The proposed imminent threat of imposing tariffs as high as 500 % on Indian exports by the United States, under the Sanctioning Russia Act 2025, marks one of the most serious stress turning points in India–U.S. relations in recent decades. Ostensibly aimed at tightening economic pressure on Moscow for its continued war in Ukraine, the proposed legislation introduces sweeping secondary sanctions on countries including India that continue to import Russian crude oil and petroleum products.

Yet, even as punitive rhetoric hardens, a narrow opening has emerged as transactional U.S. sanctions may allow a reopening of the Venezuelan oil route, offering India limited but timely energy relief.

A Sanctions Threat with Far-Reaching Consequences ;India, which emerged as one of the world’s largest buyers of discounted Russian oil after Western sanctions were imposed in 2022, now finds itself directly in the line of fire. The fallout, if such tariffs were ever implemented in full, would extend far beyond trade figures, striking at the core of India’s economic stability, energy security and strategic autonomy.

A Silver lining: Transactional Sanctions and the Return of Venezuelan Crude

Indications from senior U.S. officials suggest that the Trump administration may consider permitting India to resume purchases of Venezuelan crude oil, reflecting a transactional, and business-first approach to sanctions. Washington is reportedly weighing selective relaxation or licensing mechanisms that would allow Indian refiners to buy oil while repaying outstanding dues, recalibrating sanctions without fully dismantling them. For India, such a move would offer strategic relief at a time of volatile global energy markets and heightened scrutiny of alternative suppliers.

At present, India’s imports of Venezuelan oil are negligible, having fallen to near zero after U.S. sanctions were re-imposed. This marks a sharp contrast with pre-sanctions levels, when India was importing up to 350,000–400,000 barrels per day. If sanctions are eased, industry estimates suggest India could initially access 100,000–150,000 barrels per day, largely benefiting complex refineries capable of processing Venezuela’s heavy crude. While well below historical peaks, even this limited reopening would materially diversify India’s crude basket and revive a long-dormant energy corridor.

Impact on Stock Markets and Foreign Investors
Beyond trade and energy, the tariff threat would transmit a sharp shock to India’s financial markets. In 2024–25, foreign portfolio investors (FPIs) hold roughly USD 700–750 billion in Indian equities and debt combined, making sentiment highly sensitive to geopolitical and trade risks. A credible threat of 500 per cent U.S. tariffs could trigger short-term equity corrections of 5–8 per cent, particularly in export-exposed sectors such as pharmaceuticals, IT services, engineering goods and textiles, which together account for nearly 20 per cent of Nifty earnings. Past episodes of trade or sanctions-related stress suggest FPI........

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