Washington’s October 22 sanctions on Russia’s prime oil producers — Rosneft and Lukoil — have restricted India’s oil import choices and complex commerce talks with the US. India now faces two foremost challenges in its ties with the US: managing the affect of sanctions and securing a balanced commerce deal. It will want a transparent three-step plan.
On July 31, President Trump slapped a 25 per cent “Russian oil” tariff on Indian exports, accusing New Delhi of “fuelling the struggle” by shopping for low-cost Russian crude. When the measure took impact on August 28, complete US tariffs on Indian items doubled to 50 per cent, inflicting India’s merchandise exports to the US to drop 37 per cent between Might and September.
Regardless of falling exports, India saved shopping for discounted Russian oil, hoping Washington would ease tariffs as soon as a commerce deal was reached. That hope pale on October 22, when the US Treasury sanctioned Rosneft and Lukoil — corporations that produce 57 per cent of Russia’s crude. The order warned that any overseas agency coping with them might face secondary sanctions.
These “secondary sanctions” prolong US energy past its borders. They don’t simply block commerce — they will minimize off entry to world fee techniques and shut down the digital companies that energy world enterprise. India has already seen sanctions in motion when Microsoft on July 22 abruptly minimize off companies at Nayara Power, a refinery with Russian hyperlinks, citing EU sanctions. Operations stopped till a court docket stepped in.
Commerce deal
India was the primary nation within the Trump 2.0 period to begin FTA talks with Washington, however progress has stalled over sweeping US calls for. America reportedly needs India to take away tariffs on most industrial items, open its farm and dairy markets, and permit imports of genetically modified corn and soybean. It additionally seeks freer knowledge flows, weaker e-commerce and mental property guidelines, and bigger commitments to purchase US oil and LNG. These calls for go far past regular commerce negotiations, touching delicate areas like meals safety and digital sovereignty — each central to defending India’s farmers, small companies, and nationwide pursuits.
In return, Washington provides restricted concessions: lowering tariffs on Indian exports from 25 per cent to about 15-17 per cent. Washington additionally pushes for increased purchases of US oil, LNG, and defence gear. India’s oil imports from the US already rose 79 per cent, from $2.8 billion in April-August 2024 to $5 billion in the identical interval of 2025.
India should additionally be aware the worrying precedent set by Malaysia’s latest commerce take care of the US, which gave Washington important leverage over Kuala Lumpur’s overseas and commerce coverage. The settlement requires Malaysia to copy US commerce restrictions on different international locations, act towards overseas companies hurting US export pursuits, and search US session earlier than signing digital or expertise pacts with third international locations. Such provisions successfully give the US veto energy over Malaysia’s overseas, commerce and digital insurance policies — an final result India should keep away from in any respect prices.
Three-step plan
India’s finest method ahead is a transparent three-step plan: first, cease shopping for oil from sanctioned Russian companies to keep away from secondary sanctions; second, as soon as such imports finish, press Washington to carry the 25 per cent “Russian oil” tariff, lowering complete duties on Indian items from 50 per cent to 25 per cent; and third, solely after the US rolls again tariffs, restart commerce talks for bringing tariffs down from 25 per cent to say 15 per cent.
Step 1 — cease shopping for oil from sanctioned Russian companies: The 25 per cent tariff damage exports to the US however didn’t disrupt the economic system. The brand new sanctions, nonetheless, threaten India’s monetary and digital techniques, each closely depending on US-controlled networks.
If Indian refiners preserve shopping for from Rosneft or Lukoil, the fallout could possibly be extreme: banks could lose entry to world SWIFT fee community, and refineries could cease on suspension of software program companies by US tech companies. Tariffs trigger ache; sanctions can cripple. The affect is already seen. Reliance is slicing again Russian crude purchases, and Adani Ports has banned ships tied to sanctioned companies, affecting deliveries to IOC and HPCL-Mittal.
A near-total halt in Russian oil imports by late November now appears inevitable — not by selection, however out of necessity. It could appear like yielding to US strain, however India’s heavy reliance on American software program leaves little room to manoeuvrer.
Step 2 — press Washington to take away the oil tariff: As soon as India stops shopping for from the sanctioned Russian companies, it ought to push Washington to withdraw the 25 per cent “Russian oil” tariff. However first, New Delhi wants readability: should it finish purchases solely from Rosneft and Lukoil, or from all Russian suppliers?
The October 22 sanctions apply solely to Rosneft and Lukoil, which produce about 57 per cent of Russia’s Crude. The remaining — roughly 43 per cent— comes from non-sanctioned companies and stays authorized to commerce. But Washington’s tariff order on India ignored this distinction, punishing each barrel of Russian oil no matter supply.
If the US agrees to carry the additional tariff as soon as India halts imports from the 2 sanctioned corporations, complete duties on Indian items would drop from 50 per cent to 25 per cent — a major acquire achieved with no commerce deal.
Step 3 — do a commerce deal, however solely on truthful phrases: India ought to restart commerce talks solely after Washington removes the “Russian oil” tariff. The 2 points — oil sanctions and commerce negotiations — should stay separate, since linking them limits India’s choices.
When talks resume, they have to focus strictly on commerce. India might press for a similar tariff flexibility granted to the European Union — common industrial tariffs round 15 per cent and duty-free entry for choose merchandise.
India should fastidiously examine the dangers of permitting genetically modified (GM) corn imports for ethanol manufacturing. Any such transfer might have an effect on native corn farmers who rely on secure costs and non-GM seed techniques. GM imports could result in contamination of home varieties if strict segregation just isn’t maintained. Processing should due to this fact happen in devoted amenities with separate storage, transport, and provide chains to stop mixing with non-GM corn. Earlier than continuing, India ought to assess the long-term implications for farmer incomes, seed range, and export credibility in non-GM markets.
After securing free move with Malaysia, US will positive press India for broad digital concessions — asking it not to (i) impose taxes on digital companies, (ii) share or use its personal knowledge to construct nationwide champions, or (iii) regulate overseas tech companies. Most of those calls for could possibly be met by means of a single clause within the FTA textual content: “Each international locations comply with grant non-discriminatory therapy to digital companies and their suppliers.” However agreeing to such wording would block India from shaping its personal digital insurance policies and provides a long-lasting benefit to US tech giants. Having already misplaced a lot of the pc {hardware} sector after becoming a member of the ITA-1 pact in 1997, India should keep away from repeating the identical mistake within the digital house. A binding “impartial” clause would in actuality freeze India’s capability to tax, regulate, or promote native innovation — choking the nation’s digital future.
India should additionally assess whether or not such commitments on agriculture, e-commerce, digital commerce, and vitality make the settlement one-sided. If that’s the case, it might afford to attend. Paying a 25 per cent tariff as an alternative of 15-17 per cent is painful however manageable — China already lives with increased charges. It’s higher to bear short-term prices than to compromise long-term financial and strategic independence.
This three-step plan is a sensible method to deal with each challenges. India should transfer in sequence, not haste. Safe vitality first, restore truthful tariffs subsequent, and negotiate commerce solely on equal phrases.
In the meantime India should plan for an additional problem thrown by the sanctions. In only a week, crude oil costs have risen 7 per cent. As most Russian oil turns into off-limits, vitality prices are more likely to climb additional. India should diversify its suppliers and put together for a better import invoice.
On this age of unlawful tariffs, weaponised oil, and digital sanctions, solely cool technique — not capitulation — will safeguard India’s pursuits.
The author is founder, GTRI
Printed on November 1, 2025