What If India and China Stop Buying Russian Oil? A Global Energy Shock in the Making

Economic

Commodity

Summary:

India and China resist US pressure to stop importing discounted Russian oil, highlighting their energy security priorities. If both countries were to halt purchases...

Geopolitical Tensions Over Oil Intensify

The Trump administration's revival of secondary sanctions targeting countries that trade with sanctioned states like Russia has reignited tensions. India and China, the two largest buyers of Russian oil since the Ukraine invasion, rejected recent pressure from former President Trump. While Trump claimed Indian Prime Minister Narendra Modi had promised to stop Russian energy imports, India reaffirmed its stance: national energy security and affordability remain top priorities. China echoed a firm response, defending its Russian oil purchases as legal and warning against unilateral US coercion.

From 2021 to 2024, India’s Russian oil imports skyrocketed from 0.1 to 1.9 million barrels per day, while China’s rose to 2.4 million barrels. India saved an estimated USD 33 billion over this period thanks to steep Russian discounts following Western sanctions. For both economies, the cheap supply has proven vital. Russia, meanwhile, benefited from redirecting exports eastward to maintain revenue amid sanctions.

The Threat of Sanctions: Economic and Inflationary Fallout

Trump’s new 25% tariffs on Indian imports, tied to their oil trade with Russia, already risk raising India’s oil import costs by USD 11 billion. If fully enforced, further secondary sanctions could severely harm Russia’s already fragile economy, which is grappling with high inflation (potentially 15–20%), military overspending, and a shrinking fiscal base. For global markets, the loss of over 5 million barrels per day from Russia would be catastrophic.

Oil expert Sumit Ritolia told DW that if India had not bought Russian oil in 2022, oil prices could have soared to USD 100–300 per barrel. The US Federal Reserve estimates that every USD 10/barrel increase raises US inflation by 0.2%. Thus, a global surge to USD 110–120/barrel would stoke inflation, raise living costs, and disrupt key sectors such as transport, energy, and food.

India's Diminishing Oil Discount, China’s Strategic Edge

Although India continues importing heavily (2.08 million barrels/day in June 2025), discounts have narrowed to just USD 5/barrel down from USD 15–20/barrel in 2022. Meanwhile, China leverages its dominant position in rare earth exports as geopolitical leverage, strengthening its negotiation power. Unlike India, which faces intensified US tariffs and lacks similar counterweights, China’s vast trade scale allows greater resilience.

Replacing Russia’s 5 million barrels/day won’t be easy. OPEC’s limited spare capacity and logistical barriers make rapid substitution unlikely. CEPA expert Alexander Kolyandr emphasized that no producer can quickly replace Russia’s volume, risking a major energy shock.

India, while facing more flexible import options than China, will struggle to completely cut Russian oil. Ritolia notes it may take a year for Indian refiners to significantly diversify. Yet, a full stop is improbable.

India and China are recalibrating strategic autonomy in energy amid mounting Western pressure. Both are unlikely to abandon Russian oil entirely at least not without major market alternatives. For now, their decisions will shape not only Russia’s war chest, but the direction of inflation, trade, and power in the 21st-century global energy order.

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Gerik

Commodity

Economic

A Game-Changing Discovery Beneath the Pacific

Discovered in 2013 beneath waters near Minamitorishima Japan’s easternmost island the rare earth deposit contains an estimated 16 million tons of high-quality minerals. Scientists believe this reserve could meet global demand for centuries. Rare earth elements (REEs), which include 17 essential metals, are crucial to producing electric vehicles, jet engines, semiconductors, wind turbines, medical lasers, and military weapon systems.

Given China’s near-monopoly on rare earth processing and frequent use of export restrictions for geopolitical leverage, the discovery represents a potential strategic breakthrough for Japan and its allies.

