Trade war: India's Russian oil imports set to rise; move comes after US slaps 50% tariff

India is set to increase its Russian oil imports by 150,000-300,000 barrels per day in September, despite the US doubling tariffs on Indian exports to 50% in response to New Delhi's continued reliance on Moscow's crude. This surge is driven by attractive discounts on Russian Urals crude, now $2-$3 per barrel below Brent for September loadings, making it economically compelling for Indian refiners who source nearly 40% of their crude from Russia. Analysts indicate India is unlikely to significantly curb these imports without a clear policy directive or major economic shift, as a sharp reduction could remove 1 million bpd from global supply, potentially pushing oil prices toward $100 a barrel and impacting Russia's wartime revenues.

Analysis

Despite the United States doubling tariffs on Indian exports to 50%, India is set to increase its Russian oil imports in September, signaling a prioritization of energy security and cost-effectiveness over geopolitical pressure. Indian refiners are expected to raise purchases by 150,000 to 300,000 barrels per day (bpd), driven by widening discounts on Russian Urals crude, which are now offered at $2-$3 per barrel below the Brent benchmark. This comes as Russia increases export availability due to domestic refinery outages. Currently, Russian oil constitutes nearly 40% of India's crude needs, averaging around 1.5 million bpd. Analysts from BNP Paribas and Kpler suggest India is unlikely to curb these imports in any meaningful way without a clear government directive or a significant shift in trade economics. The situation highlights a critical tension in global energy markets: a halt in India's purchases could remove approximately 1 million bpd from global supply, potentially triggering a price spike toward $100 a barrel and severely impacting Russia's key revenue stream.

Key Decisions for Investors

• Investors should anticipate heightened volatility in global crude oil prices, as the standoff introduces a significant supply-side risk; any move by India to curb Russian imports could tighten the market by nearly 1 million bpd.
• The widening discounts on Russian crude may boost gross refining margins for Indian refiners, but this benefit is accompanied by escalating geopolitical risk from US tariffs, which could impact the broader Indian economy.
• Monitor diplomatic developments between the US and India closely, as the 50% tariffs could be a precursor to broader trade disputes, affecting investments with Indian exposure.
• Given that the full impact of these tariffs on physical oil flows will likely only be evident in cargoes arriving in October, it may be prudent to await further data before making significant adjustments to energy or emerging market positions.