US Tariff Removal Deal to Slash India's Russian Oil Imports by Half
In a significant development for global energy markets, US President Donald Trump has signed an executive order that removes the 25% penal tariffs imposed on Indian exports to the United States. This crucial decision is directly contingent upon New Delhi halting its imports of Russian crude oil, a move that is expected to drastically reduce India's procurement from Russia.
Sharp Decline in Russian Oil Imports Already Underway
Data from the analytics firm Kpler reveals that India's crude oil imports from Russia have already been declining since the Trump administration imposed sanctions on major Russian oil companies Rosneft and Lukoil. In January, imports stood at approximately 1.2 million barrels per day, a notable decrease from the peak of nearly 2 million barrels per day recorded in 2024.
The finalization of the India-US trade agreement is projected to result in Russian crude imports dropping by 50%, according to a detailed Bloomberg report. Sources indicate that both state-run and private refiners in India—with the notable exception of Nayara Energy Ltd—had already ceased purchasing spot cargoes following President Trump's initial reference to the trade deal in a social media post last week.
Government and Industry Response to the Executive Order
The Trump administration has publicly stated that India has committed to ending both direct and indirect imports of oil from the Russian Federation. The executive order explicitly warns that tariffs on Indian exports to the US could be reinstated or increased if such crude imports resume.
Foreign Secretary Vikram Misri addressed the situation on Monday, emphasizing that India will continue to source energy from a diverse range of suppliers. "India's approach on crude oil purchases has been to maintain multiple sources of supply and diversify them to ensure stability and security. The national interests will be the guiding factor for us in our choice," he stated.
Meanwhile, Foreign Ministry spokesperson Randhir Jaiswal reiterated on Saturday that safeguarding the country's energy security remains a "supreme priority," adding that India will persist in its efforts to diversify its sources of energy imports.
Refiners Scrutinize Order as Imports Expected to Plummet
Sources quoted in the Bloomberg report confirmed that Indian refiners spent the weekend meticulously examining the details of the US executive order. Notably, they have not yet received any formal instructions from the Indian government regarding implementation.
The pause in crude oil purchases is now expected to continue following the executive order issued on Friday, with imports likely to drop to roughly half of January's average level of about 1.2 million barrels per day.
Nayara Energy and Long-Term Projections
Nayara Energy, which counts Rosneft as a major shareholder, is anticipated to continue purchasing approximately 400,000 barrels per day of Russian crude. This continuity is largely due to sanctions that limit its ability to secure oil from alternative suppliers.
Vandana Hari, founder of the Singapore-based consultancy Vanda Insights, provided analysis to Bloomberg, suggesting that once the adjustment process is completed, India's overall imports from Russia may stabilize at around 400,000 to 500,000 barrels per day. She noted that the broader economic gains from a trade agreement with the United States are likely to outweigh the financial advantages offered by discounted Russian oil.
Historical Context and Market Shifts
Before the onset of the Russia-Ukraine conflict in early 2022, India purchased minimal amounts of Russian oil. However, in the subsequent period, India emerged as the largest global buyer of these supplies, capitalizing on discounted prices. The new trade dynamics with the United States mark a significant shift in this pattern, reflecting evolving geopolitical and economic priorities.
