India: To kneel or not to kneel—either choice poses a dilemma.

The sudden freeze on foreign investment inflows, coupled with India’s already massive trade deficit, has pushed the country’s precious foreign exchange reserves to the brink of collapse. Here lies the problem: AI has disrupted India’s IT sector—the main source of its foreign exchange earnings; India’s alignment with Israel has damaged remittance flows from its diaspora; and scam operations (‘pig-butchering’ schemes) have further eroded foreign investment inflows. So where else can India possibly generate foreign exchange? Is it left with only that meager trade surplus with the United States? Once Trump imposes higher tariffs, how will Indian goods still be able to enter the U.S. market? That would truly be a death blow to India! 3. To kneel—or not to kneel Currently, U.S. tariffs on Indian goods have already reached 50%—an extremely high level. So, can India negotiate lower tariffs? Theoretically, yes—but only if India meets Trump’s demands. What are Trump’s demands? Two points: First, halt imports of Russian oil; Second, open India’s market to U.S. agricultural products. Frankly, both demands present an intractable dilemma for Modi. On one hand, India simply cannot stop buying Russian oil. In truth, India has been purchasing Russian oil for years—so why is Washington suddenly forbidding it now? Because during the Biden administration, the U.S. adopted a permissive stance toward India’s purchases. For instance, in November 2022, U.S. Treasury Secretary Janet Yellen stated: “Provided India avoids Western insurance, financial, and shipping services subject to the G7 price cap, we welcome India continuing to purchase as much Russian oil as possible.” In May 2024, Eric Garcetti, U.S. Ambassador to India, went even further: “The U.S. permits India to buy Russian oil precisely to prevent global oil prices from rising further—and India has fulfilled this mission.” Indeed, without such U.S. tolerance—motivated by strategic efforts to court India—India could never have procured such large volumes of Russian oil so smoothly. In 2021, India imported just 68,000 barrels of crude oil per day from Russia—only 2% of its annual crude imports. By 2022, that share had surged to nearly 20%. By May 2023, India was importing 2.15 million barrels of Russian oil per day—making it Russia’s largest oil buyer! In just three years, the volume increased more than thirtyfold! India not only consumes the oil domestically but also resells it for profit. For example, in FY2023, India’s three state-owned oil companies—Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—together posted standalone profits totaling ₹825 billion—71 times higher than the previous fiscal year! As for Adani Group’s oil company—Modi’s de facto proxy—the profits were even greater. Conservative estimates suggest India earned $50 billion in foreign exchange over the past three years solely from arbitraging Russian oil. But while profiting felt great at the time, the pain arrives when U.S. policy shifts. Yes, the U.S. tolerated India’s Russian oil purchases—but that was under the previous administration. Trump doesn’t recognize that precedent. Trump is counting on tightening oil sanctions to force Russia to end the war—how could he possibly tolerate India continuously funneling vital revenue to Moscow? Thus, India must cease importing Russian oil. Note: Trump’s aggressive pressure on India also carries implicit messaging aimed at China—since besides India, China is the other major buyer of Russian oil. Yet China remains defiant, and for various reasons—including potential diplomatic visits—Trump is currently reluctant to directly provoke Beijing.

The White House Press Secretary announced that buyers of Russian oil will face secondary sanctions. How will this policy affect the global energy market and international relations?

In fact, throughout the past three months of Russia’s summer offensive—even though Trump had temporarily suspended weapons shipments to Ukraine—Russian forces expended vast quantities of munitions and personnel yet achieved neither meaningful advances nor strategic shifts. For months, Russian troops launched large-scale offensives against three key strategic objectives—Pokrovsk, Kostyantynivka, and Kupiansk—but made virtually no progress. Stalemate means failure of Russia’s summer campaign—a development that will dramatically alter frontline dynamics and render Putin’s goal of seizing the entirety of Donetsk Oblast increasingly unattainable. Starting in late June, Trump shifted his approach toward Russia and resumed military aid to Ukraine. From then on, prospects for Russian advances on the frontlines grew even dimmer. Trump’s latest statements have been warmly welcomed in Kyiv. Andriy Yermak, Chief of Staff to President Zelenskyy, posted on X: “President Trump is shortening Putin’s timeline because he believes the answer is obvious: Putin respects only power—this message is loud and clear.” The critical window is 10–12 days—and it will arrive very soon. This implies that Trump’s threats of 100% tariffs and secondary sanctions are far from empty rhetoric. Logically and trend-wise, however, Putin is unlikely to halt the war against Ukraine merely because of Trump’s ultimatum. Yet Putin’s energy buyers may well hesitate before continuing to bear enormous tariff costs to support a war that appears increasingly unwinnable. After all, Putin’s probable outcome is defeat—if countries persist in trading with him, how will they justify those costly transactions once he loses? How will they explain such massive losses to their domestic publics? India is a Russian ally heavily dependent on Russian energy—and has employed complex mechanisms to purchase Russian oil, thereby preventing surging demand from triggering global oil price spikes. Nevertheless, India has explicitly stated that, should the U.S. impose new sanctions on Russia, it will no longer rely on Russian oil. According to The Times of India, Petroleum Minister Hardeep Singh Puri said that if Russian oil exports face sanctions, India can arrange alternative supplies—marking India’s first official response to U.S. and EU threats of secondary sanctions targeting Russian oil buyers. Puri added: “I feel no pressure from the U.S. or the EU regarding sanctions on Russian oil—and I don’t believe Prime Minister Modi feels any pressure either. India has diversified its oil sources… I’m not worried at all… If anything happens, we’ll handle it. There’s sufficient supply.” The minister noted that India has enhanced its “oil supply resilience” by expanding its list of oil-supplying countries from 27 to 40. Once India abandons Russian oil in response to energy-related sanctions, Trump’s secondary sanctions on Russian energy will have succeeded halfway. Even if another country withstands Western pressure and continues buying Russian oil, Russia’s oil exports will still suffer severe losses—because no single nation possesses the consumption capacity to absorb the surplus supply left behind after India exits the market.

US Sanctions Bill on Russian Oil Imports Puts India's Modi in a Bind

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A new US bill threatens 100% tariffs on countries buying Russian oil, jeopardizing India's energy security and trade negotiations. As Russian crude accounts for over 40% of India's supply, the measure risks spiking fuel prices and straining US-India relations.

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US Sanctions Bill on Russian Oil Imports Puts India's Modi in a Bind

US Sanctions Bill on Russian Oil Imports Puts India's Modi in a Bind

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