Stopping Venezuela, Strangling India

U.S. President Donald Trump takes aim at Venezuelan crude oil, with India caught in the crossfire.

Donald Trump has fired another salvo in his trade wars, this time at Venezuela. The U.S. President has announced a sweeping 25 percent tariff on any country that dares to import Venezuelan oil, effectively weaponizing global energy markets against Nicolás Maduro’s regime. The announcement, made on Trump’s Truth Social platform, cited Venezuela’s alleged export of criminals (including members of the notorious Tren de Aragua gang) as the reason for this economic punishment. The move, however, has little to do with crime and everything to do with geopolitics.

India, which has become Venezuela’s largest buyer of crude, now finds itself in an awkward position. If Trump’s tariffs are enforced, Indian oil giants like Reliance Industries and Indian Oil Corporation will have to rethink their procurement strategies. Given that India imported a staggering 22 million barrels from Venezuela in 2023, amounting to 1.5 percent of its total crude purchases, the implications could be costly.

Trump’s move is less about punishing Venezuela than coercing U.S. allies into compliance - a familiar tactic from his first term, notably against Iran. But Venezuela lacks Tehran’s geopolitical clout or sanctions-proof trade networks. Instead, it wields oil as both a lifeline and a weapon, a strategy dating back to Hugo Chávez’s defiance of American dominance.

Before U.S. sanctions throttled its economy, Venezuela was the third-largest supplier of crude to the United States, exporting over 1.5 million barrels per day in the early 2000s. Chávez used oil to cement alliances, offering preferential deals to Cuba and other left-leaning governments. His successor, Nicolás Maduro, continued this trend, albeit under grimmer economic conditions. The U.S. crackdown on Venezuelan oil in 2019 forced Caracas to turn to alternative buyers, chief among them, India and China.

For India, Trump’s move complicates an already delicate balancing act. Indian refiners have increasingly relied on Venezuelan crude, especially after American sanctions on Russian oil narrowed their options. The appeal of Venezuelan oil lies in its deep discounts, often undercutting Middle Eastern crude by $15 to $20 per barrel. This makes it particularly attractive for price-sensitive Indian refiners.

If imposed, Trump’s tariffs would force Indian refiners to pay a premium on Venezuelan crude, effectively neutralizing the price advantage. The tariffs could deter Indian firms from dealing with Venezuela altogether, pushing them back towards more expensive Middle Eastern suppliers.

India’s economy is surging, with oil demand projected to rise steadily over the next decade. The country is on track to overtake China as the world’s largest driver of oil consumption growth by 2030. While India scrambles for alternatives, China stands to benefit. Beijing, already Venezuela’s second-largest oil buyer, will likely seize the opportunity to increase its influence.

Trump’s tariffs, far from isolating Venezuela, could end up deepening its dependence on China. The last time Washington imposed sweeping oil sanctions on Venezuela, China stepped in to fill the vacuum. If history repeats itself, Beijing will gain even greater leverage over Venezuela’s energy sector, further diminishing U.S. influence in Latin America.

Venezuela’s oil wealth - 303 billion barrels, the world’s largest - has been both a blessing and a curse. Discovered by foreign firms in the early 20th century, crude made Venezuela the top exporter by the 1920s by supplying oil to a war-ravaged Europe and an industrializing United States. In the 1970s, the industry was nationalized under Petróleos de Venezuela S.A. (PDVSA), a state-run oil giant, PDVSA, thus boosting OPEC influence. However, the 1980s oil crash left Venezuela in debt, forcing an IMF bailout and deepening its economic turmoil.

For India, the path forward is unclear. New Delhi has historically been pragmatic in its energy dealings, resisting American pressure when it suits its interests. It defied U.S. calls to halt Russian oil imports after the Ukraine war, securing lucrative discounts in the process. But Venezuela, unlike Russia, lacks the geopolitical weight to make defiance worthwhile.