U.S. Sanctions on Russia and Iran: Implications for India’s Energy Security and Exports

Context

The U.S. has enacted the Lindsey O. Graham Sanctioning Russia and Iran Act, 2026, increasing pressure on countries that continue significant energy trade with Russia. For India, the measure creates a difficult balance between affordable energy supplies and access to the U.S. export market.

Background and Key Provisions

The legislation seeks to weaken Russia’s ability to finance its war by targeting its leadership, energy revenues and major international buyers. It also extends the sanctions framework to Iran, with provisions continuing until 2031.

A key provision permits the U.S. President to impose tariffs of up to 100% on countries that continue importing Russian crude oil or natural gas after being among the five largest importers during the preceding 12 months. Similar action can be taken against countries identified as major facilitators of sanctions evasion.

India is particularly exposed because Russian crude has become an important component of its energy imports.

The proposed tariff would be in addition to existing U.S. duties, including:

• Section 301 of the Trade Act, 1974, dealing with unfair trade practices.
• Section 232 of the Trade Expansion Act, 1962, which permits trade restrictions on national-security grounds.

Consequently, the cumulative tariff burden could significantly affect the price competitiveness of Indian goods in the U.S. market.

Implications for India

1. Impact on Indian exports

The U.S. is an important market for Indian merchandise exports. A possible additional 100% tariff could make several Indian products considerably more expensive for American consumers and businesses.

Indian exporters may have limited capacity to absorb such a large duty themselves, while passing the entire cost to buyers could reduce demand. This could affect export revenues, investment and employment in export-oriented sectors.

2. Energy security challenge

Russian crude has been attractive to Indian refiners because of its availability and price competitiveness. A substantial reduction in purchases could therefore require India to rapidly source more crude from the Middle East, Africa and other suppliers.

This could increase procurement costs and expose India to greater volatility in international oil markets.

3. Inflationary consequences

Higher crude prices can have economy-wide effects through increased costs of:

• Petrol and diesel
• Transportation and logistics
• Fertilisers
• Petrochemicals
• Manufacturing

Thus, an external energy shock could eventually feed into domestic inflation.

4. Macroeconomic effects

More expensive crude imports could increase India’s overall import bill and put pressure on the current account and the rupee. If domestic fuel prices are moderated through taxation or other fiscal measures, the government could also face additional fiscal pressure.

5. Strategic policy dilemma

India faces competing economic interests. Continuing Russian oil purchases can support energy affordability and supply security but may increase exposure to U.S. trade restrictions. Reducing such purchases could lower tariff-related risks but potentially raise India’s energy costs.

The issue is therefore not simply a choice between Russia and the U.S.; it involves managing energy security, export competitiveness, strategic autonomy and geopolitical relationships simultaneously.

Scope for Tariff Waiver

The legislation reportedly contains mechanisms through which the U.S. President can waive the additional tariffs.

A waiver could be considered where the President certifies to Congress that it is in the national interest of the United States, accompanied by an explanation of the decision. Another possible pathway is linked to a peace agreement accepted by the Ukrainian government and an end to Russian military hostilities.

This creates diplomatic space for India to seek an exemption while protecting its legitimate energy interests.

Way Forward

• Diversify crude supplies across the Middle East, Africa and other producing regions to reduce excessive dependence on any single source.
• Engage diplomatically with the U.S. to seek tariff exemptions or transitional arrangements.
• Maintain constructive energy relations with Russia and other suppliers while complying with applicable international sanctions.
• Strengthen strategic petroleum reserves to cushion temporary supply disruptions and price shocks.
• Accelerate renewable energy, electric mobility and energy efficiency to reduce long-term oil dependence.
• Expand export-market diversification so that Indian exporters are less vulnerable to restrictions in a single major market.
• Use trade agreements and market-access initiatives to develop alternative destinations for Indian products.

Conclusion

The Act highlights the growing interdependence of geopolitics, energy security and international trade. India needs a calibrated strategy that protects affordable energy supplies in the short term while diversifying crude sources, expanding export markets and accelerating the transition towards a more resilient and cleaner energy system.

Source : The Hindu