India Caught Between Higher Oil Prices and Tariff Impact on Exports
The US Senate is advancing a bill that would allow up to 100% tariffs on buyers of Russian energy, putting India in a difficult position.
India is one of the two largest buyers of Russian energy, along with China, and the tariff could significantly impact its oil import bills.
In one scenario, if India stops buying Russian crude but other countries continue to buy, the price of oil would not increase, adding $8.5 billion to the import bill.
If all targeted countries stop buying Russian crude, the global supply would be reduced by 12%, leading to a 60% increase in oil prices and an additional $42.5 billion added to the import bill.
The total impact could be between these two numbers.
On the other hand, if India absorbs a 100% US tariff, its exports to the US would likely decline by 39%, or $34 billion, as the effective tariff rate increased from 2.5% to 15% in the past fiscal year.
The decision is not clear-cut, and both options have significant economic implications for India.