U.S.-India relations have taken a hit after U.S. President Donald Trump imposed an additional 25-per-cent tariff on imports from India, because the South Asian country continues to purchase Russian oil.Kevin Lamarque/Reuters
U.S. President Donald Trump is making a frenemy out of India as he wages a global trade war.
Relations between Washington and New Delhi sank to a new low this week after Mr. Trump signed an executive order to impose an additional 25-per-cent tariff on imports from India, ostensibly because the South Asian country continues to purchase Russian crude oil.
Once the change takes effect on Aug. 27, India’s tariff rate will double to 50 per cent. Mr. Trump had previously announced an initial 25-per-cent tariff that commenced Aug. 7, putting a chill on the once-budding bromance between Mr. Trump and Indian Prime Minister Narendra Modi.
“We reiterate that these actions are unfair, unjustified and unreasonable,” India’s Ministry of External Affairs said in a statement. “India will take all actions necessary to protect its national interests.”
Trump to impose extra 25% tariff on India for buying Russian oil, bringing total rate to 50%
The White House is justifying the punitive trade action by claiming that Russia’s invasion of Ukraine poses a “national security” threat to the United States. No argument here, but where was this logic when Mr. Trump was fawning over Russian President Vladimir Putin in recent months?
Mr. Trump, who is proving to be an unreliable advocate for Ukraine, leads a country that has been previously accused of importing “laundered” Russian oil. Global Witness, a London-based environmental and human-rights group, claims the U.S. imported 30 million barrels of fuel from refineries that use Russian oil in the first nine months of 2023 alone. Those refineries were located in countries that include – wait for it – India and Turkey.
Canadians should resist becoming distracted by this latest bout of American hypocrisy on Ukraine and the double standard that Mr. Trump is creating by singling out India. After all, China is the largest importer of Russian oil and is still benefiting from a temporary tariff detente with Washington.
Those developments are head-scratchers, to be sure, but Mr. Trump’s decision to penalize India for purchasing Russian oil is creating a new opportunity for Canadian energy exports. Ottawa should seize this moment to repair relations with New Delhi, restart trade talks and make Canadian energy the cornerstone of a bilateral trade deal.
There are signs of increasing Indian interest in Canadian oil. Indian Oil Corp. Ltd., for instance, has purchased 500,000 barrels of Western Canadian Select for September delivery as India seeks alternatives for Russian supplies, according to Reuters.
The Indian government, meanwhile, has directed the country’s refiners to create contingency plans to buy more non-Russian crude oil, according to a report by Bloomberg.
Domestic refiners have already slashed their orders of Russian oil by 40 to 50 per cent, The Economist reported in a story this week.
India, which bought a minimal amount of Russian oil before the 2022 invasion of Ukraine, has significantly increased imports in recent years as sanctions by Western countries drove down prices.
Indian processors, in turn, have profited handsomely by importing cheap Russian oil, refining it into products such as diesel, jet fuel and gasoline, and then selling those refined products to other countries.
Russian oil accounts for roughly 35 per cent of India’s crude imports versus less than 2 per cent before the start of the war, according to Reuters.
India is already signalling that it could purchase more oil from the U.S. and countries in the Middle East and Africa as substitutes for Russian energy.
Why not more Canadian oil instead?
India, which is home to the world’s largest refinery, certainly has the processing capacity.
The Jamnagar Refinery, owned by Reliance Industries Ltd., is located in western India and receives supertanker shipments originating from all over the world, including the U.S. and Mexico. It receives relatively little from Canada.
Both Reliance and Nayara Energy Ltd., another private refiner in India, currently have supply deals with Russian energy giant PJSC Rosneft Oil Co.
Canadian oil producers, however, cannot successfully compete for more business in India, or elsewhere in Asia, for that matter, without new pipelines.
The last section of pipeline is assembled on the Trans Mountain pipeline expansion project before operations are expected to begin in British Columbia, February 2024.Chris Helgren/Reuters
As I’ve argued in previous columns, the successful Trans Mountain pipeline expansion should mark the beginning – not the end – of Canada’s energy aspirations.
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If Prime Minister Mark Carney is serious about increasing Canada’s clout as a global energy supplier, his government must also resume trade talks with India.
Back in February of 2018, before relations soured between Ottawa and New Delhi, Mr. Modi called Canada an “energy superpower” that can meet India’s “growing energy needs.”
Contrary to Mr. Trump’s recent remark that India has a “dead economy,” it is already the fifth-largest in the world and requires more energy imports to fuel its future growth.
Mr. Trump, meanwhile, is practically making the case for Canadian oil.
“We have just concluded a deal with the country of Pakistan, whereby Pakistan and the United States will work together on developing their massive oil reserves,” Mr. Trump wrote on his Truth Social platform. “Who knows, maybe they’ll be selling oil to India someday!”
Who would have thought that Mr. Trump, of all people, could be the one who persuades India that Canada is a more suitable match.