The Trump Squeeze: Energy, Trade and India’s Tightrope

When Donald Trump speaks of tariffs, the world listens, warily. On July 31st, Trump declared a sweeping 25% duty on all Indian imports to the US, up from a prevailing baseline of 10%. But this was no routine tariff tiff. Trump made it personal, political, and explicitly petrochemical.

In a post on his preferred social platform, he accused India of flooding America with cheap goods, buying “too much” Russian oil and arms, and behaving like a card-carrying member of BRICS, the “anti-dollar cartel”, as he sees it. There would be, he promised, an additional “penalty” for New Delhi’s ongoing transactions with Moscow. The details were left vague. The message was not.

India’s economy, already reeling from global headwinds, now finds itself in an unfamiliar bind. It is being punished not just for what it sells, but for whom it buys from. And it is the second half of that equation—India’s energy clinch with Russia—that could reshape its foreign policy and fiscal health in equal measure.

India's Energy Calculus

Since Russia’s invasion of Ukraine, India has emerged as one of the world’s largest buyers of discounted Russian crude. At one point, it sourced nearly 40% of its oil imports from Moscow. This crude has kept petrol prices stable, refining margins healthy, and the current account deficit on a tight leash. Western outrage notwithstanding, India framed its procurement as pragmatic non-alignment, a sovereign energy choice in a volatile world.

Energy analysts say the calculus is unlikely to shift overnight. “India has been taking a stand to buy cheaper crude wherever available, and I don't foresee the US offering their typical crude priced lower than Russian oil. Hence a drastic shift is less likely,” said Abhishek Ranjan, South Asia oil research lead at S&P Global Commodity Insights.

India’s foreign ministry has taken a similarly forthright line. “Securing energy needs is an overriding priority for the country, in which it was guided by what was on offer in markets and the prevailing global circumstances. We would particularly caution against any double standards on the matter,” said spokesperson Randhir Jaiswal at a media briefing last week.

Now that policy may carry a price tag.

Sovereignty Carries a Price Tag 

If the Trumpian penalty materialises—perhaps through secondary sanctions, tighter financing restrictions, or insurance blocks—it could force Indian refiners to unwind a carefully calibrated bargain. Replacing Russian barrels with American or Middle Eastern ones will not be seamless. Logistics, cost, and supply terms vary. For a country importing over 85% of its oil, every dollar increase per barrel weakens the rupee and stokes inflation. According to a Union Bank of India report, a $10 rise in crude oil prices could widen India’s current account deficit by approximately $15 billion—equivalent to about 0.4% of GDP, with notable repercussions on both trade and fiscal balance.

Prashant Vasisht, Senior Vice President at ICRA, warned of precisely this risk. “If energy prices like crude oil and natural gas rise and those costs are passed on to end consumers, it will have an inflationary impact on the economy. It will impact the current account deficit and put pressure on the rupee to depreciate.”

This is not merely an economic threat. It is a strategic test. India has long prided itself on preserving strategic autonomy—buying Russian arms while courting American defence contracts, importing Iranian oil while signing up for Western green finance. That multi-alignment is increasingly harder to maintain in a bifurcating world. The oil trade, denominated in dollars and dominated by diplomacy, has become a theatre of geopolitical pressure.

“Yes, India believes in strategic autonomy—but we also have our limitations and needs, and we will have to make some adjustments,” said Robinder Sachdev, foreign affairs expert and author of Trumpotopia. “Strategic autonomy will continue to be our guiding principle, but there will be areas where some flexibility is necessary.”

BRICS and the Backlash

Mr Trump’s indictment of India’s BRICS ties is no accident. The bloc—Brazil, Russia, India, China and South Africa—has sought to deepen cooperation on trade, finance, and currency alternatives. Russia and China have pushed for non-dollar settlements in oil and commodities. India, while cautious, has tentatively engaged in rupee-rouble mechanisms. To the White House, such flirtations with de-dollarisation are tantamount to defiance.

“Trump has concerns regarding India’s participation in BRICS. He views BRICS as a possible mechanism—if not for complete de-dollarisation, then certainly a shift away from the dominance of the US dollar,” Sachdev noted.

At stake is more than a trade deal. It is the architecture of energy diplomacy in Asia. With Washington now tying tariffs to fuel flows, Asian economies, from Vietnam to Indonesia, must navigate an increasingly transactional global order. Buy from the wrong bloc, and your exports may suffer. Hedge your energy security too heavily on discounted crude, and you risk a geopolitical surcharge.

The regional picture is equally dynamic. Pakistan, long a US ally turned pariah, appears to be back in favour. There is talk of military cooperation, infrastructure finance, and a diplomatic reset. In contrast, India, once the poster child of America’s Indo-Pacific strategy, finds itself nudged—first gently, then forcefully—towards alignment.

“Pakistan played its cards well—combining personal diplomacy, business interests, and the promise of strong centralized decision-making,” said Sachdev. “Washington’s re-engagement with Pakistan is less about values and more about convenience and connections—especially in Trump’s transactional worldview.”

Meanwhile, Russia is unlikely to take this lying down. If India is squeezed, Moscow may offer deeper discounts, barter options, or alternative currency trades. Yet the utility of Russian oil may dim if Washington closes the banking and shipping corridors through which it flows.

Industry insiders confirm that for now, India remains committed to Russian barrels. “As of now, we are not pulling the plug on Russian crude,” said a senior executive at an Indian oil PSU. “The oil companies continue to base their purchases on techno-economic feasibility—essentially, they evaluate the yield and cost of different crude types using LP [linear programming] models to identify the most optimal option available in the market.”

What, then, is India’s play?

One option is recalibration—pivoting back towards Gulf producers, securing long-term US LNG contracts, or ramping up strategic reserves to cushion volatility. Another is resistance—doubling down on diversified energy sourcing, even at a fiscal cost, to maintain geopolitical independence. A third, more daring route, would be acceleration—fast-tracking India’s own energy transition to reduce its hydrocarbon vulnerability altogether.

“If India chooses to reduce its Russian purchases, it will rely on its diversification efforts, as said by the Indian oil minister last week, as well as those suppliers it worked with ahead of the Ukraine war,” said Richard Joswick, Head of Global Oil Analytics at S&P Global Commodity Insights. “While this may not affect global volumes, it would likely disrupt trade flows and hurt Russian revenues.”

For now, India walks a tightrope stretched between trade access and energy autonomy, between BRICS solidarity and G7 partnerships. Mr Trump’s tariff strike may be unilateral. Its ripple effects will be multilateral and enduring. The global energy map is being redrawn with every barrel rerouted, every sanction imposed, and every speech broadcast.

In this new geopolitics of oil, the question is no longer who supplies what. It is who pays whom for the privilege—and what it costs to stay non-aligned.