India-U.S.-Russia trade deal oil dynamics
2026-02-12 09:10:50
US President Donald Trump meets with Indian Prime Minister Narendra Modi in the Oval Office of the White House in Washington, DC, on February 13, 2025.
Jim Watson | AFP | Getty Images
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The big story
A few weeks ago, I interviewed India’s Petroleum and Natural Gas Minister Hardeep Singh Puri at Energy Week in Goa, India. I’ve been investigating, trying to get a 50-year former diplomat to give me a straight answer about why a US-India trade deal is so elusive.
“I am not trying to evade you,” Puri said, repeating once again that the discussions are “at a very advanced stage.”
Six days later, US President Donald Trump declared a truce.
On February 2, Trump canceled the additional 25% sanction imposed on the purchase of Russian oil, claiming that India had committed to stopping such purchases. However, Indian Prime Minister Narendra Modi did not repeat this claim in his post on X, nor was it mentioned in Joint statement issued by the two countries.
But it was a much-needed reset.
Vasuki Shastri, a senior consultant at geostrategic consultancy Gatehouse, said the relationship had reached its lowest point. “They are desperately trying to reset things. India wants stability, and the United States does not want to lose India. This is the compromise, the way out for both.”
The audacity of blackout
In all the months since Trump shocked India by sanctioning Russian oil purchases, the nation has neither stopped buying, nor said it will.
India imports 85-90% of its crude oil needs. Before Covid-19, India was not importing much from Russia, but purchases increased by almost 40% after the Ukraine war. This is primarily due to the discount on offer.
After Trump’s 25% penalty, especially in the past two months, that number has dropped toward the 20% mark, according to data and analytics firm Kpler.
In the nine days since Trump’s claim, neither Indian Commerce Minister Piyush Goyal nor the Foreign Ministry have confirmed it. External Affairs Minister Vikram Misri said that Indian energy policy will, as always, be determined by availability and pricing considerations.
Shastri told me that energy is a national security issue, and that the State Department statement was “right on target.”
Then came the other revelation: the United States is reviewing its policies Fact sheet On the business deal.
It removed the word “pulses” from the list of products on which it said India would reduce or eliminate customs duties, and replaced the word “committed” to say that India “He intends to“To make purchases worth $500 billion from the United States over five years in the agreement.
Talk about collaborative narrative management.
It is this audacity of opacity – the lack of need for a direct answer – that has led observers to suggest that this decision will remain “strategically ambiguous.”
“This is the best path for India,” said Ajay Srivastava, a former Indian trade negotiator and founder of the Global Trade Research Initiative.
Shastri goes one step further. He believes that India and the United States have reached a trade-off: let us be vague rather than lose face.
“There has been an urgent need in Washington since India reached an agreement The mother of all deals [with the EU]. The real question is what is the actual understanding between the United States and India.”
It is worth noting that India and the United States have only reached a temporary agreement so far. Negotiations on a full bilateral trade agreement have not yet been completed. “The formal agreement on this deal will take 30 to 45 days and will be signed in March,” Goyal told Indian reporters.
However, it is unclear what India’s silence on purchasing Russian oil means for these negotiations. Will it be the elephant in the room that has the power to crush the negotiating table?
“There has to be some understanding on this matter and it is an internal decision that has not been communicated,” Srivastava said.
Russia puzzle
The possibility of back-channel talks with Russia cannot be ruled out either. India’s historical dependence on Russia to meet its defense needs cannot be overstated.
Shortly after Trump Executive order The Kremlin spokesman said that India “has committed to stopping importing Russian Federation oil directly or indirectly,” adding, “We have not heard any statements from Delhi on this matter yet.”
It brought to mind the famous saying of former British Prime Minister Winston Churchill about Russia: “A mystery wrapped in a mystery inside an enigma.”
So can Russia be excluded?
“I don’t see India stopping buying Russian oil,” said Sumit Retulia, senior research analyst at Kpler. “Flows will continue, but we will not see the level of 2 million barrels per day, or 40%. It will move slowly from 20% or so as it is now to 15%, and I do not expect it to go below that.”
He sees Indian refiner Nayara Energy, in particular, doing so He continues Buying Russian oil. It is majority owned by Russian entities, including US-sanctioned Rosneft.
Oil prices
For now, markets are happy to have a deal, says Vivek Sharma, head of international business at Nuvama Asset Services & Nuvama Private.
“Politics may consume the narrative, but it will fade away. India has been smart to remain ambiguous, and remain aligned with the United States, without jeopardizing its relationship with Russia.”
The cost of oil is likely to continue to fall or remain low, and India will be able to reduce its share of Russian oil – all while saying it is following market forces rather than US dictates, Sharma said.
Kpler’s Retulia believes that India’s reduced purchases of Russian oil will not have a significant impact on its import bill or global oil prices because a “trade mix-up” will occur.
“China will buy that Russian oil that India will not buy, and for that reason it will have to give up some other market, perhaps the Middle East, from which India will buy. The pricing pool in Dubai will get a cut of the price.”
Analysts say that the biggest concern for the oil market is the possibility of a conflict between the United States and Iran.
Top TV picks on CNBC
Sham Arora, Chief Technology Officer at Tech Mahindra, talks about India’s AI ambitions and explores employment and language options in the country. He says India will remain a talent factory in AI.
Anand Rathi’s Feroze Aziz talks about Indian equity fund flows. According to industry data, gold ETFs have attracted more money than stocks. Aziz says many wealthy people have chased rising metal prices and fallen into a “FOMO trap.”
James Tom, from Aberdeen, says India’s trade deal with the US lifts a major burden, improving sentiment after months of poor performance. He sees easier liquidity, stable policy and strong earnings supporting the market recovery.
Need to know
Reserve Bank of India on Friday Keep it Interest rates are fixedas trade deals with the European Union and the United States are set to support the world’s fastest-growing major economy. “The successful completion of trade deals augurs well” for the overall economic outlook, Reserve Bank of India Governor Sanjay Malhotra said.
New Delhi is ready to submit applications With a value of up to 80 billion dollars Boeing Indian Minister of Commerce and Industry Piyush Goyal said that the aircraft Which indicates the country’s readiness To expand trade with the United States
Quote of the week
I think the government did a good job of protecting imports of soybeans and corn, because these are two commodities that the United States was exporting to China in very large quantities.
— Siraj Hussain, former Indian Minister of Agriculture
In the markets
Indian stocks fell amid mixed trading in the region on Thursday. the Stylish 50’s It fell 0.4%, breaking a four-session winning streak. The index has fallen more than 1% so far this year.
The yield on India’s benchmark 10-year government bond rose slightly to around 6.709%.
The rupee strengthened 0.16% to 90.58 against the dollar. The currency has declined by about 0.8% against the dollar since the beginning of the year.
Coming
February 16: Wholesale inflation and unemployment rate data
February 12 – 16: Marushika Tech IPO
February 16-18: Fractal Industries IPO
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