Tariffs For Oil: The Limits Of Trump’s India-Venezuela Strategy To Undercut Russia

President Donald Trump's latest foreign policy rests on a simple equation: lowering U.S. tariffs on Indian goods in exchange for India reducing its dependence on Russian oil, substituting supplies from Venezuela and the United States instead. In theory, the deal would deprive Moscow of crucial revenue and weaken its ability to finance the still ongoing war in Ukraine. In practice, however, the geopolitical and economic terrain is far more complex.

India and China together account for a bulk of Russia's oil exports. Since Western sanctions cut off most of European and American buyers after the invasion of Ukraine, discounted Russian crude has become indispensable to New Delhi and Beijing. For India in particular, Russian Urals oil—trading at roughly $16 a barrel—has been an economic windfall for the fast growing and energy hungry economy. Walking away from that arrangement cannot happen overnight, regardless of diplomatic promises.

Venezuela, however, introduces a potentially important variable. Its heavy and sour crude closely resembles Russian oil and is well suited for India's refineries, unlike America's light and sweet crude, which is optimized for gasoline production. From a technical standpoint, Venezuelan barrels could replace Russian ones far more easily than U.S. oil ever could.

Trump's strategy hinges on a dramatic political shift in Caracas. After U.S. forces captured President Nicolás Maduro on January 3rd, Washington quickly moved to dismantle sanctions and encourage Western oil companies to reenter Venezuela. The government of acting President Delcy Rodríguez pushed through sweeping energy reforms, opening the oil sector to privatization and foreign investment—a sharp break from the nationalist policies that defined Chavismo for more than two decades.

Yet Venezuela's oil revival remains aspirational. Current production hovers just above 1 million barrels per day, most of it already committed to China. Even diverting every barrel to India would fail to replace the roughly 1.5 million barrels per day India imports from Russia. While Venezuela possesses the world's largest proven oil reserves and once pumped more than 3 millions barrels per day, its infrastructure has decayed severely. Restoring that capacity would require tens of billions of dollars annually for a decade, along with sustained political stability—precisaly what investors doubt Venezuela can guarantee.

U.S. oil majors remain wary. Although sanctions have been lifted and oil laws revised, Caracas has not committed to repaying outstanding debts, guaranteeing security, or ensuring long term legal protections. High royalties and low global oil prices further cloud the investment case. As portfolio manager Rob Thummel has noted, returns in Venezuela may struggle to compete with opportunities elsewhere.

India, for its part, faces logistical and financial hurdles. Shifting supply chains from Russia to Venezuela involves longer transit time, infrastructure upgrades, and higher costs. Analysts expect to continue buying Russian oil through intermediaries and shadow fleets, even as it modestly diversifies imports to strengthen its hand in negotiations with Washington.

Meanwhile, Venezuela's internal reality underscores the fragility of Trump's plan. Thirty days after Maduro's capture, the country remains suspended between fear and cautious hope. Rodríguez insists she governs independently, even as she cooperates with the United States on oil policy. Ordinary Venezuelans, surviving on wages far below poverty thresholds, hope an oil boom might finally bring relief, but few dare to openly celebrate Maduro's downfall or trust promises of reform.

China, too, remains firmly in the picture. Caracas has reassured Beijing that oil pricing will follow international market, not the U.S. dictates, and that Chinese investments will be protected. Despite initial U.S. pressure to sever ties with Beijing, Trump has since signaled openness to Chinese and Indian participation in Venezuela’s energy sector.

In the end, Venezuela oil will not deliver a blow to Russia’s economy. Moscow has adapted through shadow shipping, higher taxes, and expanded manufacturing. Still, incremental pressure matters. If India gradually trims Russian imports, even marginally, it complicates Russia’s economic evaluation.

In a war that has claimed nearly 2 million lives, the impact may be limited—but, as one analyst put it, something is better than nothing.