OPINION | Does Imposition Of US Tariffs Present A Strategic Opportunity For India’s Energy Security?

Making strategic moves to navigate the prevailing state of affairs becomes critical to accelerate the nation’s development.

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By Manjeev Singh Puri, Pritish Kumar Acharya, Gopal K. Sarangi

India, as the third-largest energy-consuming country, now faces a formidable challenge following the imposition of a steep 50% tariff by the US on its exports. This tariff is structured as a composite measure, comprising a 25% reciprocal tariff and an additional 25% punitive surcharge over and above existing duties. Such unilateral action risks distorting the global trade order and disrupting existing energy trade equations, potentially escalating volatility and deepening instability in energy markets.

It gets pronounced in a juncture where the global climate governance is throttled by divisive and disruptive domestic climate actions by a few large emitters. Besides, this measure directly challenges India’s foreign trade policy, diplomatic positions, and significantly undermines India’s energy ambitions. Beyond an economic punishment, this strategic move by the US exemplifies authoritarian trade tactics aimed at stalling a key trading partner’s developmental trajectory.

In a way, the US, by imposing such a penalty, tactically puts pressure to make a business sense for its own oil exports. In this disrupted landscape, India must convert adversity into a strategic opportunity, advancing its energy and climate leadership through decisive, forward-looking actions. 

Fact Of The Matter 

According to NITI Aayog, India’s primary energy supply is dominated by coal with a share of nearly 60%, followed by oil (28%), and gas (7%), as of 2023-24. Oil remains critical for the nation’s transport, residential, and commercial sectors, thereby establishing its relevance in the energy portfolio. The US imposed tariffs on India, citing concerns over trade imbalances and alleging that India’s continued purchases of discounted oil from Russia are not only indirectly helping to "fuel" Moscow’s war efforts but also enabling Indian refiners to benefit through arbitrage. Senior US officials have accused India of profiteering by purchasing cheap Russian crude, refining it, and then exporting petroleum products, especially to markets that have restricted access to Russian oil.  

With effect from August 27, 2025, the 50% tariff decision targets over 70% of Indian commodities, or about $60 billion of exports to the US This ruling affects a wide spectrum of goods ranging from textiles to automobile components and fisheries. Notably, however, energy, pharmaceutical, and certain other technological imports from India remain exempt, reflecting a selective approach by Washington. This comes against the backdrop of commercial interests and domestic considerations by the US, given the affordability of Indian goods and inadequate local production in the US, especially pharmaceuticals, which cannot completely substitute imports in the short term. The Ministry of External Affairs maintains that this targeting is "unjustified and unreasonable", with leading oil players asserting "no pause" on Russian oil shipments, prioritising the country's energy security over Western expectations. 

With $50.28 billion in exports in FY25, Russia was India's biggest oil supplier, followed by Iraq ($27.35 billion), Saudi Arabia ($20 billion), and the United Arab Emirates ($13.86 billion). In the first half of 2025, Russia supplied about 1.75 to 1.8 million barrels per day (mb/d), accounting for 35% to 40% of India's crude imports, a stark rise from just 2.5% in 2022. India’s preference for Russian oil largely stems from the substantial discounts Russia offers compared to other suppliers, enabling Indian refiners to reduce costs and help control domestic inflation and fuel prices. 

Russia, facing Western sanctions and a shrinking pool of buyers, strategically turned to India as a reliable and growing market, offering competitively priced crude often below the EU's $60 per barrel price cap to sustain its oil revenues. Although discounts on Russian oil have narrowed from $13–$14 per barrel in 2023 to about $1.5–$2 today, the economic benefits remain significant for Indian refiners, who also profit by refining and exporting to global markets. Furthermore, what adds to the narrative is the fact that Indian refiners are allowed to pay Russian exporters in Indian rupees through Special Rupee Vostro Accounts (SRVAs), allowing payments to be settled efficiently without currency conversion expenses and exchange rate risks. 

Political Economy At Play 

What makes these tariffs especially unreasonable is the evident double standard applied by the US. According to a Centre for Research on Energy and Clean Air (CREA) analysis, China accounted for 47% of Russia’s crude oil exports, followed by India (38%), while the EU also contributed 6%. Moreover, the EU leads in Russian pipeline gas imports (37%), followed by China (30%) and Turkey (27%), none of whom have encountered comparable punitive measures by the Trump administration. 

Adding to the contradiction, the US itself continues to import significant quantities of key Russian commodities such as uranium, palladium, fertilisers, and certain chemicals essential for its industries, even as it weighs punitive tariffs against India. This selective targeting reveals political motives that transcend the rhetoric of energy security or national interest while complicating diplomatic relations. 

Seizing The Strategic Opportunity 

This moment represents a golden opportunity for India to strategically navigate its energy policy by taking balanced, constructive steps toward an energy-secure future. In an evolving geoeconomic landscape characterised by uncertainties, the possibility of reducing dependency on Russian oil remains questionable at least in the near future.

While India is striving hard to explore all possible domestic options to secure energy resources, it continues to rely on international markets for a stable energy supply. Beyond energy security, given the development trajectory and low per-capita income of India compared to global averages, energy affordability holds immense importance in energy policy making. 

Hence, prudent risk management by leveraging different trade channels, including those beyond conventional partners, to ensure the price predictability and supply stability, coupled with a diversified portfolio approach, lies at the heart of India's global energy diplomacy. 

Besides, this also creates an opportune time for India to accelerate efforts on the following: 

• In addition to scaling domestic capabilities in oil and gas, accelerating the deployment of solar energy remains critical, which has already been receiving the required policy attention. Besides, an aggressive push for exploring alternative energy sources such as wind, biofuels, nuclear energy, hydropower, ocean energy, geo-energy, and tapping opportunities in energy efficiency across sectors remains essential. 
• Critical minerals, vital for India’s clean energy transition and industrial growth, remain largely import-dependent. Intensifying efforts to develop domestic capacity, such as the recently launched Sixth Tranche of critical minerals blocks auctions by the Ministry of Mines, will reduce dependency and boost resilience. 
• Green hydrogen offers a transformative opportunity for India to innovate and collaborate, serving as a strategic instrument that aligns climate goals with energy security. 
• Scaling up infrastructure, including management modalities to achieve large-scale commercial viability, plays a crucial role. Building new energy corridors and storage facilities is essential to ensure a resilient supply chain. 
• With a focus on local communities, it is important to ensure a just transition. Understanding cross-sectoral interlinkages and planetary boundaries becomes critical for addressing deeper systemic challenges.  
• Accelerating investments and mobilising climate finance, especially to attract private capital flows, is essential to underpin these transitions, ensuring India’s clean energy targets are both ambitious and pragmatic in a challenging global environment. 
• Deepening South-South Cooperation enables India to sustain supplies while preserving strategic autonomy in a multipolar world. 

Making strategic moves to navigate the prevailing state of affairs becomes critical to accelerate the nation’s development to become Viksit Bharat by 2047 while achieving climate commitments and energy independence. The three critical pillars include: ambition – to make a difference and transform the country, innovation – thinking beyond the conventional, and execution – taking actions at scale, balanced with substance to take it forward. With a cross-sectoral approach and collaborative efforts across the value chain, let India’s choices reverberate globally, establishing itself as a self-reliant force and setting a case for the Global South. 

(Puri is a Distinguished Fellow, Earth Science and Climate Change, The Energy Resources Institute (TERI); Acharya is a part of TERI School of Advanced Studies; Sarangi is Associate Professor and Head of the Department, TERI School of Advanced Studies)

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