US-India Trade Talks Derailed as President Trump Cites Russian Energy Purchases

Strategic Insights -

Tensions have escalated in the US-India trade talks as President Trump accused India of aiding Moscow's war on Ukraine by purchasing Russian energy. The move has dropped like a "stink bomb" in the two countries' trade negotiations, with India calling the demand "outrageous and unwarranted." Despite sanctions imposed by the West, India has continued to buy Russian oil at a significant discount, with purchases worth over $130 billion per year. This has helped India establish a lucrative business exporting refined products to regions in need of fresh energy supplies.

Key Takeaways:

  • President Trump threatened to impose a 25% tariff on Indian goods, citing the country's purchases of Russian energy as reason.
  • India is currently the largest buyer of Russian oil, with over 45% of its imports coming from Russia.
  • India's purchases of Russian oil have suited both Russia and India, with Russia able to sell its crude oil at a discount and India able to buy it at a lower price.
  • Indian refineries have been buying less Russian oil in recent weeks, but completely replacing Russian fuel would be difficult and costly.
  • India's oil companies have refined some of the Russian oil for domestic consumption and exported the rest to Europe and elsewhere as diesel and other products.
  • The trade dispute has dropped like a "stink bomb" in the two countries' trade talks, with India calling the US demand "outrageous and unwarranted."

Statistics:

  • India has purchased over $130 billion worth of Russian oil in the past year.
  • Russia accounts for over 45% of India's oil imports, with over 2 million barrels of crude oil being sold to India every day.
  • India's oil companies have refined over 2.5 million barrels of Russian oil for domestic consumption and export every day.
  • The giant Indian refinery in Jamnagar on the country's west coast is running at full capacity, producing over 1.2 million barrels of oil every day.
  • Exxon Mobil's stock price has been flat since the start of the war, while the Indian conglomerate Reliance Group's stock price has grown 34% during the same period.

Sources:

  • The New York Times, June 2023: "India's Oil Refineries Are Buying Record Amounts of Russian Crude"
  • Kpler: "The Pivot Away from Russia — if Forced — Will Be Costly, Complex, and Politically Fraught"