OPINION | India, US Interim Trade Pact Slips On Russian Oil
After years of intense negotiations and discussions surrounding the possibility of a free trade agreement, India and the United States have finally reached a significant milestone by signing an interim pact on February 6. This agreement, officially referred to as the Interim Trade Agreement (ITA), serves as a foundational step toward a more comprehensive Bilateral Trade Agreement (BTA), with the final legal text anticipated to be completed by mid-March 2026.
However, the road to this interim agreement has been fraught with challenges. Since its announcement, the ITA has encountered numerous hurdles, preventing it from gaining momentum. Once relegated to the metaphorical cold storage of stalled negotiations, the deal now finds itself precariously positioned on slippery slopes of Russian oil.
On the evening of February 6, a wave of confusion swept across social media as vague hints of a significant announcement began to circulate, but the Indian public was left in the dark regarding the specifics of what was being referred to as a BTA. Rather than excitement, there was a palpable sense of uncertainty, with many questioning if this announcement truly represented any substantial progress in India-US relations. It wasn't until the following morning, February 7, that the situation became slightly clearer. The White House finally issued a US-India Joint Statement, confirming that New Delhi and Washington DC had merely reached an understanding on an interim agreement. While the statement attempted to frame this interim agreement as a step forward, it underscored that the more comprehensive BTA remains stubbornly mired in negotiations, casting doubt on any significant breakthrough in the near future.
Under the ITA, which came within days of India agreeing to a free trade agreement (FTA) with the European Union (EU), India has committed to eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products, including specialised grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.
The recent announcement emerged during a period when bilateral relations between the two nations are at a significant low point. In the past, India and the United States were often described as “natural partners” even as India held the designation of a ‘Major Defence Partner’ under several previous U.S. administrations. These administrations viewed India as a vital and credible ally in the context of their strategic pivot towards the Indo-Pacific region, recognizing its potential to contribute to regional stability and security.
Russia Is Not Iran
However, the current dynamics under US President Donald Trump have shifted dramatically. New Delhi’s previous stature and influence in these discussions seem to have diminished, as the U.S. appears to be prioritizing its own economic interests over a balanced and cooperative partnership. Presently, Washington's approach seems focused primarily on extracting business opportunities from India, treating it more like a market from which to siphon resources rather than as a cooperative partner committed to mutual growth and shared goals. This change signals a troubling evolution in the relationship, raising concerns about the future of India-U.S. ties and their broader implications for regional geopolitics.
To make matters worse over the ITA, the White House issued an executive order – Modifying Duties To Address Threats To The United States By The Government Of The Russian Federation – in which it stated “India has committed to stop directly or indirectly importing Russian Federation oil, has represented that it will purchase United States energy products from the United States, and has recently committed to a framework with the United States to expand defense cooperation over the next 10 years.”
This statement was supplemented by a Fact Sheet – The United States and India Announce Historic Trade Deal – issued by the White House on 10 February in which it stated that during a phone call between Trump and Prime Minister Narendra Modi on 6 February, the US President “agreed to remove the additional 25 per cent tariff on imports from India in recognition of India’s commitment to stop purchasing Russian Federation oil”. Therefore, while the U.S. rescinded a 25 percent punitive tariff on Indian goods, this was contingent on India halting Russian crude oil imports.
While the Indian government has sought to downplay this by stating that procurement of energy by any country remains its sovereign decision, New Delhi is believed to be drastically reducing its oil purchases from Russia. So far, India has opted not to address the matter head-on even as its treads cautiously on this matter. Such a move will not only compromise India's strategic autonomy stance in its foreign policy, bringing down Russian crude purchases to zero could strain defence ties with Moscow, including the sourcing of the S-400 system.
Meanwhile, Russian Foreign Minister Sergei Lavrov and Kremlin spokesperson Dmitry Peskov stated that Russia has received no official communication or statement from the Indian government indicating a plan to stop buying Russian oil. Lavrov specifically noted on February 11, 2026, that "except for U.S. President Donald Trump, nobody else has declared that India will stop buying Russian oil," noting that he had not heard such a commitment from Prime Minister Modi or other Indian leaders.
Russian oil has provided a significant cost advantage (with discounts often exceeding $10–20/bbl). Forcing a switch to costlier US oil could drive up domestic fuel prices and inflation. Most Indian refineries are optimized for the heavy-sour crude typically provided by Russia and the Middle East. US crude is generally "light and sweet," meaning a sudden shift would require blending or costly refinery re-configurations. Additionally, Shipping oil from the US to India costs more than double compared to routes from West Asia, further eroding the commercial viability of the switch. Indian refiners have already booked Russian cargoes through March and April 2026.
The government asserts that this deal presents an unprecedented opportunity to tap into a staggering $30 trillion market while also safeguarding what it deems the "national interest." However, a prevailing perception of capitulation to U.S. pressure looms large, creating a significant political vulnerability on the domestic front. It is important to acknowledge that this issue has taken on a distinctly political hue, igniting debates and scrutiny across various levels of society. Moreover, New Delhi bears a fundamental responsibility to its citizens, who are eager to understand the government's strategic decisions and their implications.
Looking back to 2019, India found itself in a similar situation when it suspended oil purchases from Iran under the duress of U.S. influence during the first Trump administration. The Modi government is well aware that it cannot do an Iran on Russia, because such a step would be not only be a costly mistake but will also have potential repercussions.
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