yes, any steep tariff would disrupt Indian exports to the US. However, our exports to the country make up just 2.2% of the GDP, which is lower than peers like Mexico or Vietnam. Simultaneously, India could gain about $29 billion in increased exports to other countries that also face Trump’s tariffs, effectively offsetting the damage. 

That economic balancing act offers Delhi a degree of insulation. 

More problematic is the diplomatic fallout. Trump’s escalation comes at a time when Prime Minister Narendra Modi has publicly portrayed his affinity for President Trump and tried to woo firms like Elon Musk’s Tesla. Now, with the spectre of tariffs, uncertainty clouds investor sentiment.

Europe, too, is watching. Thus far, the EU has quietly tolerated India’s oil trade, even as its refineries purchase Indian petroleum products derived from Russian crude. But Europe’s moral stake in Ukraine, seen as an assault on the EU itself, means Delhi’s actions could strain ties. 

India and the EU have been at loggerheads in their negotiation of a Free Trade Agreement, especially with ‘green protectionism’ in EU’s Carbon Border Adjustment Mechanism. EU wants market access into India’s agricultural industries. With India’s relationship with Russia in the public eye, European leaders may become even more cautious. 

Supply Shock
What if India were to stop buying Russian oil altogether? The consequences would be severe. 

India is the fourth-largest oil refining nation in the world, but imports over 80% of its crude. In 2024-25, it sourced over 87 million tonnes from Russia, more than a third of its total imports. That fuel powers not only exports worth over $60.08 billion, but also the domestic economy. With Russian oil contributing about 28% of the total crude refined in India, halting these imports would leave a gaping hole of $16 billion in petroleum exports alone. 

Private refiners like Reliance and Nayara Energy have enjoyed competitive prices and abundant supply. So too have public sector entities—BPCL, Indian Oil Corp and HPCL paid over $1 billion in dividends to the government last year, thanks in part to cheaper feedstock. Beyond balance sheets, everyday Indian consumers have benefited from lower prices at the pump. 

Finding alternative trading partners would also be a challenge. Iran is the only potential supplier offering comparable prices, but it comes with sanctions baggage of its own. A pivot to Tehran may merely swap one geopolitical headache for another. 

Global Shift 
Ultimately, Trump’s attack on India is not just about oil—it reflects a deeper anxiety in Washington. The post-Cold War order is fraying, and the BRICS+ bloc represents a challenge to Western dominance in both energy and finance. 

India, for now, remains the only BRICS+ member the US hasn’t thoroughly alienated. 

The biggest threat comes from the BRICS+ nations who have long tried to create a financial system free from dollar hegemony. The US’s overreach into Brazil’s judicial processes and trial of former president Jair Bolsonaro, the widespread sanctions against Russia and expansion of NATO, the ever-escalating trade war with China, cuts in USAID and tariffs against South Africa — all fit this narrative perfectly.

By targeting India, the US risks pushing Delhi further into BRICS+ alignment. So far, India has maintained a middle path: deepening Western ties without severing old ones. That equilibrium is now under stress. 

While Brazilian President Luiz Inácio Lula da Silva has engaged in a war of words with Trump and imposed reciprocal tariffs, Russia and China have taken economic and diplomatic countermeasures. 

The key question: Does the benefit of cheap Russian oil outweigh the risk of American retaliation? 

So far, the answer appears to be yes. The numbers nearly cancel each other out, and the strategic advantages tilt the balance in Russia’s favour. They include energy security, export competitiveness, and geopolitical leverage. 

But this isn’t a purely economic decision. The world is watching. And India, for once, is not merely reacting to a new order. It may be helping shape it.