Costly and Complex Extraction Plans

Japan aims to begin small-scale seabed mining operations in January 2026 and offer supply to the private sector by 2028. However, extracting REEs from depths of 6,000 meters presents enormous technological and economic hurdles. Each exploration mission is expected to cost over 150 million yen (approximately USD 1 million), according to Takahide Kiuchi of Nomura Research Institute.

Furthermore, Japan currently lacks the domestic refining infrastructure to handle these deep-sea materials. Experts emphasize the need to build new processing plants near the island to realize commercial potential.

Long-Term Geopolitical and Economic Strategy

Kazuto Suzuki of the University of Tokyo’s Graduate School of Public Policy warns that while fluctuations in REE prices or stronger government support could make the project viable, it remains commercially unfeasible for now. However, improved technology could turn this resource into a medium- to long-term counterweight to China’s dominance.

China recently expanded export restrictions on rare earths limiting seven types in April and adding five more in October tightening control over global supply chains. These moves have drawn strong criticism from the U.S., including tariff threats by former President Donald Trump.

Though Minamitorishima’s undersea deposit won’t immediately alter the global rare earth landscape, it symbolizes Japan’s long-term strategy to strengthen resource independence and mitigate economic security risks.

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Manuel

Bond

Forex

The US Treasury bought more Argentine pesos Friday than it had in any other session, traders estimated, as the currency continued to lose value despite American support.

Traders estimated that Secretary Scott Bessent’s Treasury sold more than $200 million during the trading session Friday, with roughly half coming in the final 10 minutes, according to people with direct knowledge. That approximate figure wasn’t seen in prior sessions, at least in the official spot market, the people added, asking not to be named discussing specific transactions.

The Treasury Department’s press office didn’t respond to multiple requests for comment Friday on the scale of its peso purchases. Bessent disclosed earlier that the US had also bought pesos Thursday in Argentina’s parallel exchange rate known by investors as the “blue-chip swap.”

“Treasury is monitoring all markets, and we have the capacity to act with flexibility and with force to stabilize Argentina,” Bessent wrote on X Friday morning. Argentine FX Traders Estimate US Treasury Sold Over $200 Million_1

Argentine FX Traders Estimate US Treasury Sold Over $200 Million_1

The intensified effort underscores Washington’s determination to stabilize markets ahead of Argentina’s midterm elections on Oct. 26. President Javier Milei’s party is trying to boost its representation in Congress where it only holds about 15% of seats. In addition to buying pesos, Bessent is also offering a $20 billion currency swap line, and organizing private lending of the same amount with banks and sovereign wealth funds.

In a rare move, the Trump administration last week began buying the peso, which is down about 30% so far this year, in a bid to stabilize markets, yet Argentines continue to buy dollars for fear of a post-election currency devaluation.

The peso’s slide accelerated Friday, tumbling as much as 5.2% intraday to 1,475 per dollar before closing around 1,450, while the parallel rate weakened as much as 3.7%. Bonds spiked briefly before giving back gains.

Source: Bloomberg

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Commodity

Gold’s rally has awed Wall Street for months. Gold miners have done even better - so well that investors are now asking whether historic gains in shares of Newmont Corp., Agnico Eagle Mines Ltd. and their competitors have gone too far.

The NYSE Arca Gold Miners Index was down 6% at 4:10 p.m. in New York on Friday, the biggest drop since May, while bullion fell more than 2%. Newmont sank 7.6%, Agnico Eagle Mines slid 6% and Barrick Mining Corp. retreated 6.5%. The trio had each enjoyed gains of more than 100% this year, while gold gained just over 60%.

“Traders who have been holding a long position in SPDR Gold Trust ETF are now faced with a decision - Take profits or Let it ride?” SentimenTrader’s senior research analyst Jay Kaeppel wrote in a note to clients on Friday.

The reasons for gold’s historic advance have been hard to pin down, but among the most widely accepted are that the metal is acting as a haven for investors worried about inflation, a falling dollar and political instability in some developed markets. While none of those issues have fully resolved, the past week has seen the dollar steady and the flareup in trade tensions between China and the US ease. Rally in Gold Miners Falters as Gains Outstripped Metal´s Surge_1

Rally in Gold Miners Falters as Gains Outstripped Metal´s Surge_1

The rally in miners has pushed the group’s valuation to nearly $1 trillion, triple its average over the past five years.

