How India's Russian Oil Imports Impacts its US Exports

Presumably the Indian government sees the economic benefits from cheap Russian oil imports to more than offset the hit from higher US tariffs

(Image: Courtesy Wikimedia Commons.)

September 5, 2025

The US decision last month, to raise tariffs on Indian imports to 50%, punctured a couple of major beliefs about the relationship between the two countries. One was that there is a close personal bond between President Donald Trump and Prime Minister Narendra Modi. The other was that the US viewed India as a close ally to help counter China’s rise as a military and economic power.

Instead, last week, in his first visit to China in seven years, Modi strengthened ties with President Xi-Jinping - as well as with Russian President Vladimir Putin. Modi said India and China were “committed to progressing our relations based on mutual respect, trust and sensitivities.” In turn, Xi said the world’s two most populous countries, the “dragon” and the “elephant”, should work together.

The US is India’s largest trading partner. Using the clout of the US as the dominant economic power, Trump’s administration seeks two primary objectives in its trade negotiations with Modi: sharply reduce India’s trade surplus and end India’s imports of Russian crude oil.

In 2024, India’s trade surplus with the US was $45 billion: India exported $87 billion in goods, while imports were $42 billion. Since 2022, after Russia’s invasion of Ukraine, Russian oil sells at a discount to global market prices due to Western sanctions. Meanwhile, from almost nothing in 2021, crude oil from Russia currently accounts for about 40% of India’s imports, according to energy research firm Kpler. India imports nearly 90% of its oil, which totals more than 4.5 million barrels per day.

There are two primary importers in India of the Russian oil: Reliance, the Indian conglomerate run by Mukesh Ambani, and Nayara Energy, which is majority Russian-owned. Their major refineries are located in Gujerat, Modi’s home state.

Buying oil from Russia saves India several billion dollars a year, according to estimates. Indian refiners are “just profiteering,” US Treasury Secretary Scott Bessent told CNBC. They are “buying cheap Russian oil, reselling it as product…They’ve made $16 billion in excess profits — some of the richest families in India.”

A Reliance spokesperson told the Wall Street Journal that Indian refiners were not making high profits by buying Russian oil since the shipping costs were high. If the profits - and cost savings - are indeed low, it makes little economic sense for the Modi government to allow Indian refiners to buy discounted Russian oil, thereby exposing India to punitive US and Western actions for enabling Russia to evade sanctions.

In fact, last month the Trump administration added an additional 25% in tariffs on Indian imports, doubling the total tariffs to 50%, since India continued to import Russian oil. The ostensible reason is that it is part of the US efforts to put economic pressure on Putin to end Russia’s invasion of Ukraine. India does not “care how many people in Ukraine are being killed by the Russian War Machine,” Trump wrote on social media. But Indian officials point out that the US as well as Western European nations continue to import billions of dollars of Russian goods, ignoring sanctions.

The 50% tariffs is forecast to reduce India’s exports to the US by as much as $35 billion, to around $50 billion, this fiscal year. The drop in exports will hurt the Indian economy, adding millions to the ranks of the country’s already massive pool of unemployed labor.

Apparently, the Modi government figures there is a major economic benefit from importing cheap Russian oil. Also, that the benefit more than compensates for the drop in Indian exports to the US - estimated to total $17 billion, from the additional 25% tariff imposed by the Trump administration, for India’s Russian oil imports.

Also, while in recent years, India has been buying more defense equipment from the US, it is still very reliant on Russia for its defense needs. Since 2008, India has spent $48 billion on defense imports, with nearly two thirds of the weapons sourced from Russia, and only a tenth from the US; French sales were higher than the US at 12%.

If tensions escalate, the Trump Administration could cancel the temporary work visas of some of the roughly 400,000 Indians in the US; in addition to deporting several hundred thousand Indians who are in the US illegally. In response, the Modi government could restrict the operations of US technology companies in India, especially the social media companies. India is the largest market in terms of subscribers, with great potential for subscriber and revenue growth, for Facebook, Instagram, YouTube, and other US social media companies.

Responding to last week’s India, China, and Russia summit in China, Trump posted on Truth Social, “Looks like we’ve lost India and Russia to deepest, darkest, China.”