【By Observer News】After the outbreak of the Russia-Ukraine conflict, India has become one of the "winners," increasing its oil imports from Russia and gaining considerable economic benefits. However, after the punitive tariffs introduced by the United States came into effect on August 27, these gains were all lost, and there is currently no simple solution in sight.

Reuters reported on August 27 that analysts estimate that since early 2022, India has saved at least $17 billion by increasing its oil imports from Russia. Data from the Indian think tank "Global Trade Research Initiative" (GTRI) shows that when President Trump announced a 50% tariff on Indian imports, it could potentially reduce India's exports by more than 40% in the fiscal year from April to March next year, which is nearly $3.7 billion.

Experts believe that other countries may take India's response to U.S. tariffs as a reference.

"For other countries, the key lesson is that if India, an emerging major economy and military power, faces significant pressure from the United States, they have even less capacity to resist U.S. pressure," said Happymon Jacob, founder of the Indian think tank "Committee for Strategic and Defense Research" (CSDR). "In addition, some countries may interpret the current dynamics as China possibly becoming a balancing force, especially in the context of Trump's unpredictable and aggressive geopolitical initiatives."

On February this year, Modi met with Trump at the White House. Visual China

Both the U.S. and Russia are important, but India cannot choose between them

On the evening of July 31, Trump signed an executive order announcing that the U.S. would impose a 25% tariff on Indian goods starting August 7. On August 6, Trump signed another executive order, imposing an additional 25% tariff on India for purchasing Russian energy "directly or indirectly." The U.S. Department of Homeland Security announced that the new tariffs would come into effect at midnight on August 27, at which point the U.S. will impose a 50% tariff on Indian goods.

Reuters reported that the impact of high tariffs will be long-term and may politically weaken Prime Minister Narendra Modi's position, as thousands of jobs face risks, particularly in labor-intensive industries such as textiles, gems, and jewelry.

Analysts pointed out that India's response in the coming weeks could reshape its decades-long relationship with Russia and re-adjust its increasingly complex relationship with the U.S.—which, in the eyes of the U.S., is crucial for containing China's growing influence in the Indo-Pacific region.

"India needs Russia to continue providing defense equipment in the coming years, affordable oil when possible, geopolitical support in the continental space, and political backing on sensitive issues," said Jacob, founder of CSDR: "This makes Russia an invaluable partner for India."

But he also added: "Despite the difficulties in India-U.S. relations under Trump, the U.S. remains India's most important strategic partner. At least for now, India simply cannot afford to choose between the two."

Bloomberg reported on August 26, citing several sources, that India plans to cut back on Russian oil imports. According to the sources, this is a "moderate concession" to the U.S., but also indicates that the country does not plan to sever ties with Russia.

Two Indian government officials told Reuters that India hopes to mend relations with the U.S. and is willing to increase purchases of American energy, but is unwilling to completely stop importing oil from Russia. On August 26, an Indian foreign secretary told reporters that negotiations between India and the U.S. are ongoing, and officials from both countries held online talks on trade, energy security (including nuclear cooperation), and critical mineral exploration.

Even if part of the tariffs are revoked, the aftermath could seriously harm India

According to reports, Russian crude currently accounts for nearly 40% of India's total oil imports, compared to almost zero before the Russia-Ukraine conflict. Analysts say that immediately stopping this would not only mean yielding under pressure but also be economically unfeasible. India's procurement is mainly led by Reliance Industries, owned by billionaire Mukesh Ambani, which operates the world's largest refining complex in Gujarat, Modi's home state.

Internal Indian government assessments reviewed by Reuters show that if India, the world's third-largest oil consumer and importer, stops buying oil from Russia, international oil prices could surge above $200 per barrel, more than triple the current level, while India would lose up to a 7% discount on Russian oil compared to global benchmarks.

India warned that halting the current import of about 2 million barrels per day of Russian oil would disrupt the entire supply chain and push up domestic fuel prices. India also cited former U.S. President Biden, saying that the Biden administration had supported its purchase of Russian oil to maintain global oil price stability.

Russia, meanwhile, said it expects India to continue buying its oil.

Modi himself did not directly comment on the tariffs, but he repeatedly pledged support for Indian farmers, seen as a "subtle response" to Trump's demand for India to open up its vast agricultural market. Farmers are a major voter group, and Modi will face a tough election campaign in Bihar, a major agricultural state, later this year. He also promised to significantly lower the goods and services tax by the end of October to boost domestic demand.

According to a report by The Times of India on August 25, as the new tariffs are set to take effect on August 27, Prime Minister Modi made a firm statement, vowing that his government will protect the interests of farmers and small entrepreneurs regardless of the pressure faced.

Modi spoke in Ahmedabad, Gujarat, India, saying: "I will tell our small entrepreneurs, our shopkeepers, our farmers, and our livestock farmers... For each of you, I assure you that your interests are the most important."

He emphasized that the Indian government will never allow small entrepreneurs, farmers, and livestock farmers to be harmed, "no matter how much pressure we face, we will constantly strengthen our strength to withstand challenges."

Indian Prime Minister Modi Video screenshot

Reuters noted that in the intensive diplomatic efforts toward multipolarity, India's Foreign Minister S. Jaishankar recently visited Russia, and Prime Minister Modi has also confirmed that he will visit China at the end of this month, marking his first visit to China in over seven years. Since the border clash in 2020, relations between India and China have shown signs of gradual thawing.

International relations experts believe that Trump's latest move could bring U.S.-India relations back to the worst stage since the U.S. imposed sanctions on India in 1998 following its nuclear tests. In addition to trade disputes, the tensions could affect work visas for Indian tech professionals and outsourcing services.

The report states that even if India manages to push for the removal of part of the tariffs in the future, it will leave long-term impacts, especially in the trade sector.

"Countries such as China, Vietnam, Mexico, Turkey, and even Pakistan, Nepal, Guatemala, and Kenya may benefit, even if the tariffs are lifted, India might still be excluded from key markets," said Ajay Srivastava, founder of GTRI and former Indian trade official.

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