US-India relationship ‘complicated’, but ‘at the end of the day we will come together’, says US Treasury Secretary Scott Bessent

“There’s many levels going on here. I do think India’s the world largest democracy; the US is the world’s largest economy. I think at the end of the day we will come together. I think a lot of it by the Indians has been performative. I’ve said it all along during the tariff negotiations. The US is the deficit country. When there is a schism in trade relations, the deficit country (is) at an advantage. It’s the surplus country that should worry. So, the Indians are selling to us. They have very high tariffs and we have a very large deficit with them,” the US Treasury Secretary added.

Commerce Ministry officials said that the communication lines with the US have not been severed and that the ministry is in touch with the industry to explore all possibilities to soften the impact of the tariffs. Notably, US negotiators were expected to come to India on August 25 for talks to conclude the trade deal. However, the talks were called off after US President Donald Trump announced 50 per cent tariffs on India on August 6.

India-US trade deal negotiations had started in February earlier this year soon after Prime Minister Narendra Modi visited Washington. Both leaders had announced plans to sign a bilateral trade agreement by the end of the year. India and US had also signed the terms of reference (ToR) for the trade deal. But, India’s stance to maintain protection for market access for agriculture and mid sized vehicles has created differences between trade negotiators.

Indian refiners’ hefty imports of Russian crude have surfaced as a major irritant for the Trump administration. Earlier in August, Trump announced an additional 25 per cent tariff—over and above the 25 per cent tariff announced on Indian goods last month—as a penalty for India’s Russian oil imports. The cumulative 50 per cent US tariff on Indian goods took effect on Wednesday. New Delhi has called the targeting of India over the purchase of Russian oil “unjustified and unreasonable” and said these imports began as its traditional supplies were diverted to Europe, with the US having “actively encouraged such imports by India for strengthening global energy markets stability”.

Moreover, Washington has also been frustrated over the protracted trade deal negotiations with New Delhi, given that India was initially seen as one of the frontrunners for a trade pact with the US. India’s stiff resistance to American demands of greater access to the country’s farm and dairy sectors are among the major roadblocks in the negotiations.

The renewed pressure from the US and other Western powers—pressuring India to cut down on imports from Russia—is evidently aimed at forcing the Kremlin’s hand into ending the Ukraine war. For Trump, who wants the three-year-old Russia-Ukraine war to end within days, this is an opportune time to pressure India over its Russian imports, given the long-drawn-out trade pact negotiations between New Delhi and Washington have been hit by impediments. Russia is currently the largest source of crude for India, accounting for 35-40 per cent of New Delhi’s oil imports. Notably, while Trump has slapped additional tariffs on India as a “penalty” for buying Russian crude, it has not taken any such action so far against China—the top buyer of Moscow’s oil.

Bessent also said that the US could use more assistance from Europe on pressuring India over its Russian oil imports, given that much of the refined petroleum products exported by India go to Europe. “Our European allies need to step up. I don’t see them threatening the tariffs on the Indians. As a matter of fact, they’re the ones buying the refined products that’s made from the Russian oil,” Bessent said, adding that only Canada was willing to join the US in applying secondary tariffs to pressure countries like India.

When Russia invaded Ukraine in February 2022, Moscow’s share in New Delhi’s oil imports was less than 2 per cent. With much of the West shunning Russian crude following the invasion, Russia began offering discounts on its oil to willing buyers. Indian refiners were quick to avail of the opportunity, leading to Russia—earlier a peripheral supplier of oil to India—emerging as India’s biggest source of crude within a matter of months, displacing the traditional West Asian suppliers. Notably, India was encouraged by the US to buy more of Russian oil as Washington did not want that oil to go off the market, as that would have led to a surge in energy prices globally.

India’s public sector refiners have publicly stated that they have not received any directive or indication from the government with respect to their Russian oil imports, and their strategy on buying Moscow’s crude continues to be dictated by economic and commercial considerations. The Indian government continues to maintain that the country will buy oil from wherever it gets the best deal, as long as the oil is not under sanctions. Russian oil is not under sanctions, and is only subject to a price cap imposed by the US and its allies that applies if Western shipping and insurance services are used for transporting the oil. Indian refiners and the government maintain that they have been adhering to the price cap on Russian oil.

On being asked if he was worried that India is going to do trade using the rupee, instead of the dollar, with the BRICS countries, Bessent said, “There are a lot of things I worry about. The rupee becoming a reserve currency isn’t one of them. I think the rupee is near an all-time low versus the US dollar.”