Trump's Ultimatum To India: Russian Oil Or US Trade? India's High-Stakes Choice

6 weeks ago

This special report focuses on India's critical foreign policy dilemma: choosing between a lucrative trade deal with the United States and continuing to import discounted Russian oil. Sparked by tariff pressures from Donald Trump, the debate features insights from key analysts including Ashok Malik and Alexander Slater, who examine the severe impact of US tariffs on Indian exports and the strategic implications for New Delhi. A central argument in the discussion is that this is not a simple binary choice, as articulated by one expert: 'India needs the trade deal with the US. India also needs reasonably priced energy. There is no binary choice here. India needs both'. The programme delves into whether India can navigate this complex geopolitical landscape by satisfying its energy requirements while securing its most important trade relationship, especially as data reveals a sharp 37.5% drop in exports to the US since the new tariffs were imposed.

Transcript

00:00Your first reactions to what you've heard Donald Trump do and I want to pose that question.

00:05Is it now Russian oil versus US free trade agreement? What do you believe is in India's

00:10interest? Thanks Rajdeep. This whole thing reminds me of this statement, you know,

00:15never argue with a fool. They'll drag you down to their level and beat you with experience.

00:20And I think in following Donald Trump, we have to be very careful in how we respond.

00:25And we should not follow his lead in two things. The first is that we should not make public any

00:31agreements or disagreements. And for the first half of our handling of this affair, we were being very

00:37careful about this. We were doing strategic backroom deals instead of trying to drag this fight out into

00:42the public. And I think we should continue that strategy. It was a great strategy. The second

00:48thing is we should stop phrasing trade as a win-loss kind of affair. Trade is win-win.

00:54If we manage to get a trade deal with the USA, it is a win for the USA. It is a win for India.

01:02This is a mistake on Donald Trump's view that he thinks that trade is win-loss. He thinks that the

01:08US is losing when it is trading with other countries. This is simply not true. So we should not follow

01:15that. When it comes to the US versus Russia, my personal opinion is that the US matters a great deal

01:21more than Russia. Russia is a power of the past. The US is the largest economy in the world. It's

01:27one of the most technologically advanced countries in the world. It's a very complementary economy to

01:32ours. It is a fantastic trading partner. I don't think there is any doubt when it comes to choosing

01:38between the two. There are transactional minor wins on one side and huge strategic wins on the

01:44other. The choice is clear. That's an interesting argument to take forward, William Buter. Do you believe

01:54it's as stark as that, that India should be focusing more on managing its relationship with the US, hopefully

02:01working towards a trade agreement rather than getting caught up in its oil transactions with Russia

02:10Russia? And therefore, the choice in that sense, may at some, is Donald Trump pushing India to make

02:17that choice? And is that a choice that should be made, choosing the United States in a trade deal

02:22with the US over importing relatively cheap oil from the Russians? I think it is a very easy choice, actually.

02:31Yes, Russian oil is cheaper than alternative sources of oil that are available from the Middle East,

02:43especially. But there's no doubt that India could profitably refine and re-export oil that does not come

02:54from Russia. The second point, which I think people don't focus on much, is that Russia may not be able

03:03to reliably supply oil in the future if Ukraine gets the long-distance missiles, you know, the Tomahawks,

03:11et cetera, that is asked for, in which it could disrupt the ability of Russia to be an oil supplier. So,

03:19these are sort of two practical reasons. More generally, the US and, of course, the EU are much more

03:29important trading partners than Russia. Russia all provides its oil at a profitable margin, but not

03:37enough, I would think, to risk a non-agreement on trade with the US.

03:46Let me get in. Alexander Slater, MD Capstone from Washington DC. Your views, Alexander, is that

03:57is that a choice that Donald Trump is pushing India to make and should India hold off in its national

04:02interest? According to you, at the moment, our figures show we import about 35 percent of our oil

04:07basket through Russia, but we are diversifying. Is it in India's interest, you believe, to diversify

04:13our oil basket?

04:17Thanks for inviting me to join the conversation. It's wonderful to be here with the distinguished

04:20panelists and to especially see my friend Ashok Malik. Good to see you, Ashok.

04:25Look, it's not for me to tell India what its interests are, but I do think that the facts speak

04:30for themselves, and I think some of the panelists who have preceded me have eloquently stated that.

