Oil is not a loyalty test

When the American president publicly links tariffs on Indian goods to New Delhi’s oil purchases, the remarks may sound casual, even theatrical. But beneath the informality lies a clear calculation. Oil has been identified as a pressure point precisely because it hurts, and tariffs are being deployed not to correct a trade imbalance but to influence a domestic economic choice. 

This is not, at its core, a debate about Russia. Nor is it an argument about the legitimacy of sanctions as a foreign policy tool. It is about whether an import-dependent country can retain the right to buy energy where it best suits its domestic economy, without having that choice treated as a test of political alignment.

Oil occupies a singular place in India’s economic landscape. It is the largest component of the import bill, accounting for roughly a quarter of total merchandise imports in recent years. It is a persistent driver of the trade deficit and one of the fastest channels through which global shocks feed into inflation, currency pressures and fiscal stress. When crude prices rise sharply, the effects are felt almost immediately, in transport costs, food prices and household budgets. Few other imports carry such direct macroeconomic consequences.

That reality explains why oil has become an effective lever.

India imports more than four fifths of the crude it consumes. Despite rapid growth in renewable energy and steady improvements in efficiency, oil remains indispensable to transport, industry and petrochemicals. Domestic production is limited, strategic reserves offer only temporary insulation, and alternatives cannot be scaled overnight. In practical terms, oil is unavoidable.

It is therefore not surprising that energy sourcing decisions are increasingly being pulled into wider geopolitical contests. What is new is the explicit linkage between oil purchases and punitive tariffs. That linkage marks a shift from persuasion to coercion. Tariffs, in this context, are not being used to address dumping, subsidies or market access. They are being used because they impose immediate costs, command political attention and signal consequences that can be escalated.

The logic is straightforward. If a country’s energy dependence can be converted into economic pain, it becomes a powerful instrument of pressure. That logic does not depend on the identity of the supplier. Oil is targeted because it is sensitive, not because it is symbolic.

This distinction matters, especially for India.

Following the disruption of global energy markets after the Ukraine war, India’s oil import profile changed rapidly. As European demand for certain barrels declined and discounts deepened, Indian refiners responded to price signals, as refiners everywhere do. The scale of India’s purchases reflected economic arithmetic rather than ideological alignment. Cheaper crude helped moderate inflationary pressures at a moment when households and governments around the world were grappling with rising costs.

Those purchases have since begun to moderate. New sanctions, logistical complications and commercial calculations have altered flows again. Several Indian refiners have reduced or paused imports from specific suppliers, while others continue to buy from non-sanctioned entities. This underlines a point often lost in political debate. India’s oil trade is neither static nor doctrinaire. It adjusts continually to prices, availability and risk.

Framing this behaviour as defiance or compliance misunderstands how energy markets function.

India has never argued that sanctions imposed through multilateral processes have no legitimacy. What it has consistently resisted is the idea that unilateral measures should dictate domestic economic decisions for third countries. There is no United Nations mandate governing where India must source its oil. There is no global rule that treats energy purchases as political endorsement. To suggest otherwise is to conflate policy disagreement with economic necessity.

That conflation carries risks that extend beyond the immediate dispute.

If oil sourcing becomes a condition for tariff relief today, other strategic imports could be drawn into similar frameworks tomorrow. Natural gas, fertilisers or critical minerals could be subjected to comparable political scrutiny. For countries that depend heavily on imports, this creates a permanent vulnerability. Every commercial decision becomes a potential point of external pressure.

Such a precedent would weaken, rather than strengthen, the global trading system. Energy markets depend on predictability. Buyers and sellers need confidence that contracts will be honoured and that prices reflect supply and demand rather than shifting political tests. When energy is turned into a loyalty signal, volatility increases, risk premiums rise, and costs are passed on to consumers.

There is also a question of consistency. Even as certain oil flows are singled out for pressure, others continue to reach global markets through indirect routes. Refined products derived from the same crude circulate freely. Exemptions and carve outs proliferate. The result is not a coherent moral order but a fragmented system where compliance is uneven and incentives are distorted.

For India, the economic stakes are particularly high. The country spends tens of billions of dollars annually on crude imports. That outflow constrains public investment, shapes the current account balance and limits fiscal flexibility. Any policy that raises the effective cost of oil, whether through higher prices or trade penalties, compounds these pressures. It also narrows the space for long term planning.

This is why the argument about India’s oil trade must be framed with care.

It is not a claim that energy should be insulated from politics. That is no longer realistic. It is a narrower and more defensible proposition. Decisions about where to buy oil must remain anchored in domestic economic needs. They cannot be transformed into instruments of external discipline without undermining the principle of sovereign economic choice.

Many countries, including those applying pressure today, have made similar calculations in the past. Energy security has rarely been pursued in purely moral terms. It has been shaped by geography, technology and necessity. Expecting a different standard from import-dependent economies now introduces an asymmetry that is difficult to sustain.

None of this implies that India’s energy strategy should remain unchanged. Diversification is prudent. Reducing exposure to any single supplier lowers risk. Expanding strategic reserves, accelerating the energy transition and improving efficiency are essential long-term goals. But diversification achieved under coercion is not strategy. It is compliance, and compliance does not produce resilience.

The challenge for India is to articulate its position without turning it into confrontation. That requires clarity rather than rhetoric.

It requires stating, consistently, that oil imports are a domestic economic decision. That India will continue to diversify its energy basket. That it will engage constructively with partners on trade, technology and investment. But also that it cannot accept a framework where access to energy becomes contingent on political approval.

This is not a rejection of partnership. It is a defence of predictability.

The author is a commentator on global affairs with a focus on energy security and strategic autonomy. He explores how oil, trade, and power politics shape India’s choices in a fractured world