India and China Stand Firm Against US Sanctions on Russian Oil Imports
India and China have both resisted the pressure from the United States, particularly under the administration of former President Donald Trump, who threatened secondary sanctions over their continued purchases of Russian oil. These sanctions are aimed at countries that do business with sanctioned nations, and they pose a significant challenge to India and China’s energy strategies.
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The two nations have emphasized their commitment to protecting their energy security and economic sovereignty. China has emerged as the largest importer of Russian oil in 2022, while India has significantly increased its imports over the years. This shift is not without controversy, as it has drawn criticism from the West, which accuses these countries of hypocrisy for continuing to import Russian energy despite the ongoing conflict in Ukraine.
India has pointed out that the European Union, despite reducing its reliance on Russian energy, still imports a considerable amount. Additionally, New Delhi has highlighted that the United States previously supported its oil purchases from Russia, which helped stabilize global oil prices after the invasion.
Between 2021 and 2024, India’s oil imports from Russia surged nearly 19-fold, rising from 0.1 to 1.9 million barrels per day. Meanwhile, China’s imports increased by 50% to 2.4 million barrels a day. This surge in trade has allowed India to save up to $33 billion in energy costs between 2022 and 2024, thanks to significant price discounts offered by Moscow.
Trump’s Tariff Threats and Market Reactions
Trump’s recent threats of additional tariffs have caused market volatility. He imposed a 25% tariff on Indian imports and issued an executive order for an additional 25% tariff on the same goods due to India’s purchases of Russian oil. This move has led to a nearly 1% rise in oil prices and could potentially increase India’s oil bill by up to $11 billion. The Indian government has condemned this new levy as “unfair, unjustified, and unreasonable.”
The proposed secondary sanctions would target other countries and entities involved in trade with Russia. If implemented, these sanctions could severely impact the Russian economy, which is already under strain from Western sanctions. Military spending now exceeds 6% of GDP, and inflation is estimated to be around 15-20%, putting immense pressure on Russia’s budget and arms production.
For global markets, these sanctions could trigger a significant shock in energy prices and trade flows, reminiscent of the situation in 2022 when oil prices spiked. Analysts suggest that if India had not purchased Russian crude, oil prices could have been much higher.
Economic Implications and Global Impact
If Russia were to lose five million barrels of oil per day from the market, analysts predict a sharp rise in oil prices as countries scramble to find alternative sources. Even with OPEC increasing output, replacing such a large volume would be challenging given limited spare capacity and logistical constraints.
Higher oil prices could lead to increased inflation globally. The U.S. Federal Reserve estimates that every $10 increase in crude adds about 0.2 percentage points to U.S. inflation. Similarly, India’s central bank has reached similar conclusions.
China appears to have more leverage than India in dealing with U.S. pressures. With a trade volume of over $580 billion with the U.S., China’s economic scale gives it bargaining power that India lacks. However, India continues to rely heavily on Russian oil, with imports hitting an 11-month high in June.
Future Outlook and Strategic Moves
Despite the challenges, Indian refiners continue to purchase Russian oil, driven by geopolitical considerations and competitive pricing. However, the margins have narrowed, with discounts now around $5 per barrel, compared to $15-$20 in 2022.
Russia is actively seeking to maximize its energy revenues, with rising demand from Turkey and other Asian countries. While Chinese banks are increasingly avoiding Russian transactions, India is seen as more likely to hedge its positions, reducing purchases if pressured but not abandoning discounted Russian crude entirely.
Analysts suggest that India might reduce its Russian oil imports, but a complete cessation is unlikely. The balance between economic interests and geopolitical pressures will continue to shape the future of India’s and China’s energy strategies.
