U.S. Sanctioning Russia and Iran Act, 2026:
Implications for India
Prelims:
International
relations, global trade and sanctions
Mains: 
GS Paper II- bilateral relations, GS Paper III - Indian economy,
energy security
Current relevance:
U.S. President has
signed the Lindsey O. Graham Sanctioning Russia and Iran Act, 2026 into law.
Highlights:
Objective of the
Act:
§
The original objective of the legislation was to reduce Russia's
financial capacity to fund its war with Ukraine.
§
It provides
for sanctions targeting Russia's top leadership and major energy customers.
§
The
legislation was subsequently expanded to include Iran, with sanctions
against Iran extended for another five years until 2031.
Tariff Provision
and India's Exposure:
§
The Act allows
the U.S. to impose a 100% tariff on goods originating from a country
that satisfies specified conditions.
§ One condition applies to countries that:
o
Among the five
largest importers of Russian crude oil or natural gas by total volume during
the preceding 12 months; and
o
Continue
importing Russian oil or gas after the prescribed 30-day period.
§ India and China are the two largest importers of Russian crude oil.
§ Russian crude accounted for more than 51% of
India's crude-oil imports in July 2026.
§ Therefore, continued large-scale Russian oil
imports could expose India to the tariff provision.
Other Criterion:
o
Tariffs may also apply to a country that was among the top five
countries facilitating Russian oil sanctions evasion during the preceding
12 months.
o
According to the given information, India faces a lower risk under
this particular criterion, as Indian oil marketing companies have stated
that their purchases complied with sanctions.
§
Additional
Tariff Burden:
The potential 100%
tariff would be additional to other duties already applicable to imports.
India already faces:
o
A 10%
tariff under Trade Act, 1974 on specified imports.
o
50% tariffs under Trade Expansion Act, 1962 covering
steel, aluminium, copper and related derivative products.
Therefore, a potential 100% tariff could
substantially increase the overall tariff burden on affected Indian exports.
Economic
Impact on India
1. Impact on Exports
- During the period
when 50% tariffs were in force between August 2025 and February
2026:
o Merchandise exports to the U.S. grew nearly 18%
during April–August 2025 compared with the previous year.
o Over the longer April 2025–February 2026 period,
growth slowed to 3.8%.
- some exporters
shared the cost of tariffs with U.S. customers to retain business.
- A 100% tariff
could make such cost-sharing considerably more difficult.
2. Impact on Energy Security
- Reducing Russian
oil imports could create challenges for India's oil supply and fuel
prices.
- The situation
becomes more significant when the Strait of Hormuz is constrained
and global oil prices are above $100 per barrel, as stated in the
given information.
- Replacing Russian
crude with alternative sources could therefore increase India's oil-import
costs.
3. Impact on Consumers
- Higher
crude-import costs could translate into higher domestic fuel prices.
- This could also
have wider implications for the cost of transportation and economic
activity.
Waiver and Other Exit Routes
- The Act contains a provision allowing the U.S.
President to waive the tariffs.
- For a waiver, the President must provide
Congress with:
- A written certification that the waiver is in
the national interests of the U.S.
- A report explaining the basis for the
certification.
- Another potential route mentioned in the Act
is a situation where Russia reaches a peace agreement accepted by the
free and independent Government of Ukraine and ceases the specified
military activities.
Broader Significance for India
- The issue
highlights the link between energy security and foreign-trade policy.
- India's
dependence on imported crude makes international restrictions on Russian
oil particularly significant.
- At the same time,
the U.S. is an important destination for Indian exports, making tariff
escalation a potential concern for export competitiveness.
- The situation
illustrates the challenge of balancing affordable energy supplies,
export interests and international geopolitical pressures.
Source: THE HINDU - https://www.thehindu.com/news/national/how-will-the-uss-sanctioning-act-affect-india-explained/article71485870.ece