New U.S. Sanctions Bill on Russia Puts India's Modi in a Bind
Washington's new sanctions legislation creates a difficult choice for New Delhi as India balances Russian oil purchases, energy security and its growing trade relationship with the United States.
A new U.S. sanctions and tariff bill targeting Russia's energy trade could allow President Donald Trump to impose tariffs of up to 100% on countries that continue major purchases of Russian oil and gas, including India. The measure puts pressure on Prime Minister Narendra Modi's government to balance affordable energy supplies against India's large export relationship with the United States.
India's relationship with Russia is facing a new economic test after the U.S. Congress passed legislation designed to increase pressure on countries that continue buying Russian energy.
For Prime Minister Narendra Modi's government, the issue is particularly sensitive because Russian crude has become an important part of India's energy supply while the United States has become a major destination for Indian exports.
The legislation does not automatically impose a 100% tariff on India. Instead, it gives the U.S. president authority to impose tariffs of up to that level on countries purchasing Russian energy. That distinction leaves Washington with significant discretion over how the measure is ultimately applied.
What the New U.S. Bill Does
The House of Representatives passed the sanctions and tariff legislation by 262 votes to 159 on September 16. The Senate had already approved the measure by 86-11 in August, sending the legislation toward President Trump's desk.
The bill targets Russia's energy and defense sectors and includes measures against vessels associated with the country's so-called shadow fleet, which is used to move Russian oil while attempting to bypass Western restrictions.
One of its most consequential provisions would give the president authority to impose tariffs of as much as 100% on countries that remain major buyers of Russian oil and gas.
Why India Is Exposed
India is one of the world's largest oil importers and has become one of the biggest buyers of Russian crude since Russia's full-scale invasion of Ukraine in 2022.
Russian oil has offered Indian refiners access to supplies that can support the country's large energy requirements. New Delhi has repeatedly argued that its priority is maintaining secure, affordable and reliable energy for its population of about 1.4 billion people.
Indian refiners have already arranged some Russian oil supplies for September and October, according to people familiar with the transactions cited by Reuters.
The U.S. Market Creates Another Pressure Point
India's challenge is not limited to the price of crude oil. The United States is also India's largest export destination, making access to the American market strategically important for Indian manufacturers and exporters.
Reuters reported that Indian goods shipments to the United States reached $42.79 billion during April-August, compared with $40.39 billion during the same period a year earlier.
A major tariff on Indian exports could therefore affect businesses far beyond the oil sector, while continuing to buy Russian crude could expose India to additional U.S. trade measures.
India Warns About the Impact on Bilateral Ties
India's foreign ministry said New Delhi had already raised concerns with Washington about the potential effects of the legislation on bilateral relations and international energy markets.
The ministry said India remained committed to energy security and would continue sourcing supplies from different sellers according to market conditions. It also said New Delhi would take measures to protect its trade and economic interests.
The response reflects the two competing interests at the center of India's position: maintaining access to energy while protecting its broader commercial relationship with Washington.
Could Cutting Russian Oil Raise Costs?
Indian refiners have warned that sharply reducing Russian crude purchases could increase their costs, particularly at a time when global oil markets are already facing supply disruptions.
Reuters reported that some refining sources were seeking discussions with the Indian government and U.S. authorities over possible flexibility, including time to unwind existing transactions.
Any rapid shift away from Russian crude would require Indian refiners to replace large volumes from other suppliers. That could affect purchasing costs and, depending on market conditions, put additional pressure on fuel prices.
India-U.S. Trade Talks Face Another Complication
The sanctions legislation arrives while India and the United States are also working through broader trade negotiations.
The possibility of additional U.S. tariffs could complicate those discussions, particularly because Washington has been seeking changes in India's trade and energy policies while New Delhi has been pushing for greater access and more favorable terms.
The situation therefore links energy policy directly to trade diplomacy. Decisions about where India buys oil could have consequences for negotiations covering a much wider range of goods and services.
Russia Remains Important to India's Energy Strategy
India has maintained economic and strategic ties with Russia even as it has expanded cooperation with the United States, Europe and other partners.
Russian crude became particularly important to Indian refiners after Western sanctions changed global oil trade patterns following the invasion of Ukraine. India has argued that purchasing energy based on price and availability is part of protecting its domestic energy needs.
The new U.S. legislation increases the cost of maintaining that position if Washington ultimately chooses to use the tariff authority against India.
What Happens Next
The immediate question is how the Trump administration will use the authority provided by Congress. A maximum tariff of 100% is permitted by the legislation, but the law gives the president discretion rather than automatically applying that rate to India.
India is likely to continue discussions with Washington while also assessing alternative oil supplies and the potential economic effects of reducing Russian purchases.
The outcome will depend on several factors, including U.S. policy decisions, global oil prices, India's ability to diversify crude supplies and the direction of the broader India-U.S. trade relationship.
India's Russia oil strategy is now closely connected to its relationship with Washington. The next decisions in New Delhi and Washington could influence energy costs, Indian exports and the direction of one of the world's most important emerging trade relationships.
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