Trump’s Secondary Sanctions Threat: India Reacts Adversely

His warning that 100 per cent tariffs could be imposed has been followed by NATO Secretary General Mark Rutte’s suggestion that countries like India, China and Brazil will be hard hit by the sanctions if they continued to do business with Russia.

None of these warnings have had a deterrent effect here, with the Foreign Ministry declaring that securing the country’s energy needs are an overriding priority. The snub to Trump and the NATO chief came along with the comment that double standards should be guarded against in this regard. 

The threat of secondary sanctions, which is aimed at bringing Russia to the negotiating table, will only come into effect if there are no peace moves after 50 days. But it is a clear warning to countries like China, India, Turkey and Brazil which have emerged as key trade partners of Russia.

The angst is largely over the purchase of crude oil, which has been cut back considerably by the European Union, which used to be the major buyer of this fuel. Yet, the commentary over this issue seems to have ignored the fact that European countries continue to rely on Russian energy supplies.

It is these double standards that have been referred to by the Foreign Ministry. In fact, a recent study has shown that Russian gas imports by the European Union have actually risen during 2024, despite declared efforts to reduce the level of such supplies.

A report by global energy think tank Ember has found that imports of Russian gas to the EU rose by 18 per cent in 2024. The increase is despite the avowed aim of phasing out energy imports from that country by 2027.

The rise is largely due to higher imports by Italy, the Czechia and France. The think tank notes that EU member states can still import Russian gas through various loopholes, such as the use of shadow vessels, or by purchasing indirectly.

Policy Implications For India

It is in this backdrop that one must consider the outrage by Western nations over the purchase of crude oil by India from Russia. It is certainly a fact that the volume of oil being purchased from that country has risen substantially since the Ukraine war began in February 2022.

From only about one per cent of total imports, this has risen to about 38 per cent. Yet there are no explicit Western sanctions on buying Russian oil. The only caveat made regarding such purchases is to do so within the price cap of US$ 60 per barrel.

In case India decides to curb Russian oil imports, it is not likely to have any long term impact as oil markets are awash with stocks and there is ample availability.

At the same time, it would not be easy to switch over rapidly to other exporting countries which have made earlier commitments. Thus, India would be extremely reluctant to curb supplies from Russia and take the risk of jeopardise energy security in the short and medium term.

In fact, the move to take Russian oil and gas out of the international market would have the unwelcome effect of hardening global prices. It accounts for about 11 per cent of total crude oil production, and its exit from the market would lead to a spike in prices.

How Secondary Sanctions Could Hurt The World

This would have an impact on the entire world, including on the US, which is both the largest producer and largest consumer of oil, according to the US Energy Information Agency (EIA).

At the same time, imposition of such high tariffs on goods from China and India would create inflationary pressures on the American economy. A threat of secondary sanctions on countries thus needs to be viewed holistically rather than as a simplistic threat to intimidate much of the world.

Besides, “secondary sanctions” are usually issued against individuals or corporates that are trading with countries subject to primary sanctions. It is extremely unusual for entire countries to be threatened with secondary sanctions.

As for international oil markets, these have ignored Trump’s 50-day deadline to impose secondary sanctions on countries trading with Russia. Prices of the benchmark Brent Crude are ruling at US$ 69 per barrel, and show little signs of firming up.

Given the fact that Trump’s tariff deadlines have been changing rapidly over the past few months, the market is clearly waiting and watching for the next moves like the rest of the world.