04:35Some other facts that are of interest are that since the tariffs were imposed, the price of oil has

04:43gone down 10 percent, and the discount that India was paying on Russian crude was about 5 percent.

04:49And so whatever cost India may have had to foot in terms of diversifying away from Russian crude has

04:56basically evaporated if you were comparing the situations today to August. So that's sort of the

05:02first thing. I think these questions about the reliability of Russian sources is a very good one.

05:07You've seen that Ukraine, even without the Tomahawk missiles, has stepped up its attacks on Russian

05:13energy infrastructure to great effect in Russia, where energy prices have gone up significantly

05:19and they're on the verge of energy rationing for Russians. And so these are things that I think

05:26are in India's interest to consider when they think about that side of the ledger. On the other side

05:31of the ledger, I think it's actually quite clear that the impact of the tariffs has been very negative

05:35for the Indian economy. Goods exports to the United States are down 50 percent, I think, over the last four

05:41months with the new data in from September. And that's why the rupee has depreciated five percent

05:48against the dollar over that same period. You would not expect anything like that to happen

05:53when effectively Indian goods in the United States are becoming cheaper. You would expect Americans to

05:58buy more of them, not less. But this you see the impact of the tariffs and you see the tariffs having

06:03a major impact, especially since the 50 percent came into effect in August, where the goods

06:09purchases from India by Americans have gone down 12 percent in that period. And you see having a very

06:15big impact on areas of the Indian economy like textiles, jewelry and even some electronics, steel

06:23and chemicals. And so all of these calculations have to be balanced against one another. And it seems based

06:29on, I think, some of the things the prior panelists have said and the economic data that this is trading in a negative direction.

06:35You know, just let me put that before I come to Ashok in some stark terms for our for our viewers.

06:46Cheap oil from Russia or trade deals with America is a dilemma of sorts. The United States remains

06:53India's top trading partner. Total bilateral trade touched nearly 132 billion in FY 2425. India,

07:01importantly, enjoys a surplus here. Of course, tariffs have, in a way, weakened some of the key

07:07sectors like textiles, gems and jewelry. We export more over 86 billion dollars worth of goods than we

07:14import. This is prior to the tariffs coming in. With Russia, it's the opposite story. Despite being only

07:19our fourth or fifth largest partner, India now imports over 63 billion dollars worth of Russian goods,

07:26mainly discounted oil, exporting less than five billion. That's a trade deficit of nearly 59

07:32billion dollars. Just putting that in some kind of context. Therefore, Ashok Malik, do you believe

07:37Donald Trump is willy-nilly pushing India to make certain choices? What might have been seen in India's

07:42interests a few months ago, there are those who claim it was in the interest of big business,

07:47who are doing the oil deals, not necessarily the consumers. That is a separate dispute. But do you

07:52believe that the time has come for India to re-look at the way they've benefited from Russian oil,

07:59but now need to benefit for the trade deal with the U.S.?

08:02One, India needs the trade deal with the U.S. India also needs reasonably priced energy. There is no

08:20binary choice here. India needs both. It's the responsibility of effective diplomacy and imaginative

08:27tradecraft to make sure both happen. In 2022, when the Ukraine war began, reasonably priced energy

08:34entailed an enormous amount of imports from Russia because other sources were not available. For example,

08:41Saudi Arabia stopped producing excess oil. For its own reasons, whatever reasons, it stopped producing

08:48oil. Today, Saudi Arabia is pumping out oil. Other sources have become available. The discount at which

08:55Russian oil is available has declined has declined. And organically, Indian buyers, public sector buyers,

09:02private sector buyers will make market-driven choices, some of which might see some diversification from

09:09Russia. The second point, please look at Trump's statement today in response to an answer to a question.

09:15In response to a question. His tone was collaborative. It was even dignified. He spoke about a gradual decline,

09:24not tomorrow morning, but a gradual decline. He even said, once the war is over, we're doing this to put

09:30pressure on Russia. Once the war is over, India can go back to buying Russian oil. This is all very different

09:35from the rhetoric coming out of the Trump administration a few weeks ago, which leads me to believe that some

09:41background diplomacy is working. And the third point I'd like to raise, is Mr. Trump giving himself wiggle

09:48room and the political pathway to diluting or removing the 25% sanctioned tariffs which he imposed on

09:57India, which is the key question. And the proof of the pudding lies there.

Trump's Ultimatum To India: Russian Oil Or US Trade? India's High-Stakes Choice

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