US tariffs on Venezuelan oil may lead to inflationary pressures in India
Trump’s secondary tariffs could affect several countries that procure Venezuelan crude oil including India, China, Spain, and Italy
US President Donald Trump has threatened to impose 25 per cent "secondary tariffs" on countries that import Venezuelan crude oil, from April 2. His decision could have a significant impact on India’s energy sector as India was one of the top buyers of crude oil from Venezuela in FY 2024.
Trump posted late on Monday (March 24) on Truth Social, “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’s secondary tariffs seem to be a mix of secondary sanctions and tariffs imposed on countries or individuals who deal with sanctioned entities. They could affect a wide range of targets that procure Venezuelan crude oil including India, China, Spain, and Italy.
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Rising tensions
Rising tensions between the US and Venezuela seem to be the matter of contention, particularly after Washington suspended deportation flights to Venezuela. The US accused Caracas of failing to honour the agreement of taking back immigrants, as Venezuela refused to accept the deportees. However, a new deal was agreed upon to resume flights, and almost 200 Venezuelan nationals were deported from the US through Honduras.
Trump told reporters that the 25 per cent tariffs on buyers of Venezuelan crude oil was in addition to existing levies. According to the executive order published on Monday evening, the tariffs would remain in place for one year "after the last date on which the country imported Venezuelan oil". The US holds the power to revoke these tariffs earlier than mentioned, at its discretion, according to a report by the Financial Times.
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Impact on India
India could face inflationary pressures if oil prices increase, which will in turn affect transport, manufacturing, and the country’s overall economic growth. The newly-imposed tariff could increase procurement costs for Indian refiners, disrupting essential supply chains. According to reports, the global crude market will still be volatile, and any supply shifts will have broader effects on pricing and energy security.
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India was the top buyer of Venezuelan crude oil in December 2023 and January 2024.
In December 2023, imports stood at approximately 191,600 barrels per day (bpd), with Reliance Industries securing 127,000 bpd. In January 2024, purchases of Venezuelan crude rose to over 254,000 bpd, which accounted for nearly half of Venezuela’s total exports of 557,000 bpd. India imported 22 million barrels of oil from Venezuela, making up 1.5 per cent of the country’s crude oil purchases, according to an AFP report.
Refiners may shift to Russian oil
The impact of these tariffs on the country also depend on refiners’ response to the increase in cost, as they will have to navigate a more complex landscape with shifting trade policies and subsequent supply chain realignments. If Venezuelan crude becomes very expensive with additional duties, companies might seek alternative sources, leading to an increased reliance on Russian oil imports. As Russian oil shipments resumed through non-sanctioned tankers, Indian refiners may look to increase imports of Russian crude oil, in an effort to offset cost escalations caused by US tariffs on Venezuela, as per a Reuters report.