20 September :India is facing growing pressure as it seeks to balance the need to purchase cheaper oil from Russia with the importance of maintaining strategic and trade relations with the United States. Uncertainty over oil supplies caused by the ongoing conflict in the Middle East has further complicated the situation.
On Friday, 18 September, US President Donald Trump signed a new sanctions law giving him the authority to impose tariffs of up to 100 percent on goods from countries importing oil and other energy products from Russia. One of Washington’s stated objectives is to reduce Moscow’s revenues from oil and energy exports, which are considered an important source of funding for the war in Ukraine.
It remains unclear when or how such tariffs would be applied to India. It is also uncertain whether new duties will be imposed on Indian goods. If such tariffs are introduced, however, Indian products could become more expensive in the US market. New Delhi fears that the legislation could be used to increase commercial and diplomatic pressure on India.
At the same time, the Trump administration is considering opportunities to expand business ties with Russia, further complicating the situation for India amid what appears to be a dual-track US approach.
India relies heavily on imports to meet its energy needs, with more than 90 percent of its crude oil requirements supplied from abroad. As the war involving Iran has disrupted supplies from the Middle East, India has increased its purchases from Russia. According to tanker-tracking data from Kpler, nearly 50 percent of India’s imported oil came from Russia this summer.
Changes in the US position on Russian oil have forced India to adjust its import strategy several times. In February, shortly before the war involving Iran began, the two countries reached a trade agreement under which India agreed to reduce its purchases of Russian oil, while the United States agreed to lower tariffs on Indian goods.
The situation changed soon afterwards. The US Supreme Court restricted Trump’s authority to impose tariffs, while the conflict involving Iran disrupted oil supplies from the Persian Gulf. To address the resulting shortage in the Middle East, the US Treasury Department allowed several countries, including India, to increase purchases of Russian oil.
The situation has now shifted again. As India’s dependence on Russian oil has increased, it is once more facing the threat of punitive measures from Washington.
India has opposed the latest US move. On Thursday, the Indian Ministry of External Affairs said the country remained firmly committed to ensuring energy security for its 1.4 billion people. India’s Ministry of Petroleum and Natural Gas said the country would continue importing oil from various sources based on market conditions and would seek to further diversify its energy supplies.
New Delhi has also warned that the impact of the new US legislation could extend beyond India-US relations and affect international energy markets.
US pressure over Russian oil is not new for India. Washington has previously pressured New Delhi to halt oil imports from Venezuela and Iran. US policy later shifted in response to changes in the international diplomatic environment and energy prices.
India now faces two major objectives: maintaining its relationship with the United States and securing sufficient, affordable energy to meet its huge domestic demand. Another factor has also become increasingly important—the United States itself has emerged as a significant energy supplier to India.
Before the conflict involving Iran, only about 8 percent of India’s liquefied petroleum gas imports came from the United States. That figure has now risen to more than 50 percent. India is therefore facing US pressure over purchases from other energy suppliers while simultaneously becoming more dependent on the United States for part of its energy needs.
Ajay Srivastava, director of the New Delhi-based Global Trade Research Initiative and a former trade official, believes India does not need to be overly concerned about the new US tariffs. He said some Indian exporters could be affected, but US consumers could ultimately face higher prices for imported goods.
Srivastava also said the new legislation has restored greater authority to Trump than he previously had. Since the trade agreement between India and the United States has yet to be finalised, Washington could use the new law to seek further concessions from New Delhi.
However, he cautioned that signing a trade agreement would not necessarily provide a permanent solution, noting that the United States has continued to face tariff and other disputes even with major trading partners after reaching agreements with them.
India Also Watches China
China is one of the world’s largest buyers of Russian oil, with its imports exceeding those of India. Since the new US legislation also applies to China, New Delhi is closely watching whether Washington takes measures against Beijing similar to those being considered against India.
The issue is also strategically important for India. New Delhi has strengthened its relationship with Washington for years partly as a means of responding to China’s growing power. However, repeated changes in US energy and trade policies are creating new questions for Indian policymakers.
At the recent BRICS summit in New Delhi, Indian Prime Minister Narendra Modi was seen together with Chinese President Xi Jinping and Russian President Vladimir Putin. The scene was viewed as a significant signal of cooperation among countries outside the Western alliance system. Meanwhile, Xi is expected to meet Trump in Washington in the coming days.
C. Raja Mohan, a professor at O.P. Jindal Global University, said India was being forced to choose between two uncomfortable alternatives. “Do you want to jump from the frying pan of the US into the fire of China?” he asked.
According to Mohan, India has strong reasons to maintain its relationship with the United States because of China’s growing power. However, frequent shifts in US policies on energy and trade have created fresh doubts in New Delhi about how long any future agreement with Washington would remain stable.
Srivastava believes India should refrain from entering into new agreements with the United States until Washington’s policies become more stable.
Source: Information provided and related sources