TARIFF & SANCTIONS

Key Highlights:

• The US has been pressuring India to reduce energy imports from Russia through a 25% tariff penalty.
• The US Treasury imposed sanctions on Rosneft and Likoil, two major Russian oil companies, which account for approximately 5% of global output.
• Companies have until November 21 to cease transactions with the sanctioned Russian oil companies.
• The EU has joined the US in unveiling measures targeting Russian oil and gas.
• Oil prices increased by 5% following the US Treasury's announcement of sanctions.
• India has saved at least $12.6 billion over three years by importing oil from Russia.

Detailed Insights:

• The US is using economic tools, including tariffs, to pressure Russia to end the Russia-Ukraine conflict, aiming to reduce Russia's energy revenue.
• India and China collectively import approximately 2.8 million barrels per day from Russia, making them key consumers of Russian crude oil.
• Sanctions on Rosneft and Likoil may disrupt global oil markets, potentially requiring India to seek alternative oil sources from the Middle East, the US, and other countries.
• Indian private and public sector entities may become cautious of purchasing Russian oil due to the risk of attracting secondary sanctions from the US.
• India is currently negotiating a trade deal with the US and will need to reassess its Russian oil purchases in light of the sanctions.
• The cost advantage of buying Russian oil for Indian refiners has decreased over time, reducing the incentive for continued imports.

Key Concepts Involved:

• Sanctions: Economic penalties imposed by a country or international body against another, targeting specific sectors or entities.
• Tariff: A tax or duty imposed on goods when transported across international borders.
• Secondary Sanctions: Penalties imposed on entities that engage in transactions with a sanctioned party, even if they are not directly targeted by the primary sanctions.