Modi Ducks Trump Confrontation Even as US Tariffs Hit Indian Exports and Russian Oil Is Sanctioned

Prime Minister Narendra Modi’s decision to stay away from the East Asia Summit, and more importantly, his desire to avoid a meeting with President Donald Trump on the sidelines may have been triggered by the United States’s October 22 decision to blacklist Rosneft and Lukoil – Russian energy giants that together account for 57% of Russia’s crude output and export earnings.

According to Ajay Srivastava, former trade negotiator in the government and currently founder of Global Trade Research Initiative, Trump’s decision to sanction the two big Russian companies presents India with no choice but to stop importing from them immediately.

Neither Indian oil PSUs nor Reliance Industries which were importing crude from these firms can possibly do so anymore, says Srivastava.

No wonder Reliance Industries issued a statement that it will recalibrate its crude imports from Russia as per guidelines provided by the government. The government’s silence on this issue is deafening given that events are already overtaking India in this regard.

The only question that now remains, according to Srivastava, is whether the US sanctions on Russian crude will extend beyond Lukoil and Rosneft. True to form, Trump has let some confusion prevail in this respect. One may recall Trump’s first statement was India would stop buying crude from Russia. Then he seemed to indicate that India would reduce Russian crude imports substantially.

So technically, other relatively smaller Russian firms that account for about 43% percent of crude output may remain unsanctioned for now, says Srivastava. India could possibly continue to buy crude from them.

Therefore this is the only limited space India may have for some time for importing crude from Russia. Modi will soon have to come out with a clear statement on how much reduction in crude imports will be effected by Reliance and other public sector companies like IOC, HPCL etc.

Given that the two large sanctioned Russian oil majors account for 57% of the output, it can be reasonably assumed that India will cut its imports from Russia by well over 50%.

It may be recalled that Russia’s share in Indian crude imports went up from 1% to 38% post the Ukraine war. Trump argues that India is helping fuel the Russian war in Ukraine the most given the massive increase in its purchase of Russian crude. Comparatively, China saw increased Russian oil purchases from 13% to 16% of its total imports after the Ukraine war.

So it is a near certainty that Modi will be forced to cut India’s import of Russian crude drastically in the first round. This is a fait accompli as the two largest Russian energy exporters stand blacklisted by US.

Imports from Russia still provide a discount to the market price of $4 to $5 per barrel. This is a meaningful discount though much less than the average discount of $11 per barrel that India saw in 2023 and 2024.

India’s priority will be to weigh the loss of the Russian discount against the gains made from the removal of the penal tariff of 25% imposed by Trump on Indian exports, taking the total tariff to 50%. Mixed signals are emanating from Commerce Minister Piyush Goel on the progress being made in regard to the trade talks with the US. Sometimes Goel says talks are progressing well. But yesterday he sounded a warning to suggest India will not negotiate with a gun on its head. “Trust is very important in a relationship. Trade is not just about tariffs”, he said. It appears there is a lot of waxing and waning happening behind closed doors. With Trump this process must be ever more painful for Modi and co.

Of course, this pain is never articulated publicly as the opposition seeks answers on a daily basis. Goel was dismissive of the opposition saying they don’t understand geopolitics and diplomacy. The truth is people inside the government, Modi included, are equally clueless. Even global experts have little clue as to where US trade and economic policies are headed and the IMF too is forecasting a risky ride ahead for the world economy and is advising developing economies to stay on the reformist path, whatever that means.

Meanwhile, the apex Federation of India’s Small and Medium enterprises (Fisme) has come out with a survey which says the apparel sector has seen a 40% drop in orders after the US imposed a 50% tariff. The carpet and home textile companies have seen a 30% fall in orders, the leather sector 20% and fisheries a 60% decline.

This is where the real pain will be felt in the next six months and Modi will not find it easy to address the concerns of these small/medium companies and their millions of workers who face a dark future. No wonder he doesn’t have the courage to meet Trump face to face and tell him some home truths.

This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.

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