Russia now accounts for more than 30% of India’s total oil imports, a significant increase from less than 1% in 2021-22. Many in the West see this as indirect funding of Moscow’s war by India, but Delhi denies this, arguing that buying Russian oil at a discount ensures energy security for millions of its citizens. India also sees Russia as its “all-weather” ally.
Indian Prime Minister Narendra Modi was one of the first world leaders to visit Washington, weeks after US President Donald Trump began his second term. He called Modi his “great friend” as the two countries set an ambitious goal of doubling their trade to $500 billion by 2030.
But less than six months later, the relationship appears to have hit rock bottom. Trump has now imposed a total of 50% tariffs on goods imported from India, and his earlier threat to impose an additional 10% tariff on the country’s membership in the BRICS group, which includes China, Russia and South Africa as founding members, is still in effect.
RED LINES
He initially imposed a 25% tariff, but announced an additional 25% tariff on Wednesday to penalize Delhi for buying Russian oil. The new tariffs, tied to Russia, will take effect in 21 days, while the 25% tariff already in place will take effect on Thursday. And just last week, Trump called India’s economy “dead.” It’s a stunning reversal in a relationship that has grown stronger over the past two decades, thanks to the efforts of successive governments in both countries, bipartisan support and convergence on global issues.
In recent weeks, there have been positive signals from Washington and Delhi that a trade deal is imminent. Now that looks increasingly difficult, if not impossible. So what went wrong?
A series of missteps, grandstanding, geopolitical and domestic political pressure appear to have derailed the negotiations. Trump has made comments on many issues that Delhi considers red lines. The biggest among them is Trump’s repeated positioning of India and its rival Pakistan on an equal footing. The US president hosted Pakistani army chief Asim Munir at the White House just weeks after a bitter conflict between the two South Asian rivals. He then signed a trade deal with Pakistan.
TRUMP’S TURN
Modi’s government thrives on nationalist issues, so its supporters are likely expecting a strong response from the US. It’s a surprise move; Delhi still wants to reach a deal, but it also doesn’t want to appear to be bowing to Trump’s pressure. Delhi vowed to take “all necessary measures” to protect “its national interests and economic security.”
Some analysts see his insults as a pressure tactic to secure a deal that he thinks works for the U.S. An Indian government source said Delhi made many concessions to Washington, including no tariffs on industrial goods and a gradual reduction in tariffs on cars and alcohol. It also signed a deal to allow Elon Musk’s Starlink to begin operations in India. But Washington wanted access to India’s agriculture and dairy sectors to reduce its $45 billion trade deficit with Delhi.
INDIA’S SCALE
But Delhi cannot afford to stop importing oil from Russia overnight. India is already the world’s third-largest crude oil consumer and could overtake China for the top spot by 2030 as its energy demand is likely to grow with a rapidly growing middle class, according to the International Energy Agency (IEA). Russia now accounts for more than 30% of India’s total oil imports, a significant increase from less than 1% in 2021-22.
Many in the West see this as indirect funding of Moscow’s war by India, but Delhi denies this, arguing that buying Russian oil at a discount ensures energy security for millions of its citizens. India also sees Russia as its “all-weather” ally. Moscow has traditionally come to Delhi’s aid during past crises and still enjoys support from the wider Indian public.