India’s Graham Act Dilemma: Energy Security Meets US Tariff Weapon

The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, recently passed by the US Congress, has placed India in a dilemma concerning energy security and its relationship with the United States. The legislation grants President Donald Trump the power to impose tariffs of up to 100 percent on countries that continue to buy substantial amounts of Russian oil and gas.

India, being one of the largest purchasers of Russian crude, is directly affected by the possibility of such tariffs being imposed. However, the legislation itself has yet to be signed into law and the President has not yet decided to utilize the tariff authority. The political debate surrounding the legislation has sometimes overshadowed the economic concerns that India must address, namely how to maintain energy security without allowing Russian oil to escalate tensions with the US.

The US House approved the measure with a vote of 262-159 on September 16 following an 86-11 Senate vote on August 7. The legislation's primary targets include Russian officials, financial institutions, and the shadow fleet used for transporting Russian energy, while also empowering the President to impose tariffs of up to 100 percent on major purchasers of Russian petroleum or natural gas.

India's response to the legislation has been firm yet measured. The Ministry of External Affairs affirmed India's continued commitment to energy security for its 1.4 billion citizens and promised continued diversification of sourcing based on market conditions. They also conveyed the potential implications of the American legislation to senior American officials and emphasized that India will take necessary measures to protect its trade and economic interests.

The government's stance rests on economic and geopolitical factors. Russian crude became particularly appealing for Indian refineries after Western sanctions disrupted traditional Russian energy markets. India was able to secure discounted prices, refine some of the crude, and export petroleum products. For an economy of India's size, replacing a major supplier abruptly would not only be a diplomatic gesture but could also have significant consequences on crude-import costs, refining economics, inflation, the current account, and ultimately, consumers.

Therefore, the government's reference to India's 1.4 billion citizens is more than symbolic; it is the foundation of India's argument that energy policy and domestic economic security are inextricably linked. Indian media outlets have extensively covered the potential 100 percent tariff, as it could impact India's trade relations with the United States.

However, the Times of India highlighted that the legislation does not automatically impose a 100 percent duty. Instead, it creates a pathway for the Trump administration to impose such tariffs under specified circumstances. This distinction is significant because while a 100 percent tariff on Indian exports might not immediately translate to a 100 percent decrease in exports, it would introduce a political variable that could influence negotiations and pricing strategies.

Indian manufacturers engaged in long-term contracts with American buyers would need to factor in this uncertainty, as tariffs could potentially escalate to a level that significantly impacts their export competitiveness. The economic debate in India revolves around two primary questions: whether India can afford to decrease its Russian oil imports and whether it can afford to maintain that dependence.

There is no straightforward answer. Switching to alternative suppliers swiftly could lead to higher import costs, particularly if global oil prices are already high. Conversely, continuing to purchase Russian crude while facing potential tariffs from Washington could raise export-related costs. Economic analysts in India have focused on the potential impact on exports and trade negotiations, rather than assuming that the worst-case tariff scenario will inevitably occur.

Industry leaders have also called for continued engagement, urging that tariffs should not become a permanent fixture in India-US relations.