Why Russian oil has emerged as the flashpoint in India

Why Russian oil has emerged as the flashpoint in India–US trade talks

By N.S. Venkataraman*

In recent years, India has entered into trade agreements with several countries, the latest being agreements with the European Union and the United States. While the India–EU trade agreement has been widely viewed in India as mutually beneficial and balanced, the trade agreement with the United States has generated comparatively greater debate and scrutiny.

This has occurred despite the fact that the India–US trade agreement has been commercially advantageous to India on several counts. Notably, the agreed tariff of 18 per cent for Indian exports to the US is significantly lower than the tariffs offered by the US to other countries such as China, Bangladesh and Pakistan. From a purely trade perspective, this represents a favourable outcome for India.

Trade agreements typically operate on the principle of mutual concessions, requiring an understanding of the priorities and constraints of all parties involved. In the Indian context, some apprehension has been expressed regarding the potential impact of the US agreement on the agricultural sector, particularly concerning the possible liberalised import of certain agricultural products such as soyabean from the US. Sections of the farming community have voiced concerns, and opposition political parties critical of the Modi government have highlighted potential risks to domestic agriculture.

However, several experienced analysts and policy observers have argued that these fears may be overstated. Taking a broader and more holistic view, the India–US trade agreement has, in general, received technical acceptance in India.

The controversy surrounding the agreement appears to stem less from its commercial provisions and more from geopolitical considerations. The US President has stated that the trade agreement was signed on the basis of India’s assurance that it would completely stop importing Russian crude oil. He has also indicated that if India continues to purchase Russian oil, the agreed tariff structure could be reconsidered and revised.

This position has generated unease within India. Many view the insistence that India cease imports of Russian oil as an infringement on India’s independent decision-making. Public opinion in India, which places a high value on sovereignty and strategic autonomy, has reacted negatively to what is perceived as external pressure.

Officially, India has responded cautiously. The government has reiterated that it will purchase crude oil from any source based on market prices and national interest. Notably, India has neither directly accepted nor outright rejected the US position, choosing instead to articulate its stance in general terms.

Several observers believe that acceding to US pressure to halt Russian oil imports would be politically and economically disadvantageous for India. Russia has maintained a long-standing and consistent strategic relationship with India and has supported the country at critical moments in geopolitical affairs. In contrast, India–US governmental relations have experienced fluctuations over time, even though people-to-people ties between the two countries remain strong.

Russia is currently under significant economic pressure due to sanctions imposed by the US and NATO countries. A complete halt in Indian crude oil purchases would further strain the Russian economy, an outcome that many in India are reluctant to endorse.

From an economic standpoint, Russian crude has been available to India at comparatively lower prices. In December 2025, the price of Russian crude supplied to India was USD 469 per tonne, compared to USD 506.7 per tonne for crude from the US. Crude oil prices from the UAE stood at USD 529.4 per tonne, while Saudi Arabian crude was priced at USD 503.2 per tonne during the same period. Supplies from countries such as Venezuela involve heavy-grade crude, which entails higher processing costs for Indian refineries.

A complete shift away from Russian crude would therefore increase India’s oil import bill, potentially pushing it to an economically uncomfortable level.

In summary, halting Russian oil imports under external pressure could have implications for India’s economic interests as well as its perception of strategic autonomy. A substantial section of opinion in India believes that the country should not accede to demands to stop buying Russian oil, regardless of the potential consequences for the trade agreement.

It remains to be seen how the Modi government will navigate this complex issue. Equally uncertain is how the US administration—often described as unpredictable—would respond if India continues its current oil procurement strategy. In geopolitical and trade terms, India and the US remain important partners. India is now the world’s fourth-largest economy, and its contribution to global GDP growth exceeds that of the US. From a strategic perspective, the US may also be constrained in how far it can afford to alienate India.

These factors are likely to weigh heavily in any decision regarding a possible revision of the trade agreement. Ultimately, the situation raises a familiar question in international negotiations: which side will yield first?

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*Trustee, Nandini Voice for the Deprived, Chennai

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