Implications of a Potential Reduction in Russian Oil Imports by India and China
India and China are currently facing threats of secondary sanctions from US President Donald Trump over their continued purchases of Russian oil. This comes amidst the ongoing war in Ukraine and the international community's efforts to isolate Russia economically.
According to recent data, India's oil purchases from Russia have grown significantly. From just 0.1 million barrels a day in 2021, India's daily purchases rose nearly 19-fold to 1.9 million barrels a day in 2024. China, on the other hand, became the biggest importer of Russian oil in 2022, with its daily purchases rising by 50% to 2.4 million barrels a day.
The potential consequences of these oil purchases are far-reaching. Secondary sanctions could threaten Indian and Chinese companies' access to the US financial system, exposing banks, refineries, and shipping firms to serious repercussions given their integration into global markets. Higher oil prices would trigger a sharp rise in inflation both in the US and worldwide. The US Federal Reserve estimates that every $10 increase in crude adds about 0.2 percentage points to US inflation, and India's central bank reached a similar conclusion.
If Russia's five million barrels a day were suddenly removed from the oil market, analysts think oil prices could surge once again. In a worst-case scenario, if prices were to climb from the current $66 a barrel to $110-$120 per barrel, a roughly one percentage point inflation rise would drive up costs for consumers and businesses, especially in energy, transport, and food.
However, both India and China have vowed to protect their energy security and economic sovereignty against what they consider as "coercion and pressure" from the United States. Ritolia from our website speculated that India might "reduce" its Russian oil imports, but added: "I don't see us going down to zero anytime soon." China, on the other hand, may be exempt from the new US measures due to its larger trade volume with the US.
Trump has imposed a 25% tariff on Indian imports and issued an executive order for an additional 25% tariff on the same goods over India's purchases of Russian oil. This new tariff could spike India's oil bill by up to $11 billion. Alexander Kolyandr, a senior fellow at the Center for European Policy Analysis, stated that there is no immediate source to replace the five million barrels of oil currently being supplied by Russia.
Meanwhile, China's approach to secondary sanctions suggests that they are likely to refuse Russian transactions, forcing Moscow to rely on opaque intermediaries and third-country workarounds. Slovakia and Hungary have also positioned themselves against the secondary sanctions threatened by US President Donald Trump by continuing to purchase Russian oil despite the war in Ukraine. They have likely taken measures to safeguard their energy security and economic sovereignty by relying heavily on Russian oil imports and possibly resisting US and EU pressures to diversify energy sources quickly.
Despite these challenges, the EU overall aims to reduce and eventually stop Russian energy imports by 2027. However, this faces challenges from member states with stronger dependencies. India, on the other hand, saved up to $33 billion in energy costs between 2022 and 2024 due to large price cuts from Russia.
In conclusion, the ongoing situation surrounding Russian oil purchases is a complex issue with significant economic and political implications for India, China, and the rest of the world. As the situation continues to evolve, it will be interesting to see how these nations navigate these challenges and maintain their energy security and economic sovereignty.
