How will US sanctions bill affect India? | Explained

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US President Donald Trump has signed into law the Lindsey O. Graham Russia and Iran Sanctions Act of 2026, which could lead to tariffs of up to 100% on imports from India if it continues to import oil from Russia. This law therefore has significant implications for India in terms of its export ambitions and energy security. The Indian government’s concerns about tariffs have so far gone unheeded.

Why did the US introduce this law?

The original purpose of the bill — designed by and named after the late Sen. Lindsey O. Graham — was to cut off funding to Russia to choke off its financing of its war with Ukraine. To this end, the law sets out sanctions to be imposed on Russia’s top management and its biggest energy customers.

Recently, the “and Iran” part of the title was added to the bill to convey that such measures are also aimed at Iran. The text was amended to state that sanctions against Iran would be imposed for another five years until 2031.

What does the Tariff Act say?

For India, the most important aspect of the law is what it says about countries that import Russian oil. Thirty days after its passage, the law allows the US to impose a 100% tariff on goods originating from a country that meets one of two general criteria. The first is a country that was among the top five importers of oil or natural gas from Russia by total volume in the 12 months prior to the law’s enactment and that continues to import oil or gas from Russia after the 30-day period has expired.

This is a criterion that is likely to affect India. China and India are the two largest importers of Russian oil. Russian oil has accounted for a growing share of India’s oil imports since February 2026, when the US Supreme Court struck down Mr Trump’s tariff regime, including a punitive 25% tariff he imposed on India on Russian oil imports.

Russia accounted for more than 51% of India’s oil imports in July 2026, according to the latest data. Drastically reducing this volume within 30 days, at a time when passage through the Strait of Hormuz is still restricted, is likely to be impossible for India.

The second criterion for imposing tariffs is whether a country was among the five countries that “facilitated the circumvention of Russian oil sanctions during the 12 months prior to the date of the law’s enactment.” India runs a much lower risk of qualifying for tariffs under this criterion because Indian oil companies have repeatedly claimed that all their purchases have been made without violating sanctions.

Will it be total duties on imports from India?

No. The Act clearly states that import duty imposed under this Act “shall be added to any other duty” imposed on any goods. This includes tariffs imposed under Section 301 of the Trade Act of 1974, which allows the United States Trade Representative to investigate foreign trade practices that harm American trade and to retaliate, and Section 232 of the Trade Expansion Act of 1962, which authorizes the US President to restrict imports or impose tariffs if an investigation finds that foreign goods threaten national security.

These two other laws are important because India is among the countries already facing tariffs under them. This means that the US Trade Representative has used Section 301 to investigate US trading partners to see if they have done enough to stop the importation of goods made with forced labour. Based on its findings, it imposed a 10% duty on imports from India. In addition, Mr. Trump expanded the existing Section 232 tariffs to include steel, aluminum, copper and related derived products, raising the rate to 50%. As it applied equally to all countries, it put India on a level playing field with its competitors.

Moreover, a potential 100% tariff will seriously undermine India’s competitiveness in these sectors.

Will these tariffs apply immediately?

No. A period of 30 days must pass before the US can determine whether countries are still importing oil and gas from Russia. Only after this period can the US impose duties under the law. The bill also states that the US Trade Representative, in consultation with the Secretary of State and the Secretary of Energy, will, within 180 days of the initial imposition of tariffs, re-examine the countries that are the top five importers of oil and natural gas from Russia based on the past 12 months.

What is the potential impact on the Indian economy?

The impact on the Indian economy needs to be viewed in terms of two possibilities. The first is if India continues to buy large quantities of Russian oil and bear the tariffs. The second is if India curbs its imports of Russian oil and manages to remove any tariffs.

In the event that India continues to buy Russian oil and bear the tariffs, we can look at what happened during the period when the 50% tariff was in place, between August 2025 and February 2026, to assess the likely impact.

Between April and August 2025, merchandise exports to the US increased by nearly 18% compared to the same period a year earlier. While this was partly due to the advance of exports in anticipation of future tariffs, it nevertheless highlighted the strong momentum of exports from India to the US. However, over the longer period from April 2025 to February 2026, exports to the US grew at a much slower rate of 3.8%, indicating a substantial slowdown in exports after August, when the tariffs took effect.

Interviews with exporters at the time indicated that many shared the cost of the higher tariffs with their American customers to retain them. At a rate of 50%, it was already a blow to the body for most of them. These exporters will not be able to share 100% duty.

However, historical data shows that India has chosen to comply with US pressure to reduce oil imports from countries such as Venezuela, Iran and Russia. If India again restricts imports of Russian oil, this could have serious implications for fuel supplies and prices in India. At a time when the Strait of Hormuz is restricted and oil prices are comfortably above $100 a barrel again, it is likely to be very expensive for India to look for newer sources of oil. For Indian citizens, this could translate into further increases in fuel prices. Such increases would be politically unpalatable for the government, with several key state elections coming up next year.

Is there a third way out?

The law contains provisions on tariff waivers. The U.S. president can waive the tariff once he submits to Congress a written certification that the waiver is “in the U.S. national interest” and a report explaining the basis for the certification.

The second option is if Russia signs “a peace agreement that is accepted by the free and independent government of Ukraine” and stops “all military hostilities against the government of Ukraine and any activities aimed at overthrowing, dismantling and subverting the government.”

Published – 20 Sep 2026 02:20 IST