Trump's 500% tariff threat more of a pressure tactic: Oil industry

US President Donald Trump's backing of a sanctions bill proposing a punitive 500% tariff on buyers of Russian oil is being viewed by Indian oil industry executives as a pressure tactic rather than an intent to enforce it, aimed at squeezing India in trade negotiations while nudging Moscow towards a peace settlement.

US senator Lindsey Graham said on Wednesday that Trump has "greenlit" the legislation, which, if cleared by Congress, would empower the president to impose sweeping sanctions on buyers of Russian fuel. "I look forward to a strong bipartisan vote, hopefully as early as next week," Graham wrote on X after meeting Trump, injecting urgency into a bill that had been stalled for months as the president sought changes to give him greater flexibility over the sanctions package.

Indian industry executives said Trump's recent actions in Venezuela, along with the imposition of a 50% tariff on Indian goods last year, have lent credibility to such threats. Even so, they expect the proposed 500% secondary tariff to be wielded primarily as leverage rather than actually imposed.


If the low-probability scenario of a 500% tariff were to materialise, however, it could severely disrupt Indian exports to the US and trigger significant job losses, executives warned. Until recently, even a 50% tariff had been unimaginable for India. While exporters have so far dealt with higher tariffs with limited damage, the room to manoeuvre is narrowing.

India has already sharply reduced imports of Russian crude oil following US sanctions on Rosneft and Lukoil, Moscow's two largest exporters. Imports are expected to fall further in January after Reliance Industries said it does not anticipate receiving any Russian cargoes this month. Indian refiners-except Rosneft-backed Nayara Energy-are now sourcing Russian oil only from non-sanctioned entities.

Trump's endorsement of the bill, coupled with his recent public comments on India, signals that Washington is intensifying pressure to extract more favourable trade terms, executives said. Speaking aboard Air Force One on Sunday with Graham by his side, Trump said Prime Minister Narendra Modi "knew he was not happy" and that New Delhi wanted to "make him happy" by cutting Russian oil purchases. "We could raise tariffs on India if they don't help on the Russian oil issue," Trump said.

At the same interaction, Graham pointed out that India's ambassador to the US had previously highlighted declining Russian oil flows to India during discussions with him. Around the time Trump imposed punitive tariffs on India last year, White House trade adviser Peter Navarro had also repeatedly criticised New Delhi, portraying Russian oil purchases as profiteering.

Until the final hours before an additional 25% punitive tariff on India for buying Russian oil took effect at the end of August, Indian government officials and refinery executives had hoped Trump would back down or defer the levy.