Former Reserve Bank of India Governor Raghuram Rajan has said that India should reassess its policy on Russian oil imports after the country was targeted with 50% tariffs by the Trump administration for buying energy from Russia.
The levies that came into effect on Wednesday morning are among the steepest imposed on any Asian economy. Analysts warn they could hit thousands of small exporters and jobs.
In an interview with India Today, the noted economist, speaking against the backdrop of Washington’s steep tariffs against India, stated that “We need to ask who benefits and who is hurt. Refiners are making excess profits, but exporters are paying the price through tariffs.”
If the benefit is not large, perhaps it is worth considering whether we should continue these purchases, he stated. He also described the tariffs as “deeply distressing” and a clear “wake-up call” for New Delhi to reduce its dependence on any single trade partner.
Rajan warned that trade, investment, and finance have increasingly been weaponised in today’s global order and that India should tread carefully.
“This is a wake-up call. Let us not become dependent on any single country to a large extent. Let us look east, to Europe, to Africa, and continue with the US, but unleash reforms that will help us achieve the 8–8.5% growth needed to employ our youth.”
The Trump administration has imposed a heavy tariff on India for sourcing Russian crude, even as China, the top importer of Russian oil, and Europe, which continues to purchase substantial energy supplies from Moscow, have avoided such measures from Washington.
“I don’t care what India does with Russia,” Trump claimed on Truth Social, his social network, last month. “They can take their dead economies down together, for all I care.”
External Affairs Minister S Jaishankar has called Washington’s demand that New Delhi stop buying Russian crude “unjustified and unreasonable” and accused the West of hypocrisy, noting that Europe trades far more with Russia. To avoid the extra US tariff, India would have to replace about 42% of its oil imports.
“It’s funny to have people who work for a pro-business American administration accusing other people of doing business. If you have a problem buying oil or refined products from India, don’t buy it. Nobody forces you to buy it. Europe buys, America buys, so you don’t like it, don’t buy it,” he said, responding to criticism of India’s purchases of Russian crude.
He noted that in 2022, when oil prices surged, there was global concern. “In 2022, there was deep nervousness on the international level due to oil prices going up. That time, it was said that if India wants to buy Russian oil, let them, because that would stabilise prices,” he added.
Trump’s strategy is in a sharp contrast to the former Biden administration, which had welcomed India’s Russian oil purchases in order to help keep global oil prices, which hit a peak of $139 a barrel in 2022, in check.
For now, India is unlikely to stop importing Russian oil due to energy security, people familiar with the matter told Reuters.
However, India’s imports of Russian oil are expected to fall in September from August, after state refiners paused their purchases due to smaller discounts, according to LSEG trade flow data.
India’s Russian oil imports are expected to remain subdued as state refiners are not keen to buy at reduced discounts and are instead scouting for only distressed cargoes, Indian refining told Reuters.
Discounts for Russian Urals crude delivered to India have narrowed to about $2.50 per barrel to dated Brent, Reuters said, versus discounts of $20–$25 per barrel when the war began in February 2022.
Indian officials said it is difficult to replace Russian oil supplies as the cost of replacement barrels will rise significantly.
