India's Russian oil: a tariff threat lands on an already tightening supply

India's refiners took less Russian crude in September than in any month since April. In Washington this will be read as the first effect of the new sanctions law signed on 18 September. That reading is mostly wrong. The data and the traders' accounts point to a squeeze on the supply side: Russia has less oil to sell, China is outbidding India for it, and Gulf barrels are moving again. The law matters, but as a negotiating instrument hanging over India–US trade talks rather than as the force currently reshaping India's crude basket.

What the law allows

The White House said President Donald Trump signed H.R. 5334, the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, on Friday 18 September, after the House passed it by 262 votes to 159. As summarised by Rediff, the law takes effect within 30 days of signing and requires the president to impose duties of up to 100% on goods from the countries that were the top five buyers of Russian crude or gas by volume in the 12 months before enactment. It also targets Russia's energy and defence sectors and the 'shadow fleet' of tankers, insurers and operators that moves its oil. A country can escape the gas-related duties if its imports were under 15% of Russia's gas exports and it has taken 'significant steps' to reduce them. There is no equivalent exit for oil.

The president keeps wide discretion over which countries are hit, at what rate and whether to waive. Congress chose to keep it that way. BusinessLine reports that on 14 September the House Rules Committee voted 3–7 against an amendment that would have named ten countries, India and China among them, and by the same margin against an amendment to strip the secondary-tariff power altogether. The law therefore names no one, but its volume trigger makes India's inclusion close to automatic. The Centre for Research on Energy and Clean Air, cited by CNBC, estimates that China bought half of Russia's crude exports as of the end of August and India 37%, with Turkey and the EU at 5% each.

What September's numbers show

Kpler's ship-tracking data, reported by Rediff and KNN, put India's Russian crude imports at about 1.74 million barrels per day in September, against 2.02 million in August and 2.65 million in July. Estimates for August differ by source: Reuters, citing trade data, put it at about 2.1 million bpd, down 16.5% on July, while an analysis cited by the Financial Express used about 1.9 million bpd. All of them show the same direction.

Total imports moved the other way. India brought in about 5.3 million bpd in September, roughly 600,000 bpd more than in August and 700,000 bpd more than a year earlier, according to Kpler. The difference came from the Gulf. Iraq supplied about 575,000 bpd, up from 163,000 bpd in August; Saudi Arabia about 566,000 bpd, up from 347,000 bpd; the UAE about 480,000 bpd. Kpler estimates Middle Eastern supply at about 3 million bpd, broadly back to pre-war levels, helped by improving movement through the Strait of Hormuz and ship-to-ship transfers. Russia remains the largest single supplier.

Why the drop is not mainly about Washington

Kpler's Sumit Ritolia links part of the decline to US pressure, which he says is prompting refiners to keep sourcing flexible. But he also says buying decisions are still driven 'primarily by economics, availability and refinery compatibility', and that the dip does not mean a wholesale shift. Reuters' account, from four trade sources on 28 September, is more specific. Indian refiners expect Russian supply to tighten further in October and November because exports have shrunk and Chinese buyers have been booking cargoes earlier at firmer prices. 'Demand from China has been really high,' one seller told the agency. Loadings from Novorossiysk have fallen by roughly half after repeated drone attacks, and the Arctic Northern Sea Route now offers a secure channel to China while shipments to India must pass the Red Sea.

In other words, India is buying less Russian oil partly because it can get less. Russian crude has also become dearer: the Financial Express cites analyst Natalia Katona saying Urals was trading at an $8-a-barrel premium to ICE Brent, though still cheaper than competing grades. That is a long way from the deep discounts that made Russian crude India's default after 2022.

The cost of going further

Any sharper cut would cost India more. The Financial Express analysis puts the extra bill for replacing 1 million bpd of Russian crude with barrels $5–10 dearer at $1.8bn–3.7bn a year, roughly doubling for 2 million bpd. ICRA's Prashant Vasisht told the paper that 'replacing such large volumes would be extremely difficult'. Kpler's Nikhil Dubey told KNN that 'physical crude balances are tight, particularly for medium-grade barrels'. India is also entering its peak demand season, and Brent was around $107 a barrel on 28 September, according to KNN. The comparison with Iran in 2019 is instructive: India then gave up about 313,000 bpd, roughly 6% of its imports. Russia supplied 30.3% of India's crude imports by value in FY2026, $40.8bn out of $134.7bn, according to figures cited by BusinessLine.

Analysts quoted by CNBC doubt that either India or China will cut back sharply. Kpler's Ivan Ryabov said it would be 'extremely challenging' to replace 3.5 million bpd of Russian seaborne supply plus the roughly 600,000 bpd China takes by pipeline.

Leverage, not a cliff

New Delhi's response has been firm in tone and cautious in substance. The foreign ministry said India 'remains firmly committed to ensuring energy security for its 1.4 billion people'. On 27 September Foreign Secretary Vikram Misri raised India's concerns with a visiting Congressional delegation, saying the law could affect the bilateral relationship and the international market, according to the ministry spokesman. On 30 September Prime Minister Narendra Modi and President Trump held their first call since the law was signed, covering trade, defence, energy and technology; Modi said they agreed 'to maintain close engagement'. Commerce Minister Piyush Goyal is in the US this week for G20 trade talks and bilateral trade agreement discussions.

Most observers read the law as leverage. Ronak Desai of the Hoover Institution told CNBC that the president would 'hold its tariff authority in reserve as an instrument of leverage'. Ajay Srivastava of the Global Trade Research Initiative called it 'a blunt and dangerous attempt to pressurise India to sign BTA on one-sided terms'. Sources cited by BusinessLine say the law may be used as leverage in the trade negotiations.

Three points will show which reading is right. The first is whether any tariff is announced once the law takes effect in mid-October, and on whom. The second is whether a trade agreement includes energy commitments that could serve as the 'significant steps' the law rewards. The third is the October and November import data. If Russian volumes keep falling while Gulf supply holds, India will have reduced its exposure without conceding it did so under pressure. If Chinese demand eases and Russian barrels become cheap again, the tariff question will return in a sharper form.

Sources

• Rediff — Trump signs Russia sanctions bill; India faces 100% tariff risk
• The Hindu BusinessLine — India stares at potential tariffs as US House prepares to vote on Russia sanctions bill
• CNBC — Trump gains a tariff weapon against China and India. Will he use it?
• The Sunday Guardian (via MSN) — Trump's Russia sanctions law as 100% tariff threat puts India and China under pressure over 2.1 million bpd oil imports
• Rediff — India's Russian crude imports dip to 5-month low amid diversification
• Reuters (via MSN) — Russian oil supply to India tightens on reduced exports, strong Chinese demand
• KNN India — India's crude imports rise 13% in September as Russian supply remains dominant
• Daijiworld (citing Financial Express) — Replacing Russian crude could raise India's oil bill by $3.7 billion annually
• The Hindu BusinessLine — Foreign Secretary flags concerns over US Russia sanctions law to US lawmakers
• The Week — Modi, Trump talk trade, tech, and energy in first phone call since US tariff law on Russia