President Donald Trump’s threat to impose punitive tariffs on countries buying Russian oil is already shaking global energy dynamics, with India pausing its Russian crude purchases and Moscow signaling possible retaliation that could jolt global markets.
India, now Russia’s largest oil customer since Europe’s boycott post-Ukraine invasion, had been importing nearly 2 million barrels per day (bpd) — accounting for 2% of global supply and 35% of India’s total oil imports.
However, Trump’s escalating demands for a Ukraine peace deal — or face up to 100% tariffs — have disrupted those flows. A 25% tariff on US goods from India took effect Friday, and Indian state refiners have halted new Russian oil orders, Reuters reported.
Analysts say Russia may hit back by choking the Caspian Pipeline Consortium (CPC) — a major US-led route shipping up to 1 million bpd from Kazakhstan, through Russia, to global markets. Western oil giants including Chevron and Exxon would feel the blow. Moscow has previously shut CPC operations over “regulatory issues” — most recently in 2025.
“Russia is not without leverage,” said JPMorgan, which estimates a 3.5 million bpd supply shock if CPC is cut and India drops Russian oil — a potential 3.5% hit to global supply.
Moscow could also attempt to reroute 0.8 million barrels per day (bpd) to new markets, such as Egypt, Malaysia, Pakistan, Peru, Brunei, South Africa, and Indonesia, although volumes and discounts may prove costly.
India’s energy security is at stake. Losing Russian crude, especially the heavy Urals grade, means Indian refiners may have to slash processing capacity or scramble for replacements from the Middle East and the US, said Sparta Commodities analyst Neil Crosby.
This shift would push up prices, especially in Europe, which relies on India’s diesel exports. Despite India’s oil minister asserting that alternatives exist, BNP Paribas’ Aldo Spanjer warned: “Cutting off this flow would require a massive realignment of global trade.”
Russia is already reeling from lower oil prices and sanctions. Its oil and gas revenues plunged nearly 34% year-on-year in June, and traders say a halt in Indian buying could force Russian firms to store crude in tankers, offer deep discounts, or cut output from the current 9 million bpd.
JPMorgan notes that even Trump may struggle to sustain this strategy: “Sanctioning the world’s second-largest oil exporter is nearly impossible without spiking global prices.”
The US has ramped up pressure on India to stop buying Russian oil, arguing it amounts to funding Vladimir Putin’s war on Ukraine. Secretary of State Marco Rubio called the purchases “a point of irritation” in comments this morning, as Delhi and Washington toil to secure a trade deal and scale down Donald Trump’s 25 per cent ‘reciprocal tariff’.
Rubio acknowledged India’s vast energy needs – analysts expect crude oil demand from the world’s fourth largest economy to cross 6.6 million barrels per day by 2030 – and that it was buying oil and gas from Russia because the sanction-hit country is offering steep discounts.
“But that, unfortunately, is helping to sustain the Russian war effort. So, it is most certainly a point of irritation in our relationship with India,” he told American broadcaster Fox News.
Trump, he said, expressed that with so many vendors available, India continues to buy so much from Russia, which in essence is helping to fund the war effort…”