For Candice Bangsund, Fiera Capital Corp.’s portfolio manager, current price and valuation levels suggest the heady days for miners may be coming to an end.

“The stocks have run ahead of the underlying gold price, so from here I’m not certain how much more room there is to run,” Bangsund said in an interview. As a result, she sees share prices being fairly range bound over the next 12 to 18 months.

Source: Bloomberg

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Central Bank

Forex

A Bloomberg gauge of the dollar closed out its worst week in more than two months as expectations of Federal Reserve interest-rate cuts coupled with emerging credit risks in the US banking sector weighed on the greenback.

The Bloomberg Dollar Spot Index was little changed in New York trading on Friday but declined some 0.5% from Monday’s open, the largest weekly drop since early August. Policy-sensitive two-year Treasury yields traded near a three-year low, while traders boosted their bets on Fed easing and are now pricing some 50 basis points of rate reductions by December versus 46 basis points on Wednesday.

Fed Governor Christopher Waller this week said that officials can keep lowering interest rates in quarter-percentage-point increments to support a faltering labor market, while Governor Stephen Miran reiterated his view that a move twice that size would be appropriate this month. The comments came against the backdrop of a steep slide in regional bank shares as two lenders disclosed losses tied to fraudulent loans, although the selling in US stocks abated Friday.

“Volatile sentiment and headline risk extends the somewhat erratic trading in the dollar broadly, but overall dollar slippage on the week remains notable as investors anticipate easier Fed policy and less supportive yield differentials,” said Shaun Osborne, chief currency strategist at Scotiabank. Dollar Caps Worst Week Since August on Fed Bets, Bank Woes_1

Dollar Caps Worst Week Since August on Fed Bets, Bank Woes_1

The dollar also softened as political risks in Japan and France eased this week and trade tensions between the US and China continue to jolt markets. Multiple factors are hitting the dollar at once, making it hard to pick a bottom in the selloff, according to ING Bank NV analysts Chris Turner and Francesco Pesole.

“A sudden surge in scrutiny of US regional banks is hitting equities and the dollar, which, incidentally, faces the negative drag of a dovish Fed repricing, some hopes for a Ukraine truce, falling oil prices and ongoing US-China trade tensions,” they wrote in a note.

US President Donald Trump on Friday said the high tariff rates threatened by his administration against China are “not sustainable.” US Treasury Secretary Scott Bessent said Friday that will speak by phone with Chinese Vice Premier He Lifeng this evening regarding the status of trade negotiations.

Hedge funds that have bought the dollar versus the yen and the euro earlier this month have been stopped out, while institutional investors are largely sidelined, according to traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly.

In options, near-term sentiment has turned more bearish over the next week even as positioning leans toward a stronger dollar into the end of the year. A measure of option risk reversals over the next week on the dollar-yen pair trades near its most bearish level on the greenback since early August, as measured by the ratio of puts activity to calls. Dollar Caps Worst Week Since August on Fed Bets, Bank Woes_2

Dollar Caps Worst Week Since August on Fed Bets, Bank Woes_2

The US currency has retraced roughly a third of its rebound from September’s three-year low. Europe-based traders say conviction remains thin, with investors keeping positions short-dated and trading one headline at a time. This is apparent in both the spot and options markets as major currencies are gravitating back toward recent averages.

“The search for triggers for dollar depreciation continues,” Bank of America currency strategists Adarsh Sinha and Claudio Piron wrote in a note Friday. “US data is largely absent during the government shutdown but conversely creates a future air pocket, when economic releases over a short space of time could amplify FX volatility.”

