The timing and tone of Trump’s rhetoric come despite deepening India–US ties, especially in defence and energy. Yet, agriculture and dairy remain red lines for India, given their socio-political sensitivity.
Energy trade is another area under pressure. Homayoun Falakshahi, Head of Crude Oil Analysis at Kpler, said that while India has started importing more oil from the US, Russian crude still forms a large share of India’s supply. Recent data shows a drop in Russian oil imports, but the shift to US oil is not enough to fully replace it due to differences in supply and quality.Defence analyst Thomas Mathew warned that India is in a difficult position. He noted that Trump has taken tough stands even with close allies like the UK and Japan, forcing them to make concessions. Given India’s deep trade ties with the US, Mathew believes India may not be able to avoid negotiations if Trump pushes ahead with penalties.
These are the edited excerpts of the interview.
Q: US has been investing in the India partnership for the last so many years as a buffer to China. What has gone wrong so seriously that Donald Trump has used this kind of language for the Indian government, saying that Russia and India are dead economies. They can go down together, for all I care, then, saying that we are going to penalise India with very harsh tariffs. Why would he use this kind of language for India? What’s he so upset about, and what is the US really seeking from the trade deal?
Luck: I would certainly start by saying, this seems to be frustration, not strategy. We are seeing this replicated across many of other trading partners. If you think about critical minerals, Canada is going to be incredibly important partner for our critical mineral supply chains. We are doing everything to disrupt those productive relationships. The exact same thing is true here with India.
Q: Is the US push truly about agriculture and dairy, given India sees these as non-negotiable due to its large farming population? Or is it more about larger deals like oil and defence, especially as Donald Trump refers to India as a small trading partner?
Luck: It certainly is the case that people have indicated to the president, or they have gotten into his ear and said that these barriers are things that have to come down. But to your point, I don’t think there’s a proper appreciation for the fact that these are non-negotiable. These are things that are incredibly difficult to do and, the concessions that we would have to make, which, of course, we are not willing to would have to be enormous to sort of offset the implications for the Indian economy.
To your point, there are areas of compromise. There are rather mutual benefit, whether it be through continuing to increase our defence cooperation or oil and gas and other areas. The other I would say, of course, even though they didn’t put a tariff on India for its imports of oil above the price cap from Russia, I do think if there was some ability to make movement there, that could really help.Q: We are telling the United States that we have a diversified crude partnership. Our energy partnership with the US is strong. We are going to buy $25 billion worth of oil and gas from the US this year. But we have to keep in mind geopolitics and market demand and market conditions. To what extent are you seeing India’s import of Russian energy go down? Do you significantly see India’s energy imports from US going up?
Falakshahi: To an extent imports from Russia into India have been relatively stable year-on-year. India emerged as one of the largest buyers of Russian crude after the war between Russia and Ukraine, and the imports went up from 30,000 barrels per day back in 2021, to 1.8 million barrels per day. So far this year, we are still at these levels. We are slightly under on a year-on-year basis. We are only down by about 50,000 barrels per day. But it’s true that in July, we have seen a big drop in imports into India of Russian crude, but it’s also down from a very high level back in June.
In June, we saw more than 2 million barrels per day of imports, and there’s been a 500,000 barrels per day drop in July. This could be the beginning of something, as you mentioned, that India could shift some of its crude diet more towards, let us say, countries like the Middle East, or even the US as well. So it’s true that we have seen an increase in oil imports from the US, but in terms of volumes and the magnitude of the shifts, it is far from being sufficient, I would say, in the Indian market.
We have seen a drop of 500,000 barrels per day from Russia and on the other side, we have seen an increase of 100,000 barrels per day from the US. Looking forward, given the US has a very diversified export market, the US cannot really replace Russia in the Indian market. We could see imports from the US go to as high, I would say as 300,000 barrels per day, which is another 100,000 barrels per day on top of what is currently being achieved. But it’s hard to see it go a lot higher, considering all the different characteristics of US crude as well, which is quite different in terms of quality, compared to Russian crude.
Q: As someone who has watched India US relations for a long time, Is there still room for some creative negotiations and diplomacy? How do you find a way around your red lines? You have got a US President saying that you have to give me unprecedented access, or I am going to hit you with secondary tariffs, and those could come as early as the next 10 days, if the Russia Ukraine talks were to fail, there could be more penalties on India. What does what options do India have?
Matthew: India is in a slightly precarious position here. You have Trump, who is very unrestrained in this, both his actions and talk, and he will walk his talk. If you see what has happened to UK, you should understand the Anglo-Saxon country has always been the closest to the United States. Even with regard to UK, he has negotiated a very tough deal and got several concessions from UK, and he has reduced the tariffs to 10%.
Another strategic partner, like Japan, he has imposed 15% and EU, the largest trading block also 15%. Now can India defy Trump? My answer is no, India cannot. Now, if India were to be penalised for importing Russian oil, it should impact India’s economy substantially. We need to accept that the US is the giant in the world market, is about 26% of the world GDP, and plus India’s exports to US, and India’s trade with the US is about, is about 18 to 20% of its total trade. So, India cannot do without the US.
But at the same time, I think India will have to take a principle stand and negotiate very carefully. The whole shift in Trump strategy with regard to Russia, I am told, happened because Melania Trump’s influence on Trump, and there has been a sudden shift saying that the Russian President, who was considered to be very savvy, very smart by Trump, has suddenly become his nemesis.
Now if he is going to take a tough stance with regard to Russia, you need to understand that we are importing, close to 37 to 40% of our needs from Russia, and that’s about $50 billion, can you change overnight? You cannot. You will probably be able to spread your intake to other countries over a period of time. But if Trump takes a tough stance, you will be compelled to enter into some kind of negotiated settlement.
If EU has been compelled, if Japan has been compelled, if UK, the closest ally of the of the US, has been compelled, then I think India has no choice. India will have to negotiate very subtly with the US administration. Although the stance of Trump administration, according to me, is completely irrational from many points of view.
For full interview, watch accompanying video
