The trade relationship between India and the United States has been strained by the imposition of 25% tariff by the US on Indian goods.
This move comes amid growing tensions over India's continued purchase of Russian oil, which the US views as indirectly supporting Russia's war in Ukraine.
The dispute threatens key Indian industries and has added a new layer of complexity to the economic ties between the two countries.
On July 30, US President Donald Trump announced an unspecified penalty on India for buying Russian oil.
If that was not enough, on Monday, August 4, Trump posted on his social media account on Truth, 'India is not only buying massive amounts of Russian oil, they are then, for much of the oil purchased, selling it on the open market for big profits. They don't care how many people in Ukraine are being killed by the Russian war machine. Because of this, I will be substantially raising the tariff paid by India to the USA. Thank you for your attention to this matter!!! President DJT'.
Syed Firdaus Ashraf/Rediff offers an explainer on why India continues to buy Russian oil despite the US threat.
What is the genesis of the Russian oil controversy?
Donald Trump, on July 15, issued a 50-day warning to Russian President Vladimir Putin to halt the war in Ukraine, and that tariffs would be imposed on countries doing trade with Russia if the three-year war was not stopped.
How did Putin respond to this warning?
By firing an overnight barrage of more than 300 drones, four cruise missiles, and three ballistic missiles at Ukraine, indicating that he will not resile from the invasion of Ukraine, which started on February 24, 2022.
What did Trump do?
He did not retaliate against Russia, but on July 15 he raised tariffs on all the countries doing business with Russia, in an apparent move to cripple the Russian economy.
Trump stated that India was funding the war in Ukraine by supporting the Russian economy and that he wanted to stop the killing of innocent Ukrainians.
Why is India insisting on buying Russian oil?
Because Russia sells its crude oil at a discount to India.
For example, in December 2022, when the Brent price (a benchmark for global oil prices) was $60 a barrel, Russia was selling crude oil to India at $40 a barrel.
In just two years, Russian crude oil, which was 0.2% of India's total oil import bill, rose to nearly 40% after the Russia-Ukraine war.
Prior to this, India's major oil supplies were Saudi Arabia and Iraq.
How will Trump's tariffs impact India?
It will impact certain export sectors of the Indian industry, such as 'Made in India' smartphones, refined petroleum products, gems and jewelry, pharmaceuticals, and textiles and apparel.
What is the volume of India-US trade?
India's goods exports to the US grew by 11.6% in FY 2024-2025, reaching approximately $86.51 billion, up from $77.52 billion in FY 2023-2024.
Imports from the US rose by 7.44% to around $45.33 billion in FY 2024-2025 compared to $42.2 billion in 2023-2024.
What is Prime Minister Modi's stance?
Modi told an audience in Varanasi on Saturday that Indians should go 'Swadeshi'.
He urged Indians to buy local goods, indicating that India will continue to import Russian oil to meet its energy needs.
'Now, whatever we buy, there should be only one scale; we will buy those things which have been made by the sweat of an Indian,' Modi said in Varanasi.
On Monday night the ministry of external affairs responded strongly to the US threat stating, 'Where the US is concerned, it continues to import from Russia uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilizers as well as chemicals. In this background, the targeting of India is unjustified and unreasonable.
'Like any major economy, India will take all necessary measures to safeguard its national interests and economic security.'