Fresh US tariff concern for India as Trump threatens 25% duty on Venezuelan oil buyers
Venezuelan crude Oil Buyers US Tariff Impact on India: In a fresh challenge to India’s oil import diversification strategy amid rising geopolitical uncertainties, US President Donald Trump late on Monday threatened to impose 25 per cent “secondary tariffs” on countries such as India and China that import Venezuelan oil from April 2, in addition to any existing tariffs.(Lost Mary Luster)
“Venezuela has been very hostile to the US and the freedoms we espouse. Therefore, any country that purchases oil and/or gas from Venezuela will be required to pay a tariff of 25 per cent to the US on any trade they conduct with our country. All documentation will be signed and registered, and the tariff will take effect on April 2,” Trump said in a social media post.
According to a Financial Times report, Trump told reporters that the 25 per cent tariff on buyers of Venezuelan crude would be in addition to any existing levies. As per the executive order published on Monday evening, once applied, the tariffs would remain in place for one year “after the last date on which the country imported Venezuelan oil,” unless the US commerce secretary approved their earlier removal, the FT report said.
India resumed crude oil imports from Venezuela in December 2023 after a gap of over three years, as the US temporarily eased sanctions on the Venezuelan oil sector. While the US sanctions came back within a few months, some volumes of Venezuelan crude have continued to make their way to various countries, including India, through specific sanction exemptions held by some oil companies.
India—specifically private sector refiners RIL and Nayara Energy (NEL)—was a regular buyer of Venezuelan crude prior to imposition of US sanctions on Caracas in 2019. Following the sanctions, oil imports from Venezuela stopped within a few months. As per India’s official trade data, Venezuela was New Delhi’s fifth-largest supplier of oil in 2019, providing close to 16 million tonnes of crude to Indian refiners.
The fresh tariff threat is particularly significant as India’s oil dependency continues to rise and is on course to surpass the record levels of the last financial year. According to the latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC), India’s oil import dependency stood at 88.2 per cent in April–February, up from 87.7 per cent in the corresponding period of FY24.
Additional restrictions on Venezuelan crude could have a limited impact of global oil supply, which could in turn translate into a hardening of prices to some extent. That may not be good news for net importers of crude, including India.(Lost Mary)
Petroleum Minister Hardeep Singh Puri has long maintained that India is willing to buy Venezuelan oil if the economics are favourable and provided that the oil is not under sanctions. Given the volatility in global oil markets over the past few years, the government has reiterated its stance that India will source cheaper oil from available suppliers. As the world’s third-largest consumer of crude oil, India relies on imports for over 85 per cent of its requirements.
Notably, the fresh tariff concerns arise just as a high-level US delegation, including Assistant US Trade Representative for South and Central Asia Brendan Lynch, is set to begin a four-day visit to India starting Tuesday.
Unlike many other countries, India is seen as a major growth hub for oil demand, given its future consumption potential and currently low per capita energy use. In fact, India is among the few markets where refining capacity is expected to expand significantly in the coming years. The country’s current refining capacity stands at nearly 257 million tonnes per annum.