Source: Bloomberg

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Economic

China–U.S. Trade War

Finance chiefs from around the world wrapped up talks this week resigned to the reality that trade tensions, geopolitical mistrust and the euphoria over the US-led boom in artificial intelligence all pose increasingly entrenched risks to the global economy.

In Washington, where a partisan standoff closed the government into a third week, the mood at the World Bank and International Monetary Fund was a mix of relief that US President Donald Trump’s tariffs hadn’t caused a deeper slowdown and dread that the fallout was only just beginning to lift prices, squeeze profits and delay investments.

Heading into to the organizations’ annual meetings, tensions between the US and China flared again, and the week saw some of the harshest rhetoric between Washington and Beijing in Trump’s second term.

As both sides flexed their dominance with export controls in key industries — the US with advanced technology and China with rare earths — Treasury Secretary Scott Bessent upbraided a Chinese negotiator, describing him as “unhinged” and perhaps having “gone rogue.”

While the anxiety mostly played out behind the scenes, with few officials willing to publicly opine on power politics between the world’s largest economies, the IMF’s managing director urged policymakers not to panic. Kristalina Georgieva suggested the lack of retaliation against the twin shocks of US tariffs and abundant Chinese exports was helping keep subpar global growth from collapsing.

“Our message to everybody is: Be calm,” she said in an interview Thursday with Bloomberg Television. “And to China: Be careful, do not provoke other countries to see you as a threat to their economies.” Global Finance Chiefs Urged to Keep Calm as Trade War Escalates_1

Global Finance Chiefs Urged to Keep Calm as Trade War Escalates_1

Still, the IMF leader warned that countries “shouldn’t be complacent” given mounting fiscal and spillover concerns. Global public debt is on track to exceed 100% of GDP by the end of this decade — its highest since 1948. Argentina is suffering from a depressed currency and is poised to get a $20 billion lifeline from the US.

Meanwhile, equity markets hovering near records were whipsawed all week by the latest trade drama.

Underpinning the recent rally are shares of US artificial-intelligence chipmakers, which fed into a drumbeat of warnings from central bankers and supervisors about high asset prices, potential complacency in financial markets and the risk of a sudden, sharp correction.

Some, including the IMF’s Georgieva and a former official at the Washington-based fund, drew comparisons with the dot-com bubble that burst in 2000. “I wouldn’t immediately agree with this opinion, but it’s something we need to watch,” European Central Bank Governing Council member Joachim Nagel said Friday.

Analysis by Bloomberg Economics found that a renewed trade war between China and the US, coupled with the threat of an AI bubble that eventually bursts poses a $1.4 trillion hit to world growth.

The mood was less grim than when officials last gathered in Washington in April, just weeks after Trump announced the biggest round of tariff hikes since the 1930s. But the fresh escalation of tensions put a lid on any optimism, said Josh Lipsky, senior director of the GeoEconomics Center at the Atlantic Council in Washington and a former adviser at the IMF.

“There’s this strange dichotomy between feeling better than they did in April and yet being very worried about all the risk, which could become a tipping point at any moment,” Lipsky said. “That tension played out throughout the week in a mixture of relief and anxiety combined.” Global Finance Chiefs Urged to Keep Calm as Trade War Escalates_2

Global Finance Chiefs Urged to Keep Calm as Trade War Escalates_2

That subdued spirit was backed up in the IMF’s forecasts for 3.2% world growth this year and 3.1% next — both well below the historical average of about 3.7%. If trade risks materialize, global growth could be lower by 0.3 percentage point, Krishna Srinivasan, the IMF’s director of the Asia and Pacific Department, told Bloomberg TV’s Haslinda Amin.

By week’s end, though, there were signs that Trump and President Xi Jinping would meet later this month in South Korea and iron out some differences. That’s the hope of rich and poor economies caught in the middle, with big stakes in ensuring the dispute doesn’t widen.

“We are monitoring the situation very closely,” German Finance Minister Lars Klingbeil said. “I am now somewhat hopeful that much can be resolved at the meeting between President Trump and President Xi.”

