India Navigates Oil Diversification Amid Tariff Tensions

New tariffs challenge energy security strategy, with broader geopolitical implications

India is facing a complex energy security landscape, attempting to balance its import needs with growing international trade pressures. Recent tariff decisions have put the nation’s strategy for diversifying oil sources under scrutiny.

Shifting Supply Lines

New Delhi began importing Russian crude following the Ukraine conflict, as traditional Middle Eastern supplies were redirected. Iraq, Saudi Arabia, and the United Arab Emirates remain significant suppliers, collectively accounting for 45% of India’s oil imports in 2024.

Minister of Petroleum and Natural Gas Hardeep Singh Puri highlighted India’s broad diversification efforts, noting that the country now sources oil from approximately 40 nations. Emerging suppliers like Guyana, Brazil, and Canada are also contributing to the market.

Navigating Trade Disputes

The Indian government has voiced strong disapproval of recent tariff impositions, labeling them “unfortunate, unfair, unjustified and unreasonable.” Foreign ministry spokesman Randhir Jaiswal stated that India would take necessary steps to safeguard its interests, emphasizing that imports are driven by market dynamics and the nation’s energy security objectives for its 1.4 billion citizens.

Analyst Ashley Tellis of the Carnegie Endowment for International Peace suggests that these pressures place Prime Minister Narendra Modi in a difficult position. “India is now in a trap,” Tellis observed, “because of Trump’s pressure, Modi will reduce India’s oil purchases from Russia, but he cannot publicly admit to doing so for fear of looking like he’s surrendering to Trump’s blackmail.” Reuters has previously reported that India’s state refiners had temporarily halted Russian oil purchases.

Geopolitical Ripples: US, China, and India

China remains the world’s largest importer of Russian crude, with Türkiye also being a significant buyer. Former US President Donald Trump has warned countries purchasing Russian exports could face sanctions if a peace deal with Ukraine is not reached.

However, imposing similar tariffs on China presents distinct challenges, according to Dr. Susan Stone, Chair of Economics at Credit Union SA, University of South Australia. “China’s been showing its willingness to retaliate, and of course, it has the economic heft behind it to make those retaliatory measures more painful, maybe than other countries to the US,” she explained. Dr. Stone noted that US trade with China is five times larger than its trade with India, making any punitive measures against Beijing potentially more impactful.

As part of ongoing trade negotiations, Trump has implemented 30% tariffs on Chinese goods, a rate lower than the combined import taxes India faces. Former Indian trade official Ajay Srivastava described Trump‘s actions toward India as hypocritical, especially given China’s larger volume of Russian oil purchases. “Washington avoids targeting Beijing because of China’s leverage over critical minerals, which are vital for US defence and technology,” Srivastava told AP.

According to the U.S. Energy Information Administration, the global average price for Brent crude oil was approximately $84.74 per barrel in May 2024, highlighting the fluctuating cost considerations for all nations. This figure underscores the economic factors at play in India’s pursuit of stable and affordable energy supplies.