US-EU Pressure Mounts: Tariffs over Russian Oil Impact India’s Trade Diplomacy

The global energy chessboard has once again placed India in the spotlight. As the conflict in Ukraine drags on and Western allies seek to tighten economic pressure on Russia, the United States has been calling on G7 and European Union nations to impose tariffs on countries purchasing Russian oil. Among those countries, India has emerged as a focal point—both for its growing imports of discounted Russian crude and its parallel efforts to deepen trade engagement with the European Union.

This twin reality—defending energy security while negotiating trade deals with the West—has put India in a delicate diplomatic position. The stakes are high: how India navigates these pressures could redefine its role in global supply chains, shape its energy strategy, and determine its future diplomatic clout.

The American Push: Sanctions and Tariffs

Since 2022, the US and EU have sought to limit Russia’s ability to finance its war in Ukraine through a combination of oil price caps, sanctions, and trade restrictions. However, Russia has continued to sell oil to major importers such as China and India at discounted prices, effectively cushioning its revenues.

The Biden administration has now floated the idea of secondary tariffs—a policy tool targeting not just Russian exporters but also the countries buying Russian oil. The logic is clear: if major importers like India face trade penalties, the incentive to buy discounted Russian crude weakens, amplifying the effect of sanctions.

While the EU has not formally embraced this approach, growing alignment between Washington and Brussels suggests that some form of punitive economic measure could be on the horizon. For India, which imports over 85% of its crude oil needs, this is no small matter.

India’s Energy Security Argument

India has consistently defended its purchases of Russian oil by invoking energy security and affordability. Officials argue that:

As a developing nation with 1.4 billion people, India must prioritise cheap and reliable energy supplies.
Western sanctions and supply chain disruptions have inflated global energy prices, disproportionately affecting poorer economies.
Purchasing Russian crude at discounted rates helps India control inflation, stabilize fuel prices, and safeguard economic growth.

External Affairs Minister S. Jaishankar has often emphasized that India cannot be expected to shoulder the costs of a European war, saying:

“Europe has to make its own choices. We will make ours. Our priority is the energy needs of the Indian people.”

This framing resonates domestically but has drawn criticism abroad, where India’s growing imports are seen as undermining Western sanctions.

EU-India Trade Talks: A Parallel Track

Even as pressure mounts, India and the European Union are engaged in their most advanced trade negotiations in over a decade. The India-EU Free Trade Agreement (FTA), stalled since 2013, was revived in 2022 and is now at a critical phase.

Key areas under discussion include:

Tariff Reductions: Especially on automobiles, wines, and dairy products from the EU, and textiles, IT services, and pharmaceuticals from India.
Market Access: Greater access for EU companies in India’s service sector and for Indian firms in EU manufacturing and agriculture.
Sustainability Norms: Compliance with Europe’s Carbon Border Adjustment Mechanism (CBAM) and green energy transition commitments.
Regulatory Harmonisation: Aligning safety, data, and quality standards to reduce non-tariff barriers.

The EU is India’s third-largest trading partner, accounting for nearly 11% of India’s total trade. The deal, if concluded, would be India’s most comprehensive trade pact to date.

Yet, Washington’s push for tariffs over Russian oil imports complicates matters. Should the EU give in to American demands, India’s bargaining leverage could weaken dramatically.

The Geopolitical Balancing Act

India’s dilemma is not just economic; it is deeply geopolitical. The country has sought to position itself as a balancing power in a multipolar world.

With the United States, India is deepening defense and technology partnerships through QUAD and Indo-Pacific initiatives.
With Russia, India maintains historical defense and energy ties. Nearly 60% of India’s military hardware originates from Russia.
With the European Union, India seeks access to capital, markets, and technology needed for its manufacturing and green transitions.

This multi-vector diplomacy allows India flexibility, but it also exposes it to competing expectations. The US and EU demand alignment on sanctions; Russia expects loyalty as a long-standing partner; domestic politics demand affordable energy and jobs.

Risks of Missteps

The risks for India are substantial:

Trade Retaliation
If the EU or US decides to impose tariffs on Indian goods in response to Russian oil imports, sectors like textiles, IT services, and agriculture could be hit hard.
FTA Stalemate
Diplomatic friction could derail the India-EU trade deal, undermining years of negotiation and weakening India’s global trade ambitions.
Strategic Credibility
Over-reliance on Russian crude may cast doubt on India’s ability to act as a reliable partner for the West in global supply chains.
Economic Ripple Effects
Tariffs or sanctions could spook foreign investors, complicate India’s export diversification strategy, and slow its growth momentum.

The Indian Strategy Going Forward

India’s response is likely to be multi-pronged:

Diversification of Energy Sources: Expanding imports from the Middle East, Africa, and the US while maintaining some Russian purchases.
Diplomatic Bargaining: Using trade negotiations with the EU as leverage to soften positions on Russian oil.
Strategic Communication: Framing its energy choices as pragmatic, not ideological, and highlighting its commitments to clean energy and climate goals.
Domestic Resilience: Accelerating renewable energy adoption and building strategic petroleum reserves to reduce external vulnerabilities.

India’s broader message is clear: it will not compromise its energy security, but it remains open to dialogue and gradual adjustment.

Voices from Analysts

Several analysts have weighed in:

Prof. Harsh Pant, ORF: “India is walking a tightrope. It cannot alienate Russia, but it also cannot afford to lose the EU market. Diplomacy here is about buying time and diversifying dependencies.”
Energy Economist Vandana Hari: “Discounted Russian crude has been crucial in keeping India’s inflation under check. Any disruption would have immediate economic consequences.”
European Diplomat (anonymous): “The EU understands India’s constraints, but the optics of financing Russia through oil are becoming harder to ignore.”

A Test for Global Trade Architecture

This standoff also highlights the fragility of the global trade architecture. Sanctions, tariffs, and protectionist policies are increasingly being used as geopolitical weapons. For India, which aspires to lead in global supply chains, the challenge is to avoid becoming collateral damage in great power rivalries.

The outcome of the India-EU FTA negotiations will be a litmus test: can India secure favorable terms while maintaining strategic autonomy? Or will Western pressure force it into concessions that limit its options?

Conclusion

The US push for tariffs on Russian oil buyers and the EU’s delicate dance with India have created a complex diplomatic puzzle. For India, the path ahead requires balancing immediate energy needs with long-term trade ambitions, all while maintaining credibility as a global partner.

How New Delhi navigates this moment will shape not just its economy but also its place in the emerging multipolar order.

In the end, India’s ability to stand firm yet flexible may prove to be its greatest diplomatic asset.

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