German media: Don't buy Russian oil: Will India give in to Trump's "secondary sanctions"?

Trump imposed secondary sanctions on India to block the source of funding for Moscow's war. What impact will the crackdown on Russian oil trade have on the global market? Will India make concessions beyond its strong diplomatic statements?

US President threatens to impose secondary sanctions, and India responds firmly. India purchases crude oil from Russia, which is a key financial pillar for Moscow's war against Ukraine.

India accuses the West of hypocrisy, stating that EU countries are still continuing to import Russian energy despite the EU significantly reducing its dependence after the war in Ukraine.

From 2021 to 2024, India's imports of oil from Russia increased nearly 19 times, from 100,000 barrels per day to 1.9 million barrels per day. China saw an increase of 50%, reaching 2.4 million barrels per day.

Analysis: India saves $3.3 billion

Katinas, an energy analyst at the Center for Research on Energy and Air (CREA) in Lithuania, told DW that as the second-largest recipient of Russian oil, India saved up to $3.3 billion in energy costs between 2022 and 2024. Because Europe and the US cut their reliance on Russian oil and gas, Moscow offered significant price discounts on crude oil to India.

Katinas said that India has long pursued a policy of balancing relations with the US, Russia, and China. The decision to purchase discounted Russian oil shows that New Delhi prioritizes energy security and prices.

This Wednesday, Trump signed an executive order, adding an additional 25% tariff on top of the existing 25% tariff on India, due to India's purchase of Russian oil.

As soon as the news broke, crude oil prices rose nearly 1%. Indian media reported that the new tariffs could increase the country's oil spending by $11 billion. New Delhi called the additional tariffs unfair and unreasonable.

Trump stated that the tariffs will take effect in 21 days, giving India and Russia time to negotiate import taxes with the US. Trump expects to announce broader secondary sanctions against other countries and entities that have oil trade with Russia. The White House said details will be released on Friday.

International oil prices may rise sharply

For the Russian economy, the secondary sanctions will bring another major blow. The country's economy is already struggling due to Western sanctions. Russia's military spending now exceeds 6% of GDP, and some analysts say the country's inflation rate has reached 15-20% - official figures are 9%.

For the global market, the new sanctions could lead to a similar energy price surge as in 2022.

Litoria, a petroleum analyst at the Kpler Trade Institute in New Delhi, told Germany's DW: "If India had not purchased Russian crude oil in 2022, it is speculated that the oil price might have been $100, $120, or even $300 per barrel." In the weeks before Russia's invasion of Ukraine, WTI crude oil prices fluctuated between $85 and $92 per barrel.

India "has no choice"

Trump's implementation of a 25% "secondary tariff" may now leave India with no choice but to at least cut back on part of its oil trade with Russia. If there are more sanctions measures, it would be like adding insult to injury.

Katinas said that the secondary sanctions pose a significant threat to Indian companies, including access to the US financial system. Indian banks, refineries, and shipping companies also face serious consequences because they have integrated into the global market.

Analysts believe that if 5 million barrels per day of Russian crude oil suddenly disappear from the market, oil prices may rise again, as affected countries will turn to other sources to purchase oil. Even though OPEC recently increased its output, given limited capacity and logistical constraints, it will be difficult to fill this huge gap in the short term.

Litoria told DW that Indian companies may need a year to cut their dependence on Russian oil.

A rise in oil prices could also lead to a surge in inflation in the US and around the world. The Federal Reserve estimates that a $10 increase in oil prices would raise the US inflation rate by 0.2%. The Reserve Bank of India has reached a similar conclusion.

Sources: DW

Original: www.toutiao.com/article/1839933383668170/

Statement: This article represents the views of the author.