Indian Prime Minister Narendra Modi finds himself in a difficult energy policy situation with no easy solutions. Reducing Russian oil imports to avoid potential new US tariffs could lead to higher fuel prices before crucial regional elections or strain government finances. Conversely, continuing these purchases could severely impact India's exports to its largest market.
India, the world's third-largest oil importer and a significant buyer of Russian crude, reacted with unusual force on Thursday to a US congressional bill that proposes tariffs of up to 100% on countries, including India and China, for substantial purchases of Russian oil. This strong reaction highlights how energy trade, which has saved India billions of dollars since Russia's invasion of Ukraine in 2022, is now conflicting with its broader strategic and commercial interests.
New Delhi stated that it had warned the United States that the measure could harm bilateral relations and disrupt global energy markets, emphasizing its commitment to "ensuring energy security for its 1.4 billion people" by sourcing from diverse suppliers.
However, maintaining its current stance could further strain relations with Washington, especially after a tumultuous year marked by repeated trade and tariff disputes under President Donald Trump. A planned trade agreement between the two nations has already faced numerous delays.
TRADE TALKS AT DELICATE STAGE
Two Indian sources indicated that the recent tensions do not signify New Delhi's abandonment of hopes for a trade deal with Washington. However, they suggested that India might increasingly need to rely on other international deals if additional US tariffs affect its exports.
Since last year, India has entered into a trade agreement with Britain, finalized one with the EU, and aims to conclude negotiations for another with Canada by the end of the year.
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One of the sources mentioned that New Delhi is anticipating a breakthrough during Modi's visit to the US for the G20 summit in December, where he might meet Trump on the sidelines.
The White House and the Indian government did not immediately respond to requests for comment.
"The US-India relationship has suffered over the last year for a range of reasons, including US tariffs," said Michael Kugelman, a senior fellow at the Atlantic Council in Washington. "But this new legislation, which enjoyed strong bipartisan support and takes the most maximalist position possible on punishing India for its Russian oil buys, may be the biggest blow yet."
Kugelman added that while the damage might be manageable if Washington delays implementing tariffs or applies them lightly, the legislation could still widen the trust gap in Delhi regarding a trade deal and make it harder for Indian negotiators to agree to last-minute concessions needed to secure an agreement.
"From the perspective of the trade talks, this new legislation couldn’t have come at a worse time," he stated. "The two sides are not far from the finish line, but getting there will require careful diplomacy."
POLITICAL HEADACHE FOR MODI
The bill has already become a political issue in India, with the opposition urging Modi to adopt a firmer stance. Any increase in fuel prices would be risky for Modi, whose party faces elections in India's most populous state, Uttar Pradesh, in Punjab, and in Modi's home state of Gujarat, starting early next year. Modi's BJP governs both Uttar Pradesh and Gujarat.
Before Trump, India was courted by the United States for decades as a strategic counterweight to China. However, the world's fifth-largest economy has repeatedly faced setbacks over the past year due to decisions made in Washington.
Following Russia's invasion of Ukraine, India significantly increased its purchases of discounted Russian crude, which now constitute over 40% of India's total oil supplies. These increased purchases were partly responsible for Trump imposing tariffs of up to 50% on Indian goods in August 2025, among the steepest levied on any country.
In February, Trump rescinded those duties in exchange for what he claimed was India's commitment to halt Russian oil purchases and lower trade barriers.
However, New Delhi only briefly reduced its purchases from Russia in early 2026. They have since surged, particularly after the supply shock that followed the US and Israeli attack on Iran.
New Delhi has consistently resisted pressure to scale back its purchases, arguing that its large population and growing economy require secure, affordable, and reliable energy supplies. Sources familiar with the matter have informed Reuters that Indian refiners have already secured crude supplies for September and October that include Russian oil.
Indian analysts contend that the country's purchases of Russian oil are not financing the Ukraine war but are instead helping to stabilize global supplies and keep domestic prices in check.
"Tariffs of up to 100% would punish Indian exporters and American consumers, disrupt trade and give the US president excessive power over major partners," said Ajay Srivastava, founder of the New Delhi-based think tank Global Trade Research Initiative and a former trade ministry official.
