Summary: The US Senate has passed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, which proposes to impose up to 100% secondary tariffs on countries importing significant volumes of Russian crude oil or natural gas, affecting all sectors regardless of goods. As one of the largest purchasers of Russian energy, India faces a significant risk of triggering this mechanism. This article examines the framework of the proposed legislation, its likely commercial impact on Indian trade, and the contractual and policy measures that Indian businesses must now consider.
Introduction
The sanctions framework in the United States of America (“US”) has traditionally followed a designation model, whereby once a person, be it an individual or an entity, or a country is added to the relevant sanctions list, consequences/ penalties follow automatically. The Bill for the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 (“Graham Act”),[1] recently passed by the US Senate, departs from this model in one key respect—its secondary tariff provision is triggered by trade volume, not designation. By linking secondary tariffs to the volume of Russian oil and gas imports, this approach introduces a more objective, data-driven form of sanctions, directly impacting major importers like India. The Graham Act’s volume-based mechanism is thus a noteworthy evolution in the US sanctions policy.
Reading the Graham Act: Two Instruments, One Objective
The Graham Act operates through two instruments built around a common objective. The first is a conventional sanctions framework targeting Russia’s war efforts.[2] Like any other US administered sanctions measures, the Graham Act binds every “US person”, including foreign subsidiaries of US companies, to comply with its prohibitions.[3] Consequently, an Indian subsidiary with a US parent could potentially face exposure in terms of penalties for non-compliant conduct.
The second instrument, which is more directly relevant for India, is the secondary tariff mechanism.[4] This mechanism allows the US President to impose tariffs on exports to the US from countries that meet certain trigger conditions (each, a “Covered Country”)[5], namely, where a country:
- knowingly continues new purchases of Russian-origin crude oil or natural gas after 30 days from the enactment of the Graham Act; and was ranked among the five largest importers of such crude oil or natural gas by volume over the preceding 12 months; or
- was ranked among the top five facilitators of Russian oil sanctions evasion over that same 12-month period.
Notably, the Covered Country list is reassessed every 180 days under Section 113, so exposure is never settled, though tariffs apply only to countries meeting this test, and to Russia itself.[6]
India is likely among the five biggest importers of Russian energy and could potentially trigger Section 113, exposing it to tariffs of up to 100% on US exports, with no exception for Indian subsidiaries of US parents and no distinction by sector or goods. However, one exception does exist—natural gas imports by a country would not attract tariffs, where they fall below 15% of Russia’s total annual gas exports and the importing country has taken demonstrable steps to reduce such imports.[7]
Commercial Impact on Indian Business and Trade
Although the Graham Act is not law yet, Indian businesses must evaluate whether their trade structures can handle its implementation. If Section 113 comes into effect, Indian exports may face severe consequences.
A 100% secondary tariff could instantly wipe out existing tariff advantages, undermining the viability of US-bound trade across sectors—pharmaceuticals, textiles, IT services, and engineering, even though energy sector is the trigger.
With the Covered Country list updated every 180 days, long-term supply contracts and pricing arrangements face ongoing uncertainty. Additional secondary sanctions from the US, EU, and the UK will only heighten compliance challenges for Indian exporters.
Way Forward
By making the tariff trigger a moving statistical threshold rather than a fixed designation, the Graham Act calls for commercially flexible arrangements, not a compliance afterthought. A tariff that is merely a possibility today already changes contract economics, so risk allocation cannot rest solely on force majeure, which addresses unforeseen disruption, not for a risk that develops gradually, based on published trade data. Since US importers are legally liable for the duty and often hold the greater bargaining power, Indian exporters should treat any safeguard as something to be negotiated, not assumed. Illustratively, the following merit consideration:
- Contractual Safeguards: Build in automatic tariff pass-through or price adjustment clauses to update contract prices if Section 113 duties are imposed. Agree on realistic cost-sharing for any residual burden. Make the US counterparty share trade data and notifications, so action is based on published triggers, not surprises. Include a right to suspend or exit if the contract becomes economically unviable, protecting both parties from undue reputational harm.
- Portfolio Diversification: Indian exporters should actively diversify across markets and buyers, as even robust contracts only help if the underlying trade relationship is still viable.
- Policy Advocacy: Industry groups must engage with the Indian Government to pursue diplomatic channels with the US, seeking possible tariff waivers under the Graham Act’s presidential discretion provision.
Conclusion
The above safeguards do not neutralise the tariffs. It instead ensures that if imposed, the impact is managed by design, and that Indian exporters are negotiating from prepared ground rather than reacting under pressure. The Graham Act demonstrates that geopolitical risk is now quantifiable and contractible, and not simply limited to diplomatic channels. Businesses that treat this as a live commercial variable today will be better placed than those that wait for the Bill to become law.
[1] CONGRESS.GOV, H.R. 5334 – Lindsey O. Graham Sanctioning Russia and Iran Act of 2026
[2] ibid, see Sections 102 to 111.
[3] supra note 1, see Sub-section 11 of Section 101.
[4] supra note 1, see Section 113.
[5] supra note 1, see Sub-Section (c) of Section 113.
[6] supra note 1, see Sub-Section (e) of Section 113.
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