Rupee Plummets, Fuel Prices Soar—The Widening Sparks of "Double Sanctions": Pressure from the US and EU and the Search for New Supply Sources

Prologue: The Shock of the US-Europe "Pincer Movement"

On the early morning of July 31, 2025, two telegrams that swept through diplomatic circles in New Delhi redrew India's energy map. One was the announcement by US President Donald Trump that he would impose a flat 25% additional tariff on Indian products starting August 1, along with a warning of penalties for countries continuing to purchase Russian crude oil. The other was a clause in the 18th EU Sanctions Package against Russia adopted on the same day, explicitly stating the complete ban on imports of refined products made from Russian crude oil via third countries. As a result, India's oil refining industry, which had been reliant on cheap Russian crude, entered an unprecedented phase of simultaneous pressure from both the US and Europe.European Council

Key Messages

• Trump Administration: 25% Tariff + Sanctions Hint for Russian Oil Procurers

• EU: Closing the "Backdoor" for Products Derived from Russian Crude

• India: Major 4 Companies Halt Russian Oil Orders, Urgent Crude Diversification

Chapter 1: Pressure from the US - The "100% Tariff" Card and "Dead Economies" Remark

At a campaign rally on July 14, President Trump declared, "Countries supporting Russia's war will face a 100% tariff," specifically naming India, which imports large quantities of Russian crude oil. On the 31st, a provocative post on Truth Social stating "India and Russia are dead economies" sparked intense backlash within India. While the ruling BJP remained silent, the opposition pursued the Modi administration's "diplomatic blunder" in parliament. In the forex market, the rupee plummeted to 87.74 per dollar, and the Nifty50 fell 0.6% from the previous day.

Reuters

Chapter 2: EU's 18th Sanctions - Closing the "Third Country" Loophole

The 18th EU sanctions adopted by the EU Council on July 18 expanded the embargo to include fuels refined from Russian crude oil in third countries, with exceptions limited to five Western countries, including Canada, Norway, and the United States. This clause is expected to directly impact about 30% of diesel and jet fuel exports by Indian private giants Reliance and Nayara to Europe. Analysts point out that "Gulf oil-producing countries will seize the open European market," forcing Indian players to restructure their sales channels towards Latin America and Africa.Reuters

Chapter 3: Immediate Response of the Indian Refining Industry - Can It Operate "Without Russia"?

The state-owned four companies, IOC, BPCL, HPCL, and MRPL, have halted orders for Russian oil. Procurement officers testified, "We have increased spot purchases of Murban (UAE), Bonny Light (Nigeria), and Kazakh CPC blend since last week." However, African and Middle Eastern oils are mostly low-sulfur "sweet" oils, making it difficult to optimize yields at high-complexity refineries designed for heavy Russian oil. The gross refining margin (GRM) plummeted to $2.8 per barrel in the fourth week of July, falling below the industry average breakeven point (~$3.5).Reuters

Chapter 4: Ripple Effects on Markets and Exchange Rates - The Rupee Defense Line and Stock Price Strain

Following reports of the "25% tariff," the rupee in the forex market on the 31st approached just 0.13 rupees shy of its all-time low. The RBI (Reserve Bank of India) intervened by selling dollars to curb the sharp decline, but with the Fed holding off on interest rate cuts, the downside risk persists. The increase in energy import costs is estimated to push the current account deficit (CAD) from 2.1% to 2.8% of GDP. In the stock market, the market capitalization of the four refining companies evaporated by a total of 750 billion rupees in one day.

Chapter 5: Social Media Frenzy - "#TariffShock" and "#OilNationalism"

In the trending section of X (formerly Twitter), within just 30 minutes of the US announcement, **"#TariffShock" and "#OilNationalism" simultaneously entered the top 10. An Indian investor account, @websticknl, posted, "Dow plummeted by $1,600 - #TariffShock heralds a global recession," garnering 24,000 reposts.X (formerly Twitter)
Around the same time, AIMIM party leader Owaisi mocked the administration, saying, "being threatened again by the 'buffoon-in-chief'**," while liberal media outlets published columns criticizing Prime Minister Modi's silence. From the right-wing, voices emerged calling for "counter-tariffs against sanctions infringing on national sovereignty," deepening the divide in public opinion.The Times of India

Chapter 6: Expert Perspectives - Short-term Bleeding and Long-term Opportunities

In a report, rating agency ICRA analyzed that "the FY25 EBITDA of the four state-owned refiners will decrease by 12-15%, but refinancing with Middle Eastern oil will lead to a recovery in the latter half." Meanwhile, global traders pointed out that "the EU sanctions will reorganize the diesel route, increasing shipping costs from Asia to Europe by 30%." This could, conversely, widen the spread between Singapore benchmark prices (MOPS) and domestic sales prices in India, potentially providing profit opportunities for export-oriented private Reliance.The Economic Times

Chapter 7: Green Transition Scenario - Accelerating Towards "Hydrogen Liberalization"

The current crisis, which warns against dependence on Russia, could also serve as an accelerator for the Indian government's **"2047 Energy Net Zero" goal. The Ministry of Petroleum plans to announce the second edition of the National Hydrogen Mission** within August,

• aiming to produce 1 million tons of green hydrogen annually by 2026.

• By 2030, the co-firing ratio of ammonia and methanol in power generation will reach 20%

• with plans to include **joint procurement of "electrolyzer clusters" at refineries**
  . Negotiations are underway for a technology cooperation MoU with the US Energy Dept., and whether the cooling US-India relations due to sanctions and tariffs can be re-bonded through clean energy cooperation will be key.
  
  
  

Conclusion: Redefining "Energy Diplomacy"

The US-Europe "two-front strategy" forces India to break away from dependence on Russian oil and redesign its supply chain. Meanwhile, India's negotiating power, backed by the world's largest population and growth market, remains significant.

• In the short term, it faces a triple punch of compressed refining margins, a weaker rupee, and falling stock prices.

• In the medium term, risk diversification will progress through diversification of crude oil procurement and restructuring of export destinations.

• In the long term, leveraging investments in hydrogen and renewable energy, the paradigm shift from an "importing country to an energy technology exporting country" comes into view.

New Delhi now faces a dilemma caught between the geopolitical puzzle of the US, Europe, and Russia, and domestic public opinion. However, the crisis also presents an opportunity to expand options. Whether the strategy of **"multiple sources, multiple fuels"** functions effectively—the answer lies in the execution of India's "hydrogen liberalization" roadmap.

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