U.S. Push for 500% Tariff on Russian Oil Buyers: Why India Is at Risk

A new US legislative proposal could significantly disrupt India–US trade ties, especially because of India’s continued purchase of Russian crude oil. According to reports, a bipartisan bill in the United States, backed by President Donald Trump and spearheaded by Senator Lindsey Graham, proposes tariffs of up to 500% on countries that keep buying Russian oil. While the stated aim is to weaken Russia’s war economy, the potential fallout for India could be severe, given the size and importance of its trade relationship with the US.

The proposed law, often referred to as the Sanctioning Russia Act of 2025, is designed to go beyond traditional sanctions. Instead of only targeting Russia directly, it introduces the idea of “secondary tariffs.” This means countries that import Russian oil and then export goods or services to the US could face extremely high tariffs on their exports. In practical terms, the US would use access to its market as leverage to pressure countries into cutting energy ties with Russia.

India has emerged as one of the largest buyers of Russian crude since the Ukraine war began. With Western sanctions limiting Russia’s export options, India has been able to buy oil at steep discounts, helping control domestic fuel prices and manage inflation. From India’s perspective, this has been an economic decision driven by energy security and affordability. From the US perspective, however, such purchases are seen as indirectly funding Russia’s war effort.

What makes this proposal particularly worrying for India is the scale of trade at stake. India exports more than $120 billion worth of goods and services to the US every year. A tariff as high as 500% would make Indian goods completely uncompetitive in the American market. Even a fraction of that rate would severely dent exports across sectors such as pharmaceuticals, textiles, engineering goods, and electronics.

The situation becomes more complex when services are considered. Traditional tariffs apply only to physical goods, not services like IT outsourcing, software development, or consulting, areas where India has a strong presence in the US market. The article notes that there is no clear legal mechanism to impose a “tariff” on services. However, policymakers could explore indirect methods, such as taxing payments to Indian firms or restricting market access, if they choose to extend the punishment beyond goods.

Another sensitive point raised is selective enforcement. While both India and China are major buyers of Russian oil, the article suggests that India has so far faced more direct punitive actions, including existing tariffs of up to 50% on certain products. This raises concerns in New Delhi about fairness, consistency, and the politicisation of trade measures.

There is also uncertainty around whether the bill will become law and how it would be implemented. It still needs approval from the US Senate, and the practical enforcement of a 500% tariff raises legal and economic questions. Such extreme tariffs could violate international trade norms and trigger retaliation, potentially escalating into a broader trade conflict.

In simple terms, the proposed US tariff is less about trade and more about geopolitics. It uses economic pressure to influence foreign policy choices. For India, the challenge will be to balance energy security, strategic autonomy, and its crucial economic relationship with the United States. While nothing is final yet, the proposal highlights how global politics and energy decisions can quickly spill over into trade and business risks.