New Delhi signals quiet defiance of US attempts to dictate its oil and trade policies.
It is just as well that India’s Prime Minister Narendra Modi decided to skip going to the two-day East Asian leaders’ summit in Kuala Lumpur from October 26 to 28. Modi settling for virtual attendance at the ASEAN summit is being seen as his way of averting a face-to-face bilateral meeting with US President Donald Trump.
As speculated, had an in-person meeting between the two happened, Trump’s two-faced pressure on India to halt import of Russian oil would have become three-faced.
In his current tactics of harm-and-charm, on the one hand, Trump publicly warns India against importing oil from Russia and threatens even higher tariffs; on the other hand, he tweets flattering messages to Modi saying he’s a good friend and great leader and telephones to greet him on occasions such as his birthday and the Diwali festival.
Modi plays along when it comes to Trump’s messages and calls to charm him. Modi’s verbal response may be effusive, but his actions show that he does not expect these pleasantries to make the US retreat from inflicting harm on India by way of tariffs. The only way the latter can happen is if Modi refuses to buckle under Trump’s pressure as he appears to be doing, by not meeting Trump in-person.
The official reason advanced for Modi staying away from this important forum is Deepavali (or Diwali) festivities. However, there are few takers for this explanation. Observers point out that Modi had also kept away from the summit on Gaza in Egypt, evidently to avoid being cornered by Trump. He has deputed External Affairs Minister S Jaishankar to represent India at the East Asia Summit whereas he sent a junior minister to Egypt.
Modi is said to be miffed with Trump for claiming more than 50 times in recent months that he had mediated the ceasefire between India and Pakistan after a short but fierce military standoff between the two Asian neighbors in May this year. This has been repeatedly denied by New Delhi. Worse, Trump has claimed at least five times that Modi assured him of stopping oil purchases from Russia.
Trump’s assertions of Modi’s promise on this move, under threat of raising tariffs further, has been followed by sanctions on Russian oil firms Rosneft and Lukoil. This year, at least 34% of India’s crude requirement has been imported from Moscow and these two Russian oil giants account for 60% of the supplies. In addition to the reciprocal tariff of 25% already in place since July 30, the US slapped another 25% secondary tariff on India for buying Russian oil.
The sanctions will force Reliance Industries, India’s biggest buyer of Russian oil, to reduce imports; and public sector oil companies such as Indian Oil may be ‘advised’ to follow suit though they have no direct arrangements with Rosneft and Lukoil. For now, they may continue buying from intermediaries. Another company to suffer a body blow from the US sanctions is Nayara Energy, one of India’s largest refineries, in which Rosneft holds a 49.13% ownership share.
The sanctions on Rosneft and Lukoil mean that any entity, US or foreign, dealing with these companies runs the risk of massive penalties. Reports are that Reliance Industries, which is estimated to have purchased $35 million worth of oil since the outbreak of hostilities in Ukraine in 2022, will have to start reducing imports gradually and possibly stop all imports from Russia by November 21. In its statement on Friday, the company said it is reviewing the impact of Western sanctions on its Russian suppliers and will adjust operations accordingly while maintaining domestic energy security.
Reliance will be hit very hard although a large proportion of the crude, imported at discounted prices and refined by it (into petrol, diesel and aviation turbine fuel) was exported to the US and Europe at good profit. The company, which has a 25-year agreement with Rosneft to buy 25 million tons of crude per year, is reported to have imported nearly 50% of the 1.8 million barrels supplied daily to India. The absence of discounted crude from Russia could mean a loss of $5 to $6 billion per year, according to a former foreign secretary. Trump had described the move as a “gradual process” and said India would bring Russian oil imports “down to almost nothing” by year-end.
Reports are that in the wake of US-imposed sanctions on Rosneft and Lukoil, China’s big state-owned oil companies are suspending purchases of “seaborne Russian oil”.
Trump’s attempts to squeeze India and China in a big way to gradually reduce and end oil imports from Russia is to beat Moscow into submission and make it comply with his diktat for a deal with Ukraine. However, Russian President Vladimir Putin is unlikely to yield any ground under mounting pressure from the US, and Europe. Putin made it clear this week that “no self-respecting country and no self-respecting people ever decide anything under pressure.”
Such a position should hold good for India as well. However, New Delhi does not have the economic and military heft of China and Russia to withstand US pressures beyond a certain point. Putin slammed sanctions on the big two Russian oil companies as an “unfriendly act” and admitted that it “will have some consequences.” But, he said, “they won’t greatly affect our economic stability.” The same cannot be said about the impact of sanctions on the Indian economy.
New Delhi has pointed out more than once that energy security is critical and India’s imports from Russia are dictated by its national interest in ensuring stable prices and secure energy supplies. The government called Trump’s tariffs as “unfair, unjustified and unreasonable.” The friction caused by tariffs has stalled progress on a trade agreement between India and the US although talks continue at various levels.
Some of these conversations seem to be pulling India deeper into a situation where New Delhi may find it hard to push back against the tremendous pressure being exerted by the US. This is evident, first and foremost, in India agreeing to cut Russian oil imports, although there is no official word of this being done to comply with Trump’s demand; and asking public sector oil companies to source more crude from the US. Second, India has reportedly agreed to open its agriculture sector to US produce, which the government had been unwilling to do as higher farm imports could hurt India’s farmers.
These developments relating to the two critical sectors of energy and agriculture are being attributed to the recent visit of Trump’s new special envoy Sergio Gor to India. Gor’s visit appears to have melted New Delhi’s resistance to stay the course with Russian oil imports and not open the agriculture sector to US produce. Gor was in India for five days from October 10 to 15. On October 11, he met with Modi, Jaishankar, National Security Adviser Ajit Doval, and Foreign Secretary Vikram Misri. Rare is the diplomat who has scored such high-level intensive discussions with four top figures in government in a single day. In fact, ambassadors have to wait weeks, if not months at times, to present their credentials after being posted to Delhi.
Whereas Gor, as of now, is ambassador-designate to India and scheduled to assume office only in the New Year. He has a larger role as Trump’s Special Envoy for South and Central Asia and that mandates him to engage with Pakistan, Bangladesh, Afghanistan, and the Central Asian states.
Gor is not a career diplomat. He served as Trump’s campaign strategist. His appointment, the royal reception he received in New Delhi and the upbeat mood with gung-ho remarks by both sides show that Trump means business when he wants India to abide by his terms whether on energy or agriculture. It might be a case of diplomacy leveraging transactional deals for an India-US geopolitical alignment with implications for regional security. Gor’s meeting with India’s commerce secretary suggests that, after scoring on energy and agriculture, his next target may be to wrap up a bilateral trade deal in November.
Washington is gradually and inexorably lowering the boom on Russia, India, and China. This could have unforeseen effects on India’s foreign policy, its relationship with Washington, Moscow, and Beijing, and its role in multilateral forums such as SCO and BRICS besides a troubled neighborhood where the US is a major player. That is, if Trump continues to call the shots.
