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Oil, Opportunism,and Tariffs

Can Washington afford to push India entirely into Russia’s embrace, undoing over two decades of American diplomatic investment?

By Ambassador Sanaullah | October 2025


In the article “Deal or No Deal?” published in the August 2025 edition of SouthAsia Magazine, I highlighted the tough choices facing Indian Prime Minister Narendra Modi in reconciling his domestic image as a strong nationalist leader with U.S. President Donald Trump’s shifting positions on tariffs with India. Washington’s unwillingness to tolerate India’s high tariffs and non-transparent trade practices was already straining relations. Yet, given the high stakes of trade disruption, I argued that a mini trade package was still possible.

That hope quickly faded. On July 30, 2025, Trump startled India by imposing a 25% tariff on imports such as generic pharmaceuticals and precious gems—higher than those faced by India’s Asian competitors. Then, on August 7, he escalated further: a blanket 25% tariff on all Indian exports plus an additional 25% on selected goods tied to Russian oil purchases. Cumulatively, Indian exports now face duties of up to 50%. For India, this was not just an economic blow but a strike at its sovereign right to pursue affordable energy.

India felt unfairly targeted. After all, China—also a major buyer of Russian oil—was spared similar treatment. The explanation, however, lies in how the two countries handle Russian crude. Although larger in volume, China’s purchases are mostly retained for domestic use. India, by contrast, has built a lucrative business in arbitrage of Russian oil: refining, reselling, and exporting petroleum products to Western markets. By mid-2025, nearly 42% of India’s oil imports came from Russia, up from less than 1% before the Ukraine war. Estimates suggested that 30–40% of India’s petroleum exports had Russian origins. To Washington, this looked like profiteering at the West’s expense, giving Trump a clearer political case for singling out India.

Trump’s stance towards China was far more restrained. Despite threats of 100% tariffs, he has kept duties capped at 25%. The reason is obvious: the U.S. depends on Chinese electronics, rare-earth technologies, and supply chains. A tariff war with Beijing risks consumer price hikes and geopolitical blowback—an unpalatable prospect before the 2026 elections. In contrast, sanctioning India is politically easier: retaliation risks are lower, and the U.S. expects less backlash.


Economists warn that the fallout for India is severe. With merchandise exports to the U.S. worth around US$87 billion annually, Chief Economic Adviser V. Anantha Nageswaran estimated that the tariffs could shave 0.5–0.6% off GDP growth this fiscal year. India’s government projects resilience, stressing “Make in India” substitution, diversification of trade partners, and readiness to “sustain pressure.” Yet its strategic squeeze is undeniable: it needs cheap energy, and Russian oil provides it, but Washington views these imports as indirectly funding Moscow’s war in Ukraine.

Politics compounds the problem. Analysts believe Modi annoyed Trump by refusing to endorse his claim of mediating the brief India-Pakistan conflict, undermining Trump’s Nobel Prize ambitions. India’s leadership role in BRICS and the SCO—especially its push for alternatives to the U.S. dollar—has also fed suspicions in Washington. Meanwhile, American businesses worry that Trump’s tariffs undermine the U.S. strategy of shifting supply chains from China to India.

Still, there are reasons for guarded optimism. U.S. ambassador-designate Sergio Gor has described current tensions as “minor hiccups,” insisting the two sides are “not that far apart” on a trade deal. Trump himself has sent mixed signals, alternating between threats and conciliatory remarks. India’s Russian oil purchases, though still large, are reportedly beginning to decline. Former Foreign Secretary Shyam Saran noted that Indian diplomacy faces its toughest test, but a second or third round of U.S. tariffs may not materialize. After all, Washington cannot afford to push India entirely into Russia’s embrace, undoing over two decades of American diplomatic investment.

In short, India’s sharp expansion of Russian oil trade—and its resale of discounted crude—makes it look opportunistic in Washington’s eyes. Yet the larger story is about leverage: China has the economic muscle to retaliate, while India does not. That imbalance explains why Trump’s tariff war spares Beijing but singles out New Delhi.

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