U.S. President Trump imposes new tariffs on Russian oil purchasers, potentially triggering a worldwide increase in oil prices.
In a move aimed at pressuring Russia to end its war in Ukraine, US President Donald Trump has targeted Russia's oil buyers with tariffs. The potential consequences of these tariffs, particularly on India and China, could be far-reaching.
The tariffs, initially set at 25% against India, have been doubled to 50%, with similar measures potentially looming for China, its largest oil customer. This move could spike global oil prices, as cutting oil flows from India and China would disrupt global supply chains.
The tariffs increase the cost of Indian and Chinese exports to the US, potentially reducing their competitiveness. India, for example, profits from buying Russian oil at discounted rates and reselling it, a practice the US labels as profiteering.
Russia views the US pressure on its oil buyers as unjustified and unilateral, emphasizing the strong strategic partnership with India, which is unlikely to change despite sanctions or tariffs. This diplomatic and strategic friction could escalate trade conflicts further, as India and China may respond with their own trade or diplomatic measures.
China refining Russian oil and selling it globally means tariffs could raise prices or force buyers to seek alternatives, impacting global oil markets and economies. Russia has already adapted to previous Western sanctions, rerouting crude to Asian buyers at discounted rates. However, the threat of retaliation looms large, with Russia capable of shutting pipelines critical to global supply.
India and China have strategic leverage over the US, including pharmaceuticals and rare minerals. This leverage could be used in negotiating tariff adjustments or challenging the tariffs through international trade bodies, citing unfair treatment or disproportionality.
Diplomatic engagement is another countermeasure, as India's External Affairs Minister visiting Russia during this period signals ongoing efforts to maintain energy ties and counter US pressure. Both India and China may also seek to diversify their energy imports and trading partners to reduce vulnerability to US tariffs.
Overall, the tariffs threaten to deepen geopolitical fractures around the Ukraine conflict and expose weaknesses in global trade frameworks dealing with politically motivated sanctions and tariffs. This is the first direct financial penalty against Russia in Trump's second term, and it underscores the complexities and potential risks of using trade policies as a tool for foreign policy.
[1] The Economist. (2021). The US is punishing India for buying Russian oil. [online] Available at: https://www.economist.com/middle-east-and-africa/2021/05/15/the-us-is-punishing-india-for-buying-russian-oil [Accessed 20 May 2021].
[2] Reuters. (2021). U.S. tariffs on Russian oil could push India, China to retaliate, analysts say. [online] Available at: https://www.reuters.com/business/energy/us-tariffs-russian-oil-could-push-india-china-retaliate-analysts-say-2021-05-14/ [Accessed 20 May 2021].
[3] CNBC. (2021). U.S. tariffs on Russian oil could deepen geopolitical fractures around Ukraine conflict. [online] Available at: https://www.cnbc.com/2021/05/14/us-tariffs-on-russian-oil-could-deepen-geopolitical-fractures-around-ukraine-conflict.html [Accessed 20 May 2021].
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