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Opinion Best of Both Sides: On tariffs, Russia is a red line for India

New Delhi will have to take a hard call: For now, economy-greasing oil from Russia, and a plan for diversification for the future

Discounted oil purchases from Russia have kept India’s economy running, and prices stable.

August 8, 2025 09:24 AM IST First published on: Aug 8, 2025 at 07:15 AM IST

India’s National Security Advisor Ajit Doval arrived in Moscow on August 5, to discuss regional stability, counter-terrorism, energy security and defence purchases. According to reports, Russian President Vladimir Putin is expected to visit India later this year. This will be Putin’s first trip to India in four years. The high-level activity in the Russia-India corridor is not matched by a similar engagement in the India-US space. On August 1, President Donald Trump threatened India with 25 per cent tariffs on its exports plus additional penalties of up to 500 per cent if New Delhi didn’t stop its purchases of Russian oil by August 7; on August 6, he doubled the threat to 50 per cent.

Is Russia the red line for India? It may well be. The US tariffs come at a time when India is re-entering the global commercial arena as an equal player. The country is currently negotiating free trade agreements (FTAs) with six countries, including the US, having successfully closed 16 trade agreements over the last five years. The ASEAN-India FTA is being considered for review; more than two dozen countries are in line to develop trade links with India. At home, India is building its industrial capacity and developing new markets and supply chains, eyeing the China+1 space.

Discounted oil purchases from Russia have kept India’s economy running, and prices stable. And Russia has been a reliable security partner. The S-400 air defence system performed admirably during India’s Operation Sindoor against Pakistan. Upgraded Russian equipment is still desirable in New Delhi, especially as it comes with technology transfers and possible co-production, unlike the US with its many restrictions. Doval is likely to ask for more. India has already contracted with Russia for $50 billion worth of military purchases over the last 20 years.

Also Read | Best of Both Sides: Bargain with the US on tariffs is still possible

In contrast, India has bought $24 billion in US defence equipment since 2008, and at the Modi-Trump meeting in Washington in February, a promise to buy more was made. India’s own domestic defence industry is catching up; it has tripled in value to $14 billion over the past decade, and is rapidly ramping up. Already 65 per cent of defence equipment is made domestically, compared to a 65 per cent import dependence from 10 years ago.

The allure of Russia for India has increased since Trump made nice with Pakistan immediately after Operation Sindoor, and the tariff threats have intensified public opinion in Moscow’s favour. This is a good time then, for India and Russia to accommodate each other.

Putin the strategist sees India cornered by Washington, and will play to it. Russia has some frustrations with India which will be conveyed to NSA Doval. First, though bilateral trade has reached a record $68.7 billion, over 90 per cent of it is oil, and India runs a massive deficit with Moscow. Second, US and EU sanctions against Russia have forced the rupee-rouble trade practice back into the bilateral, and now 90 per cent of all India-Russia trade is in local currencies. Russians are unable to invest much in India, as Moscow needs funds to run its own war-time economy. Third, on the Ukraine war, Russia has been less than happy with India’s make-peace-not-war statements.

Regionally, though Russia has managed to separate its historical proximity with India from its new and deep friendship with China, at the SCO, there are clear sides: Russia-China-Central Asia on one side, with India being the outlier. Bilaterally, India has specific needs from Russia, viz defence equipment. India would like to buy more, but Moscow is using large quantities of its production for the Ukraine war.

It doesn’t compare with India’s current unhappiness with Washington. Sanctions on traditional oil suppliers like Iran and Venezuela have cut off those supplies for India, and now penalties on Russian oil threaten to do the same, destabilising India’s growing economy. It has been a particularly unkind cut, as the Biden administration had appealed to India to buy Russian discounted oil to keep energy markets steady.

Trump has been cavalier about the QUAD, which was meant to keep China in check in the Indo-Pacific. The next QUAD meeting, due to be held in India in October, may be a damp squib without the presence of the US President. Meanwhile, Trump’s irritation with BRICS, which he sees as nations colluding to displace the US Dollar’s dominance, will only increase as India takes the chair of the plurilateral in 2026. India has been holding off a reconvening of the Russia-India-China Trilateral, but if it does so, Trump will have one more grouse against India.

New Delhi will have to take a hard geopolitical call, and take the bargain available on the table: Economy-greasing oil from Russia for now, and a plan for future diversification. On Ukraine, India could take a stronger position, emphasising that the West acknowledge the fundamental reason for Russia’s war with its neighbour. India could project a harmonious partnership with Russia, with Putin visiting New Delhi in the next few months – a sure way to infuriate Trump. That may compel India to be a grown up and take the 50 per cent tariffs hit, till a renegotiation takes place or a trade agreement to mutual US-India satisfaction comes about. It will also force Indian companies to diversify into new, non-G7 markets, and invest more in research and development at home. An all-important domestic benefit to going the Moscow way: Standing up to Trump will give PM Modi a boost just before the Bihar election.

The writer is executive director, Gateway House: Indian Council on Global Relations