Tariff Blitz: Is India Becoming Collateral Damage In Someone Else's War?

NDTV

5 days ago

In today's fractured world, great power rivalry is rewriting the rules of economic engagement. As the European Union (EU) and the United States tighten the screws on Russia, the knock-on effects land squarely on India. A slew of unilateral coercive measures is shrinking New Delhi's freedom to calibrate its foreign policy. The situation warrants discreet diplomacy and sober calculation, not slogans.
Escalating Ultimatums
The EU's eighteenth sanctions package, unveiled on July 18, slashes the price cap on Russian crude and bars the import of petroleum products refined from that crude in third countries. Indian refineries that bought discounted Russian oil and sold petroleum products to Europe now face exclusion and the loss of European finance, insurance and shipping cover if they continue handling Russian barrels.
Across the Atlantic, the proposed 'Sanctioning Russia Act' threatens secondary tariffs of up to 500% on goods from any country trading with Russia should a Ukraine peace deal remain elusive. US President Donald Trump warned of "very severe tariffs" of 100% on any state "feeding Russia's war machine". Senator Lindsey Graham, the prime mover of the bill in the Senate, admonished Brazil, China and India, and said, "We're going to tear the hell out of you and crush your economy, because what you are doing is blood money."
The EU foreign policy chief, Kaja Kallas, has previously voiced similar sentiments, accusing buyers of Russian energy of "sharing responsibility" for prolonging the conflict. NATO Secretary General Mark Rutte has also warned that India, China and Brazil "might be hit very hard" if they continue to lean on Putin.
The message from transatlantic capitals is unmistakable. They are not only closing ranks against Russia but are also closing doors on those who refuse to fall in line. Compliance is no longer voluntary. It is being engineered.
New Delhi has pushed back, accusing the EU of "double standards", alluding to European purchases of Russian energy. The Helsinki-based Centre for Research on Energy and Clean Air calculated that Russia has earned 913 billion euros from fossil fuel exports since February 2022. The EU accounts for 212 billion euros of that.
Policy Peril
Moral arguments aside, the economic risks are serious. Cheap Russian oil has helped India moderate inflation, and, paradoxically, the EU's lower price cap sweetens those discounts. Yet, a supply disruption triggered by the loss of shipping, insurance or tanker cover, or by high US duties on Indian imports, would flip the equation. Each $10 rise in crude prices adds an estimated $14 billion to India's annual import bill.
Refineries geared to EU markets may have to abandon Russian feedstock or surrender premium customers. Punitive US duties would bruise Indian exports of pharmaceuticals, apparel, and machinery, sap investor confidence, and threaten jobs. The sanctions debate is not academic. It touches the factory floor and the balance sheet.
India Has Been Here Before
As a diplomatic trench warrior, I have seen India weather such situations before. Western sanctions followed our 1998 nuclear tests. India held its nerve through restraint and engagement. During the US-Iran standoff in the Obama administration, India devised a rupee payment mechanism to keep Iranian oil flowing. In 2022, it secured a CAATSA waiver to import Russia's S-400 air defence system.
What is new now is the intensity of India's links with sanctioning partners. The EU is a vital source of trade, investment and technology. Prime Minister Modi and EU Commission President Ursula von der Leyen pledged to clinch a free trade agreement in 2025. The United States is India's largest export destination and key to its Indo-Pacific strategy. PM Modi and President Trump have set a $500 billion trade target for 2030 and aim to sign the first tranche of a trade agreement this autumn. Also, negotiations are underway on reciprocal tariffs scheduled to take effect on August 1.
Meanwhile, India values its defence and diplomatic ties with Russia. The escalating sanctions are stress-testing India's three-cornered strategy. Walking a tightrope is hard enough. Juggling three flaming torches on that rope is quite another level of difficulty.
Engagement Strategy
Rhetoric won't ease tensions; deliberate diplomacy might. The EU financial measures bite only when buyers rely on European services. Moreover, tracing the origin of molecules in diesel or aviation fuel is technically fraught. It makes enforcement tricky, save at the Nayara refinery, where Rosneft holds a stake. India should quietly pursue regulatory clarity and carve-outs that offer compliance flexibility, without surrendering principle.
With Washington, the priority is to preserve strategic trust. India can signal, discreetly, its intent to avoid dependence on any single supplier. Petroleum Minister Hardeep Puri has pointed out that India now imports from 40 nations, as against 27 before the start of the Ukraine conflict. Diversification is not optics. It is a strategy, and it undercuts the claim that India is "feeding Russia's war machine".
Geo-economic interdependence also favours dialogue. The American Action Forum estimates that imposing 100% tariffs on the top five buyers of Russian exports, including India, would hit roughly 40% of total US imports, accounting for more than $1.3 trillion in goods. This could trigger supply shocks unseen since the pandemic. New Delhi can press this argument and, if necessary, seek a CAATSA-style waiver. A tariff war, it can convincingly show, would be a lose-lose outcome.
Holding the Centre
There is no virtue in grandstanding, nor wisdom in surrender. India's challenge is to retain economic and diplomatic space without becoming collateral damage in somebody else's contest. In an era where sanctions are the new missiles and tariffs the new trenches, India's credibility will rest on holding the centre calmly, clearly and on its own terms.