White House trade adviser Peter Navarro on Monday stated that India’s purchases of Russian crude were funding Moscow’s war in Ukraine and had to stop. In an opinion piece published in the Financial Times, Navarro asserted that New Delhi was 'now cosying up to both Russia and China.'

Navarro emphasized, 'If India wants to be treated as a strategic partner of the United States, it needs to start acting like one.' This stern warning comes on the heels of US President Donald Trump’s announcement earlier this month of an additional 25 percent tariff on Indian goods, citing New Delhi’s continued purchases of Russian oil. This move will escalate total tariffs on imports from India to 50 percent, placing significant economic strain on the bilateral trade relationship. A planned visit by US trade negotiators to New Delhi from August 25-29 has been called off, delaying talks on a proposed trade agreement and dashing hopes of relief from additional US tariffs on Indian goods from August 27.

The Indian Foreign Ministry has previously defended its stance, noting that India is being unfairly singled out for buying Russian oil while the US and European Union continue to purchase goods from Russia. Despite the US pressure, Indian Oil Corporation (IOC), the country’s top refiner, will continue to buy Russian oil depending on economics, as confirmed by the company’s head of finance Anuj Jain at an analyst meeting. Jain reported that IOC’s Russian oil processing in the June quarter was about 24 percent, compared to an average of 22 percent in 2024/25. He added that purchases for the September quarter were continuing, with discounts on Russian oil in the range of $1.50 per barrel to the Dubai benchmark.

Key Indicators

What this signals for the market/industry: Heightened geopolitical risk for global supply chains and energy markets, indicating a potential period of trade volatility and diplomatic friction. This could influence investment decisions and global trade flows.
Leading indicators and data points: US decision to increase tariffs on Indian goods to 50% total, signaling an escalation in trade disputes. Indian Oil Corporation's continued purchase of Russian oil at a $1.50/barrel discount. Cancellation of US trade talks in New Delhi. Indian Prime Minister Narendra Modi's meeting with Chinese President Xi Jinping and Chinese Foreign Minister Wang Yi's visit to India, indicating a shift in regional balances.

Regional Perspective

These developments reveal the US directly demanding that India choose sides in a broader geopolitical struggle, placing New Delhi in a delicate diplomatic position. India is striving to maintain its strategic autonomy and economic interests, particularly regarding energy security. The US pressure presents a significant challenge to India's ability to balance its ties with the West against its need for affordable energy resources and its historical relationship with Russia. India's recent cautious rapprochement with China, despite border tensions, reflects New Delhi's strategy to diversify partnerships amid a volatile international environment, especially with the unpredictable approach of the Trump administration.

Analysis

Peter Navarro’s explicit challenge to India marks a potential turning point in US-India relations, which were once considered a cornerstone of the US strategy for the Indo-Pacific. This move could lead to further trade friction and undermine trust between the two nations. It highlights the larger issue of national sovereignty over economic decisions in the face of external pressure, particularly in the context of global sanctions. For New Delhi, continuing to purchase Russian oil is driven by the economic reality of securing significant discounts, which is vital for a major oil-importing nation striving to fuel its economic growth. However, this decision comes with an increasing geopolitical cost. In the long term, these tensions might push India to accelerate its efforts to diversify supply chains and energy sources, potentially strengthening its trade and defense ties with nations other than the United States. The cautious rapprochement between India and China, despite historical tensions, could signal a broader shift in Asian geopolitical dynamics, with far-reaching consequences for regional and global balances. Global businesses should assess the risks associated with supply chains heavily reliant on India or Russia and consider mitigation strategies for market volatility and trade policies.