US President Donald Trump has given a waiver with immediate effect on the heavy duties imposed on countries importing Russian oil under the 'Lindsey Graham Act', which imposes stringent economic sanctions on Russia and Iran. Under the law, a provision was made to impose punitive tariffs of up to 100 percent on countries purchasing Russian energy products, which was to be applicable to many major importing countries of the world, including India and China. This relaxation has come just when there were only a few hours left for the final period of restrictions to come into effect. This decision of the US administration is being seen as a major strategic U-turn towards maintaining stability in the global energy market and stopping rising fuel prices in the domestic market. Trump has made it clear that this step has been taken in view of American national interests and the demands of the global economy. India's Ministry of External Affairs and Commerce have welcomed this stance of the US, as it increases the possibility of gaining momentum in the proposed trade talks between the two countries. #1 Advantage 1: Cheap Crude Oil and Guarantee of Energy Security India will get the direct and biggest benefit of the relaxation on sanctions given by America on the energy security front. Indian oil refineries have been buying crude oil from Russia at concessional rates, thereby meeting a major part of the country's total energy demand at an affordable cost. If the US tariffs were to go into effect, Indian companies would have to either switch to costlier Middle Eastern oil or face huge US penalties. After this order of Trump, now major Indian refining companies like Indian Oil, Bharat Petroleum and Reliance Industries can continue to buy cheap crude oil from Russia without the threat of any US sanctions or 100% punitive tariffs. This will greatly help in keeping the current account deficit of the country balanced and the country's foreign exchange reserves will also remain safe. #1 Benefit 2: Petrol and diesel prices will remain stable, there will be a brake on inflation rate. Fluctuations in crude oil prices in the global market have a direct impact on the pockets of the common Indian citizen. India imports about 85% of its crude oil needs. If the availability of cheap oil from Russia stopped, then it was believed that there would be a huge increase in the prices of petrol and diesel in the domestic market, due to which the transportation of goods would become expensive and the prices of daily consumption items including food items would start skyrocketing. With the relaxation of restrictions, cheap oil will be available with Indian refineries, which will keep the prices of petrol and diesel under control. With the brakes on inflation, the Reserve Bank of India (RBI) will also have the opportunity to keep interest rates favorable to promote economic growth. This is a matter of great relief for both the common consumer and the manufacturing sector. #1 Benefit 3: India-US trade talks get a boost. This decision of the Trump administration has also had a positive impact on the bilateral trade relations between India and America. For the past few weeks, a major trade tension was arising between India and the US due to the US stance on Russian oil purchases, which had cast a cloud of uncertainty over the pending free trade agreements and bilateral trade talks (US-India Trade Deal) between the two countries. This exemption order, which came just before the US Secretary of State's visit to India, strengthens diplomatic trust between New Delhi and Washington. India had earlier also made its stand clear to America that its energy policies are designed to provide affordable energy to its 1.4 billion citizens. Now that the threat of sanctions is over, India-US strategic partnership and trade talks can move forward without any hindrance. #1 New Challenge: How can the relaxation given to China become a headache for India? Although Trump's exemption order has brought relief to India, it has also created a new geopolitical and economic challenge in Asia. Under this law, America has exempted India as well as China from restrictions on purchasing Russian oil and gas. China is Russia's biggest energy customer and has entered into a more aggressive race to acquire Russian crude at discounted rates after US sanctions were lifted. Large-scale hoarding of Russian energy resources by Beijing could reduce the discount on Russian oil for Indian companies in the global crude market. Additionally, the growing economic tie-up between Russia and China on the energy front poses a new challenge for India to maintain strategic balance in the Indo-Pacific region. India now has to not only ensure its own energy supply but also see to it that China is unable to use cheap Russian fuel to further enhance its industrial competitiveness.
