India has another independence test on August 15 thousands of kilometres away in Trump's land

Economic Times

2 days ago

Synopsis
As India celebrates its Independence Day, a crucial summit between Trump and Putin in Alaska looms, potentially impacting India's economic and geopolitical ties. The meeting could alleviate US pressure on India's relationship with Russia, particularly regarding energy and defense, or intensify it with further sanctions and tariffs. India's strategic balancing act hinges on the summit's outcome.
As India prepares to celebrate its 79th Independence Day on August 15, the nation's political gaze will stretch far beyond its own borders, northward to Alaska, where Donald Trump and Vladimir Putin are scheduled to meet on August 15.The timing is symbolic, but the stakes are real: this summit could determine whether India can raise its hopes for any relief from the economic and geopolitical pressures bearing down on it from Washington.At the heart of the issue lies India's 'Special and Privileged Strategic Partnership' with Russia, a term Prime Minister Narendra Modi himself uses. That partnership is under strain from Trump's tariff threats and his campaign to isolate Moscow over the war in Ukraine.A successful Alaska summit, if it leads to a de-escalation of the conflict and the lifting of sanctions, could ease US pressure on New Delhi, reopen key supply channels from Russia, and potentially roll back Trump's recent tariff hikes.Donald Trump hasn't minced words.
In recent weeks, he's attacked India over its heavy dependence on Russian oil and weapons. On August 6, he escalated matters, threatening to impose an additional 25% tariff on Indian exports to the US, taking the total duty to 50%. The new rate will come into effect in 21 days, so on 27 August, according to the executive order.The move was directly tied to New Delhi's continued purchases of Russian crude, which the US administration claims is 'fuelling the war machine' in Ukraine.Trump is using the threat of steep tariffs to push India away from Moscow, hoping to increase pressure on Russian President Vladimir Putin to end the war.New Delhi isn't budging. The foreign ministry slammed the penalties as 'unfair, unjustified and unreasonable' and vowed to 'take all actions necessary to protect its national interest.' Earlier in the week, Kremlin spokesman Dmitry Peskov said, 'Sovereign countries should have and do have the right to choose their own trading partners.'On August 8, Prime Minister Narendra Modi posted on X (formerly Twitter) that he had a 'good and detailed conversation with my friend President Putin' and reaffirmed their commitment to deepen bilateral ties.India–Russia trade has surged to $69 billion in the past three years, with discounted Russian crude playing a central role. India now accounts for more than one-third of Russia's oil exports, second only to China, according to the Observer Research Foundation. Discounts of up to 20% have saved Indian refiners $17 billion over three years, as per credit-rating firm ICRA. Those savings have helped keep domestic fuel prices stable and supported budgetary stability, while allowing refiners to profit from exports of refined products.While India's exports to the US reached around $87 billion in 2024, the lure of cheap Russian oil remains strong, especially for a country with an enormous and growing appetite for energy.India imports 90% of its crude oil, making it the world's third-largest consumer after the US and China. That dependency, combined with its fast-growing economy and population of 1.4 billion, leaves the country with an insatiable demand for affordable energy.When Western nations turned away from Russian oil and imposed a price cap, India seized the opportunity, ramping up purchases of Russian crude. The supply has allowed India to sell fuel domestically at lower prices and resell refined products abroad at a profit.Just before the war began, Russian crude made up a tiny fraction of India's oil imports, only 0.2 percent. Fast forward to May 2023, and that share skyrocketed to over two million barrels a day, roughly 45 percent of India's total imports. For the past two years, India has maintained a steady flow of Russian oil, with purchases totaling more than $130 billion annually. Indian refiners process the oil both for local consumption and export, turning crude into diesel and other products shipped to Europe and beyond.Even so, India's refiners have begun to hedge their bets.Data from analytics firm Kpler shows imports of Russian crude fell by about 500,000 barrels a day in July, hitting a five-month low of 1.6 million. Private refiners, who process more than half of India's Russian oil, are now sourcing from the Middle East and West Africa and are expected to boost imports from those regions.As per WSJ, analysts warn that replacing Russian supply is 'logistically daunting, economically painful and geopolitically fraught.'Much of India's refinery infrastructure is tailored to Russian oil's specific properties. Kpler summed it up plainly: 'The pivot away from Russia, if forced, will be costly, complex and politically fraught.'Russian crude remains a critical pillar of India's energy strategy, and cutting it off suddenly, as Washington demands, would be devastating to its economy.More than half of India's military hardware, from tanks and submarines to fighter jets, still comes from Russian or Soviet designs. The Stockholm International Peace Research Institute (SIPRI) notes, 'India was the world's second largest arms importer in 2020–24 with an 8.3 per cent share of global imports. Indian arms imports decreased by 9.3 per cent between 2015–19 and 2020–24, at least partly due to India's increasing ability to design and produce its own weapons.'That shift is visible but not absolute. As SIPRI adds, 'India is shifting its arms supply relations towards Western suppliers, most notably France, Israel and the USA,' and most new or planned major arms orders will come from these sources.Still, Russia remains deeply embedded in India's arsenal