G-7 Meeting

Klingbeil said Germany made it clear during Group of Seven talks this week that “we disagree with China’s approach, and we will monitor the situation very closely in the hope that we can do what we can politically to ensure that there is no escalation, but rather a détente between the US and China.”

For monetary policymakers, the concern centers around their goals to control inflation, avoid sharp currency moves and sustain growth through trade dislocations.

South Africa’s central bank governor Lesetja Kganyago said tensions between the US and China could push prices lower in other countries at the expense of their own manufacturers.

“The interesting thing about that spillover is that it could actually depress prices elsewhere and initially it might be beneficial,” Kganyago said. “And it might actually end up looking like dumping or something along those lines.”

The combination of trade and geopolitical tensions combined with financial fragility could yet trigger market turmoil, People’s Bank of China’s Governor Pan Gongsheng warned during meetings of Group of 20 financial chiefs and central bank leaders.

Such uncertainty, according to the IMF, is a permanent fixture that will require policymakers to stay vigilant and flexible. “The reality is people are both resilient and creative and you figure out ways how to compensate things,” Pakistan Finance Minister Muhammad Aurangzeb said.

Source: Bloomberg

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Cryptocurrency

Bitcoin is close to giving up all of this year's gains, dragged lower since renewed trade tensions between the U.S. and China sparked a reversal in the digital assets market. The world's largest cryptocurrency (BTCUSD) has declined about 7% since Monday, according to research platform Messari.

The drag in bitcoin prices is reflected in the shares of stocks linked to it. Bitcoin treasury Strategy (MSTR), crypto exchange Coinbase (COIN) and stablecoin issuer Circle (CRCL) are all down at least 5% in the past five days. At around $107,000, bitcoin's 14% year-to-date return is now roughly in line with the S&P 500's.

Trade worries last week sparked a historic purge in the crypto market, upending the bitcoin-as-safe-haven narrative and severing the link between it and gold, whose recent climb to record highs is driving American consumers to cash in. Gold, Yardeni Research President Ed Yardeni wrote earlier this week, "is the new bitcoin."

Why This Matters to Investors

Trade tensions have taken some of the air out of bitcoin's sales, pulling the price of the cryptocurrency back from recent record highs. That, and a continued move higher in gold, could be interpreted as a sign that investors once again see it more as a risk asset than a hedge. Still, some crypto experts see reasons why the climb could start again.

Bitcoin has pulled back from recent record highs, which some observers note is not uncommon: Some past highs have also been followed by substantial pullbacks.

Still, with bitcoin seemingly once again viewed more like a risk asset than a safe haven, experts are considering crypto-specific factors to project the next move for prices. Several remain upbeat.

Ben Cowen, founder and chief of quantitative market analysis provider Into the Cryptoverse, is eyeing technical indicators such as bitcoin's 50-week moving average, which is currently around $100,000. He expects another top in bitcoin in the last few months of the year before a bear market in 2026.

"There's still a reason to be optimistic as long as bitcoin is holding above the 50-week moving average," said Cowen in a recent episode of the Milk Road podcast.

Cathie Wood's Ark Invest and Fidelity—which are behind the Ark 21Shares Bitcoin ETF (ARKB) and the Fidelity Bitcoin Fund (FBTC), respectively—recently published quarterly reports for the digital asset, highlighting possible near-term positives.

Ark's report pointed toward indicators—public companies boosted their holdings by 40% this year, and crypto derivatives markets are healthy—it sees as bullish for bitcoin. "Although short-term volatility is always possible, the confluence of strong on-chain metrics, institutional demand, and macroeconomic support suggests continued upside potential," Fidelity wrote."

Matt Hougan, chief investment officer of Bitwise Asset Management, issuer of the Bitwise Bitcoin ETF (BITB), expects the crypto market to shrug off the latest rout because no major crypto player keeled over, blockchains handled the stress test with no issues, and professional investors have "largely ignored" it.