The startling move even took his own Republican Party supporters by surprise, as it was contrary to all previous strategies of cutting Russia’s oil revenues as a way of ending the Ukraine war. 

The decision was followed immediately by a 60-day waiver postponing implementation of the newly minted Lindsay Graham legislation, seeking to impose heavy tariffs on countries importing oil from Russia. 

These unexpected moves by the Trump administration may have astounded the world but are the outcome of political compulsions in the run up to the mid-term Congressional elections in November. 

Behind The Volte Face

The biggest factor behind the volte face is the rising price of gasoline and diesel in American markets. Retail rates of petroleum products in the US are directly linked to global prices. This is vastly different from India, where pump prices are nominally controlled by public sector oil companies but are actually based on guidance from the government. It is for this reason that retail prices of petrol and diesel have remained relatively stable here in the last few months despite hardening witnessed in world markets. American retail outlets, on the other hand, have passed on the price hikes immediately to consumers. 

The pass-through effect has led to a sharp increase in the prices of both motor spirit, called gasoline in the US, and diesel. Gasoline prices have gone up from about US$ 3 to US$ 4.3 per gallon over the last year. Diesel prices, on the other hand, have nearly doubled over the same period from US$ 3.6 per gallon to over US$ 6 per gallon. These unprecedented hikes are the source of considerable angst for American consumers. What has caused even more concern to the Trump administration is the fact that diesel prices have hurt the interests of some of the president’s biggest supporters. These include farmers, truckers, and ranchers who need diesel for powering their transport vehicles and agricultural equipment. The aim of buying diesel from Russia is to provide relief to this segment by tamping down prices.

Trump’s Declining Popularity

The need to do so has become urgent as soaring gasoline and diesel prices have added to Trump’s declining popularity ratings. The CNN Poll of Polls shows the President's approval ratings are at 34%. This is ominous on the eve of the November mid-term elections. These Congressional elections are usually seen as a signal to the presidential elections held after another two years. This time, however, Trump’s poor polls could result in the Republican Party losing sway over the lower house, the House of Representatives. It would make it difficult for Trump to implement much of his agenda for the rest of his term.

Apart from the domestic factor, however, the move to import Russian diesel has wider geopolitical ramifications. The US has also asked Ukraine to stop attacking Russia’s energy infrastructure in that country. It has so far been able to target refinery infrastructure with great precision, according to reports. It is these attacks that have contributed to the worldwide shortage of refinery products like diesel. In fact, Russia itself has fallen short of these products due to refinery damage and has even made some emergency purchases of both gasoline and diesel from India recently. It is in this backdrop that there must be doubts over whether Moscow can actually provide the volumes of diesel mentioned in the agreement. The amounts specified are 300,000 tonnes initially, followed by 500,000 tonnes in November and one million tonnes in December. Subsequently, another three million tonnes is proposed to be supplied within a short period. 

The quantities are not a significant amount for the American market, since daily diesel consumption amounts to anywhere between 3.7 and 4 million tonnes per day. It would thus be unrealistic to expect any softening of diesel prices owing to these imports. 

Concern Over Purchase From Russia

Even so, the plan to purchase Russian diesel has caused deep concern in Ukraine and as well as among European allies who have indicated their unhappiness with the deal. The European Union has reacted by saying the only way to end the war is to put pressure on Russia. Clearly, it is worried over the prospect of higher oil revenues being generated to stabilise the Russian economy.

In the midst of all these developments, oil markets have been volatile. Concerns over potential risks from Iran on the Strait of Hormuz as well as Houthi attacks on Saudi Arabia have pushed up prices of the benchmark Brent crude to nearly US$ 110 per barrel. At the same time, the flows of crude from the Gulf region have reached nearly 80% of levels prior to the US-Iran war, according to American officials. Refined products, on the other hand, remain in limited supply, pushing up prices.

Gains For India – For Now

As far as India is concerned, the flip flops of American policymaking are all to the good. At least for the time being. The decision to buy Russian diesel and simultaneously pause the implementation of the Lindsey O. Graham law gives a breather to Indo-US ties that have come under considerable strain in recent times. Secretary of State Marco Rubio has even positioned the decision to lie low on sanctions against Russia as a measure to support allies like India that cannot pivot away from imports from that country. 

These decisions also come at a time when the India-US trade deal has been hanging fire for several months, with both sides repeatedly claiming it is on the verge of being tied up. Clearly, the issue of Russian oil imports had been a sticking point in the trade deal. It now appears, judging by recent statements by officials on both sides, that most of the contentious issues in the proposed pact have been resolved and the final announcement may be made very soon.

Trump’s volatile shifts in stance, however, are not desirable in the long run. Maintaining stability in ties between nations means ensuring consistency in bilateral support on critical issues of national importance for both sides. So far, India has had to bear the brunt of whimsical changes in critical economic sectors like tariffs and energy supply. 

The latest round of policy moves has been in this country’s favour, but this will not always be the case. The country must therefore continue to expect that India-US relations will be buffeted by headwinds in the rest of Donald Trump’s tenure.

(The writer is a senior journalist, columnist, and commentator on economic and business developments. Views are personal.)