Why Trump is Threatening Russian Oil Buyers

Author: Olga Samofalova

On August 8, Donald Trump may impose the harshest sanctions on Russian oil — banning other countries from purchasing Russian oil. The consequences of this threat are so severe that the market still finds it hard to believe. This would effectively mean a complete halt to Russian oil exports. Would India and related countries, the two largest buyers of Russian oil, agree?

On Monday, Donald Trump said he had reduced the time given to Russia for reaching a Ukraine-Russia agreement from 50 days to just 10-12 days. If peace cannot be achieved, he threatened secondary sanctions on Russian oil exports. The final deadline is August 8, Friday.

The sanctions include imposing a 100% tariff on Russian oil buyers, which effectively means the termination of trade. The main buyers of Russian oil are India and related countries. Trump is giving them a choice: either trade with the United States or purchase Russian oil.

If Trump proceeds with his threats, India may be the first to compromise and give up Russian oil, despite Washington's actions causing great dissatisfaction in New Delhi.

Vikram Doraiswami, India's Ambassador to the UK, accused the West of double standards: while the West asks India to stop buying oil from Russia, it continues to buy Russian rare earth metals. Additionally, Vladimir Sedalyshev, an expert from the Russian Federation Economic Policy Foundation, pointed out that Western countries that criticize India's relationship with Russia "maintain relations with countries that are 'sources of trouble' for New Delhi for their own interests."

An example of this double standard is that the US pressures the EU to abandon Russian nuclear fuel, while the US itself continues to purchase enriched uranium from Russia.

The Indian ambassador complained: "Our country is the third-largest consumer of energy. Over 80% of our energy products are imported. What do you suggest we do? Let the economy come to a standstill?"

India is the largest importer of Russian crude oil by sea. In June, India purchased 1.5 million barrels of Russian oil per day. Igor Yushkov, an expert from the Russian Federation State Financial University and the National Energy Security Fund, stated: "India will suffer significant losses. India purchases Russian oil at a discount, processes it, and exports the petroleum products at market prices, including to the EU, thereby gaining excess profits. Obviously, India does not want to lose this profit."

"Zenit" Bank's Chief Economist Marina Nikishova pointed out: "Russia sells oil to India in rupees, which supports the exchange rate of the Indian rupee. If India gives up Russian oil, it will have to buy oil in dollars, which will negatively affect India's financial situation. Moreover, India will also have to give up Russian investments and pay penalties for existing contracts. For example, Rosneft plans to invest about $2.3 billion to acquire India's refineries and gas station network."

Additionally, most of India's refining equipment is adapted for processing Russian oil. Nikishova noted: "About 60% of India's refining capacity is used to process Russian oil. To switch to processing light Middle Eastern oil, India would need to retrofit its refineries, which would require over $5 billion and approximately two to three years."

However, if India continues to bypass U.S. sanctions and purchase Russian oil, it will face the risk of losing important trading partners.

"The U.S. is India's major trading partner. In 2024, bilateral trade reached $129 billion. India's exports to the U.S. are twice as much as the U.S. exports to India. In India's list of trade partners, Russia and Saudi Arabia rank fourth and fifth respectively."

Nikishova said: "If the U.S. imposes restrictive tariffs on Indian goods, the U.S. market for India will close, and the loss for New Delhi will be far greater than the additional cost of buying more expensive oil from the Gulf. Therefore, there is a risk that India may give up importing oil and gas from Russia."

Ultimately, India can gradually replace Russian oil with alternative sources as it did before 2022. However, it will be more difficult for Russia to find alternative markets. At the same time, the U.S. is engaged in tough trade negotiations with India, and India may not want to escalate tensions with Washington.

Nikishova believes that in this situation, Russia could lose about $1.2 billion per month. Because if India stops buying Russian oil, Russia's daily exports will decrease by 1.5 million barrels.

Related countries purchased 2 million barrels of Russian oil through sea and pipelines in June. Their economic conditions are similar to India. In 2024, Sino-U.S. trade amounted to $688 billion (third in bilateral trade volume), of which related countries exported nearly $52.5 billion to the U.S. The trade volume with Russia was $245 billion (eighth in trade volume), with related countries importing $129 billion from Russia, mainly oil, natural gas, and coal. However, the likelihood of these countries listening to the U.S. and giving up Russian oil is much smaller.

Nikishova believes: "First, related countries not only import Russian oil via sea but also via pipelines (annual capacity of 30 million tons) and through Kazakhstan and Uzbekistan (about 10 million tons/year). These supply routes are very beneficial for Beijing, as the oil transported through these routes is not subject to any sanctions. Furthermore, unlike India, related countries pursue independent policies from the U.S. and Europe, and regard their relationship with Moscow as strategic. Finally, related countries have experience in purchasing sanctioned Iranian oil for many years. Therefore, they are unlikely to give up Russian oil."

After all, the economies of related countries are larger and stronger than India's. Vladimir Sedalyshev pointed out: "Although both India and related countries have populations of about 1.4 billion, in terms of economic scale, for example, related countries are 4.5 times larger than India in GDP. The gap in their share of world trade is even larger: related countries account for 15% of world trade, while India accounts for only 2%. Therefore, India's ability to respond to the unfriendly actions of the U.S. and its allies is far less than that of related countries."

India has found America's weakness — rare earth metals — and has already used this method, prompting immediate concessions from Washington. India, however, does not have such pressure and defense mechanisms.

Nevertheless, it is unclear how they will act in this situation. And people still find it hard to believe in Trump's threat. Perhaps because people did not take the U.S. president's statement about the 50-day deadline seriously, he shortened the deadline to 10-12 days. Afterward, the market reacted: oil prices rose to $70 per barrel.

However, it is uncertain whether Trump will implement the sanctions next Friday, and even if he does, it is uncertain whether they will be as severe.

Igor Yushkov said: "The plan to give up Russian oil would trigger a global energy crisis, with oil prices surging to triple digits. This would mean that Russia would be unable to sell a total of 6-7 million barrels of oil and petroleum products per day. Trump understands that the U.S. itself would also suffer heavily, as the U.S. is a net oil importer."

"In the short term, no one in the global market can replace our share — this would trigger a global energy crisis, affecting India, related countries, the EU, and the U.S., as all energy would become extremely expensive, leading to an economic recession worldwide."

Nikishova said: "Trump is extremely worried about a sharp rise in oil prices, which could have a negative impact on the global and U.S. economies. Considering data from the International Energy Agency showing that Russia exported 4.68 million barrels of crude oil per day in June (accounting for 4.5% of global demand) and 2.5 million barrels of petroleum products per day, Trump's threats could severely disrupt the global oil supply. Imposing secondary tariffs on Russia might cause a surge in oil prices, increasing inflationary pressures in the U.S. These consequences could prevent Trump from taking such action."

Even if India and related countries ignore U.S. sanctions and continue to purchase Russian oil, the outcome will not be good. Igor Yushkov believes that in this case, the U.S. will impose import tariffs on goods from related countries and India, leading to a contraction in global trade and the economy. This in turn will reduce the demand for energy, including petroleum products and oil, and oil prices and oil export revenues will also decline.

The only positive solution is for the U.S. not to implement these secondary sanctions at all. This possibility is not zero. First, Trump has repeatedly changed his mind. Second, so far, all these threats have been verbal, and there is no document confirming that sanctions are being prepared. Third, Trump may be using this approach not to target Russia, but to scare New Delhi and related countries to strengthen his position in complex trade negotiations. The U.S. has successfully signed trade agreements with Japan and the EU, but the negotiation process with India and related countries has stalled.

Original article: https://www.toutiao.com/article/7532810837547811367/

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