ICE Brent rallied by more than 2.3% yesterday, pushing prices back above US$70/bbl. This was in response to President Trump saying he would shorten the deadline for Russia to come to a deal to end the war with Ukraine from 50 days to 10-12 days. No deal could see Russia facing tougher US sanctions, along with the US imposing secondary tariffs of 100% on trading partners that import Russian oil. If imposed and enforced strictly, it would cause a significant shift in the oil outlook. India, China and Turkey have increased purchases of Russian crude since the Russia-Ukraine war, taking advantage of the discounts for the oil.
However, these countries will need to weigh the benefits of importing discounted crude oil against prohibitively high tariffs on their exports to the US. For China, crude oil imports from Russia have averaged 1.99m b/d so far this year, or 17.5% of total crude imports. In 2024, 14.7% of total Chinese exports went to the US, making it the largest destination for Chinese shipments. This share has fallen to 11.9% so far this year, given the tariff environment. Meanwhile, India, which has imported around 1.75m b/d of Russian crude oil so far this year (35% of total crude imports), saw 20% of its total exports go to the US in FY24-25. Given the large share of exports to the US, secondary tariffs would likely see these two large buyers of Russian oil try to put a stop to these flows.
Another key question is whether Trump would go ahead with these sanctions and secondary tariffs. It’s no secret that Trump is keen to see lower oil prices. Such an action would push prices significantly higher, erasing the expected surplus in the market through 2026. Russia exports more than 7m b/d of crude oil and refined products. Then there’s the potential disruption to broader trade if prohibitively high tariffs are imposed. It’s for these reasons that we don’t believe these secondary tariffs will come into effect, at least not at the 100% level.