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Informist, Tuesday, Aug. 5, 2025

 

By Priyasmita Dutta and Anand JC

 

NEW DELHI – India will continue to procure Russian oil, given the price benefit, and protect its agriculture market by not offering free access to the US, even if that means New Delhi may not secure the first tranche of the bilateral trade agreement with Washington by October, a senior government official said Tuesday. "Both these clauses are non-negotiable," the official told Informist.

 

The official's comments came in the wake of President Donald Trump's repeated, belligerent threat to raise tariffs on India for trading with Russia. Only a few hours earlier, Trump told CNBC in an interview that he would "substantially" raise tariffs on India in the next 24 hours for New Delhi's crude oil purchases from Moscow.

 

While Trump has been speaking repeatedly about "raising" tariffs, it is unclear if he would further raise the tariff he announced on Indian goods last week or levy a penalty over and above the tariff for trading with Russia. Trump had Wednesday announced 25% tariff on Indian goods shipped to the US, along with an additional unspecified penalty for India's procurement of military equipment and energy from Russia. The 25% tariff is set to kick in Thursday.

 

"Trump is throwing spanners into our wheels," the official said, adding that this is an attempt to "heckle" India into quickly sealing an inequitable trade deal. "We are not backing out from these two clauses, so unless Trump agrees to them, we don't foresee a trade deal being finalised by October," the official said.

 

New Delhi and Washington have been negotiating a bilateral trade agreement for several months now, with the next round of negotiations scheduled to begin Aug. 25. At the last round in July, the two countries had extended talks but failed to sign a deal, mainly because of differences over market access for agricultural and dairy products. With the US having one of the most heavily subsidised agricultural sectors, the entry of subsidised US farm products into the Indian market, which is very labour-intensive, poses huge risks to farmers and also exporters.

 

Beyond farm products, Trump's comments point to rising tensions between the two countries over Washington's clear displeasure with India's energy procurement from Russia, with whom India has maintained close economic ties for several decades now. While India has traditionally relied on Moscow for military equipment, New Delhi has become one of the biggest buyers of its crude oil since Russia invaded Ukraine in February 2022.

 

India has been buying crude oil from Russia at discounted prices amid sanctions by Western countries on Russia. The Group of Seven developed nations had initially imposed a $60-a-barrel price cap on Russian crude and later imposed more sanctions to try to curb Moscow's petroleum sales. India has bought Russian crude oil up to $30-a-barrel cheaper, though discounts have varied sharply over the past three years and have been around $4 a barrel in recent times. The International Monetary Fund in February said India saved around $7 billion per year by importing crude oil at a discounted price from Russia.

 

According to the official quoted earlier, India's import bill will rise if New Delhi stops procuring discounted Russian crude oil. "We can't let unilateral tariff threats make way for decisions that are economically bad for India," the official said. "Even if we agree to buy US oil, the option of buying cheaper oil, which at the moment is from Russia, should be available." 

 

To be fair, India has maintained that it is not fixated on Russian crude oil and will import from any country that suits its requirement. However, moving away from Russian oil may not be enough to escape Trump's tariff threats since Washington has been pushing countries to commit to buying energy from the US as part of the trade agreements, in addition to making investments there. The European Union committed to purchase $750 billion of US energy products over three years as part of its trade deal with Washington.

 

All said and done, Trump's 25% duty plus penalty could significantly hurt India's exports, as the US is India's top export destination with a share of nearly 20% in total outbound shipments in value terms. India exported goods worth $86.51 billion to the US in the financial year 2024-25 (Apr-Mar) and had a trade surplus of $40.82 billion, according to commerce ministry data. The reciprocal tariffs may bring India's total exports below $400 billion for the first time in four years in FY26 and pose a downside risk of at least 20 basis points to economic growth, experts have said.  End

 

US$1 = INR 87.80

 

Edited by Rajeev Pai

 

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