Why in the News
The United States (US) has waived its threatened duties on buyers of Russian oil, but the waiver can be withdrawn at any time, so India has gained time rather than a settlement. With the India-US trade deal still unsigned, how long the waiver lasts now decides whether India must choose between Russian crude and access to the US market.
What is the Sanctioning Russia and Iran Act?
- What it is: The Lindsey O Graham Sanctioning Russia and Iran Act lets the US President punish countries that keep buying Russian energy. It works like fining the customer in order to hurt the seller.
- Duties on Russia: The Act authorised duties of up to 500% on direct US imports from Russia.
- Duties on buyers: It authorised duties of up to 100% on goods from the five largest buyers of Russian crude and gas. China and India are the main targets.
- The takeaway: The US cannot shut Russia’s oil trade by itself, so the Act turns access to the US market into leverage over buyers such as India.
What has the waiver changed?
- Waiver: On October 16, the US President waived the specified duties and sanctions under the Act.
- Not a repeal: The waiver does not repeal the Act and can be withdrawn. The US Secretary of State said the administration would take about 60 days to assess its implications.
- Earlier penalty: In August 2025, the US raised the combined duty on many Indian goods to 50%, half of it linked to Russian oil.
- Unsigned deal: An interim trade agreement, a first-stage deal, was reached in February 2026 but remains unsigned.
Why is US trade policy hard to rely on?
- First-term US record: The US quit the Trans-Pacific Partnership, a planned Asia-Pacific trade pact, and fought a trade war with China. It also blocked appointments to the World Trade Organization (WTO) Appellate Body, the WTO’s top trade court.
- Tariff playbook: Since its broad “Liberation Day” tariffs of April 2025, the US announces a duty and forces a reaction. It then either strikes a deal or raises the next threat.
- Partner responses: The United Kingdom, Japan and the European Union (EU) settled below their peak tariffs. Canada chose retaliation.
- Bargaining instrument: The 100% duty was never automatic. The President decides whether to impose it, so the threat works as a bargaining instrument.
- China’s leverage: After the Chinese President’s recent visit, the US and China cut tariffs and extended a trade truce. A partner with enough economic leverage can make the US lower its tariff threat.
What is India’s dilemma?
- Hormuz shock: The Iran war disrupted shipping through the Strait of Hormuz and raised oil prices. Importers such as India then had to find non-Gulf barrels and protect their export markets.
- Venezuelan option: The US Secretary of State called India a “refining superpower” able to process more Venezuelan crude. The offer serves US bargaining aims and does not by itself replace India’s Russian barrels.
Challenges
- Reversible relief: A waiver the President can withdraw leaves Indian refiners unable to plan long-term crude purchases.
- Secondary sanctions risk: US secondary sanctions, penalties on third countries that deal with Russia and Iran, complicate India’s payments and joint ventures in their energy sectors.
- Hormuz chokepoint: Over 60% of India’s oil imports transit the Strait of Hormuz, so Gulf disruption pushes India toward sanctioned suppliers.
Way Forward
- Sign the trade deal: India and the US should sign the interim agreement as a bilateral trade deal before the waiver lapses.
- Diversify crude sources: India should widen its crude basket beyond the Gulf and Russia, including Venezuelan barrels.
- Long-term energy contracts: India should sign fixed-price liquefied natural gas (LNG) contracts with the US to cut exposure to price swings.
Conclusion
India has won a pause on US secondary tariffs, not a settlement, and its energy and trade choices still hang on a decision it does not control. The marker to watch is whether the trade deal is signed before the US finishes reviewing the waiver.
What is energy diplomacy?
- Meaning: Energy diplomacy uses foreign policy to secure energy supplies, attract energy investment and export energy technologies.
- India’s stake: India is the world’s third-largest energy consumer and is projected to account for 35% of future global demand growth.
- Import dependence: India imports about 85% of its crude oil needs.
- Realism pillar: The realism pillar of India’s energy diplomacy seeks secure fossil fuel supply through diversification. India now imports crude from 41 countries.
Matching Previous Year Question
“No direct PYQ traced in the provided files. Thematic PYQ: [2025, GS2, 15 marks] “Energy security constitutes the dominant kingpin of India’s foreign policy, and is linked with India’s overarching influence in Middle Eastern countries.” How would you integrate energy security with India’s foreign policy trajectories in the coming years?”
