US tariff threat puts India’s energy strategy under pressure: India has faced US sanctions before, including after the Pokhran-II nuclear tests in May 1998. But the circumstances were very different. The sanctions imposed after the tests were principally under the Glenn Amendment to the Arms Export Control Act, not Section 301 of the Trade Act. They restricted US assistance, defence sales, military financing, certain financial support and exports of controlled technology. The experience nevertheless showed that India could absorb external pressure when policy responses were combined with financial mobilisation, trade diversification and continued economic reform.
The Resurgent India Bonds raised $4.2 billion in foreign currency resources, according to the Reserve Bank of India. The United States waived the nuclear-related sanctions in September 2001, barely three years after the tests, rather than after 25 years.
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The latest challenge is more complicated because the pressure is directed at two areas central to India’s economy: access to the US market and access to Russian crude. In August 2025, the Trump administration imposed an additional 25% duty on Indian goods over India’s purchases of Russian oil. That additional duty was removed in February 2026 after Washington said India had committed to stop importing Russian oil and to purchase more US energy. The US and India simultaneously announced a framework for an interim trade agreement under which the US would apply an 18% reciprocal tariff on specified Indian goods.
That arrangement has since been overtaken by events. On September 18, President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law. The legislation authorises tariffs of up to 100% on imports from countries that fall within specified categories of major purchasers of Russian crude or natural gas, or countries identified as facilitating Russian sanctions evasion. India is not named for an automatic 100% tariff. Whether it is covered depends on the statutory criteria and subsequent determinations by the US administration. The law requires action within 30 days and provides for reassessment of the relevant countries every 180 days.
A two-sided exposure
The immediate concern for India is therefore not that a 100% tariff has already been imposed. It is that the legislation gives Washington another instrument with which to exert pressure while bilateral trade negotiations remain unresolved. The potential consequences would run in both directions.
A sharp increase in US duties would make Indian goods less competitive in the American market. The effect would vary considerably by product because exporters differ in their margins, pricing power and ability to redirect shipments. Pharmaceuticals, engineering goods, textiles, chemicals and other sectors with substantial US exposure could face different degrees of pressure. The important point is that the tariff risk is now linked explicitly to India’s energy purchases.
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The other side of the equation is crude oil. Russian supplies have become a major component of India’s import basket. Reuters reported that Russian crude imports averaged about 2.1 million barrels per day in August 2026 and were preliminarily estimated at about 1.9 million barrels per day in September. Russia remained India’s largest supplier despite the decline.
Replacing those supplies would be possible, but not necessarily at the same cost or with the same reliability. India can increase purchases from Iraq, Saudi Arabia, the United Arab Emirates, the United States, Africa and Latin America. But crude is not a completely interchangeable commodity. Refinery configurations, crude quality, freight, insurance, payment arrangements and prevailing market prices all affect the economics of substitution.
This matters because an oil shock would extend beyond refiners. Higher crude prices can increase the import bill, put pressure on the current account and feed into transport and production costs. The effect on inflation would depend on the scale and duration of the price increase and on how much of it was passed through to consumers. India’s ability to absorb such a shock through lower fuel taxes or fiscal support would also have limits.
The West Asian situation makes the calculation more difficult. If Russian supplies become less available at the same time that Middle Eastern supplies face disruption, the price of alternative crude could rise. Reuters reported that India’s Russian oil imports had already fallen in August and that refiners were increasing purchases from other suppliers while monitoring the possibility of further US sanctions.
India has been here before, but the choices are different
The comparison with 1998 is useful mainly for what it says about resilience, not because the two episodes are identical. After Pokhran-II, India was dealing with restrictions on aid, financing, defence cooperation and sensitive technology. The response included the Resurgent India Bonds and greater reliance on domestic economic capacity. The economy was also at an earlier stage of liberalisation, and the US market did not occupy the same position in India’s export strategy that it does today.
Today’s exposure is therefore more tightly connected to India’s integration with global markets. The United States is an important destination for Indian merchandise and services exports, while Russia has become a major source of crude. A policy that reduces India’s access to either side can impose costs through different channels.
China’s position also illustrates the difference in bargaining structures. China has a much larger manufacturing base and occupies important positions in areas such as rare earths, solar equipment and electric vehicles. It therefore has economic instruments that differ from India’s. India has considerable strengths in services, pharmaceuticals, engineering and information technology, but its ability to offset pressure from the US through alternative merchandise markets remains more limited.
The latest US-China understanding illustrates the point. Following the Trump-Xi summit, Washington and Beijing agreed to work towards preferential tariff treatment covering about $30 billion of non-sensitive goods in each direction and established a bilateral Board of Trade. More than 90% of the products covered by the arrangement are expected to receive most-favoured-nation treatment after the two sides complete their domestic procedures.
That does not mean China has escaped trade pressure. It does show that the structure of its economic relationship with the US gives both sides a larger set of negotiating instruments. India’s challenge is different. It must protect export access to the US while reducing the vulnerability created by concentration in any major source of energy.
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The trade agreement has become more consequential
The India-US trade negotiations now have to contend with a legal and geopolitical environment that did not exist when the February framework was announced. In February, the US Supreme Court ruled that the International Emergency Economic Powers Act did not authorise the president to impose tariffs. The ruling forced the administration to rely on other statutory authorities for subsequent tariff measures.
The Graham Act changes part of that calculation because its tariff authority comes from legislation enacted by Congress. It therefore cannot simply be treated as another executive tariff order vulnerable to the same legal objection. At the same time, the law gives the administration discretion over the rate within the statutory ceiling and allows for waivers and other adjustments.
India’s position will consequently depend not only on the eventual tariff rate but also on how the law is implemented, how Russian oil purchases are measured and how the ongoing trade negotiations evolve. The February framework remains an important reference point, but it cannot be assumed to determine the final terms of the bilateral agreement.
India’s experience after Pokhran-II suggests that external pressure need not translate into economic paralysis. But the present challenge requires a different form of resilience. The objective is not simply to find another buyer for exports or another supplier of crude after a disruption occurs. It is to reduce the economic cost of having too much dependence on any one market or energy source before that dependence becomes a negotiating liability.
For India, the immediate task is therefore to keep the trade negotiations open while expanding the range of energy suppliers and export markets. That will not eliminate the leverage available to Washington. It can, however, reduce the cost of exercising it.