plans.Just last month, the Navy commissioned a new stealth frigate from Russia, with two more under construction in India using Russian designs from Yantar shipyards. In 2018, during Trump's first term, India defied the threat of sanctions to buy five squadrons of Russia's S-400 air-defence system. Three have been delivered and deployed along the borders with China and Pakistan.'It will be many decades before India can actually replace the Russian kit in their inventory, if they can replace it at all,' said Ashley J. Tellis of the Carnegie Endowment for International Peace, speaking to Wall Street Journal. Russia is still India's largest arms supplier, though its share of imports has dropped from 72% in 2010–14 to 36% in 2020–24. Pending Russian defence deliveries to India, including the remaining two S-400 squadrons due by 2026–27, are the highest of any buyer.Each squadron's missiles can intercept targets at ranges between 120 and 380 kilometres and are integrated into India's air-defence grid against both China and Pakistan.The systems proved their worth during Operation Sindoor against Pakistan in May, despite Islamabad's denials.SIPRI's 2025 data reveals deeper trends. Asia and Oceania remain the largest arms-importing region, accounting for 33% of global imports in 2020–24. India, Pakistan, Japan and Australia are all in the global top 10.Globally, Ukraine's imports surged nearly 100-fold (+9,627%) due to the war, making it the largest buyer in the period. Meanwhile, Russia's own arms exports plunged 64% since 2015–19, squeezed by sanctions, reduced orders from India and China, and Moscow's decision to prioritise its own military needs.The US dominates exports with a 43% global share, followed by France (11%), Russia (7.8%), China (5.9%) and Germany (4.4%).For India, the Trump–Putin meeting offers a potential off-ramp from escalating pressure. If Trump softens his position on Russia in exchange for concessions from Putin, sanctions could ease, freeing up blocked defence shipments and reducing the political cost of buying Russian oil. Indian diplomats such as Pankaj Saran and D.B. Venkatesh Varma see the summit as 'defining and potentially transformative.'"It is a defining and potentially transformative summit for the world, specially for India. Our ties with both countries are integral to the success of our national development and security goals. India should extend its full support to the summit," Saran said."The Alaska summit could prove to be a turning point at the global level and India has a vital interest in its success," noted Verma.India's ties with Russia run far deeper than a matter of convenience; they rest on decades of shared history and mutual backing in difficult moments. In the 1960s, Moscow offered oil at a 10% to 20% discount, extended loans for military hardware, and stood by New Delhi when Washington tilted towards Pakistan. As the Wall Street Journal notes, the relationship since the Cold War has been anchored in arms deals, economic cooperation, and diplomatic support.Moscow moved closer to India in the 1960s as tensions grew between the Soviet Union and Beijing, extending more than a billion dollars in loans for both military and civilian purchases. This economic courtship had a personal touch: 'This was all part of the Soviet 'oil offensive,'' said historian Sergey Radchenko, a Cold War expert at Johns Hopkins University. In the 1950s, the Soviet Union played a central role in helping India develop its nascent oil industry. Soviet geologists conducted extensive surveys across the country and were instrumental in discovering several oil and gas fields, including major reserves in Gujarat and Assam. These efforts laid the groundwork for the creation of India's state-owned Oil and Natural Gas Commission (ONGC) in 1956. While the finds were not enough to make India self-sufficient in oil, they marked a significant step forward for the country's energy security at the time.Alongside technical assistance, Moscow also ensured India could secure oil supplies without depleting its foreign currency reserves. During the Cold War, the two countries operated a 'rupee–ruble' trade settlement system. Under this arrangement, India paid for Soviet oil and other imports in rupees, and the Soviet Union used those rupees to purchase Indian goods, from tea and pharmaceuticals to engineering products.This mechanism kept hard currency outflows in check and deepened the broader economic and political partnership between New Delhi and Moscow.The bond deepened when the US backed Pakistan and sanctioned India after its nuclear tests in 1974 and again in 1998. 'Many Indians still find Russia today, because of the history, a reliable partner,' said Harsh V. Pant of the Observer Research Foundation. 'Many in India believe that America has always been more favourably disposed towards Pakistan.'That sentiment persists even as India draws closer to Washington. The Ukraine war has not changed New Delhi's position; India has stayed neutral, abstained from UN votes condemning the invasion, and refused to join Western sanctions, staying true to its long-standing policy of avoiding firm alignments with major powers.While the US and EU press India to scale back trade with Russia, they themselves continue doing business with Moscow in select sectors. The foreign ministry has been explicit: 'Where the United States is concerned, it continues to import from Russia uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilisers as well as chemicals.'Europe's record is similar. 'The European Union in 2024 had a bilateral trade of Euro 67.5 billion in goods with Russia,' a figure 'significantly more than India's total trade with Russia that year or subsequently.'For policymakers in New Delhi, this underscores the perception that India is being unfairly targeted, while Western capitals maintain commercial ties with Moscow when it suits their own interests.That backdrop makes the Trump–Putin summit in Alaska a moment to watch closely. Scheduled on India's Independence Day, it could ease sanctions pressure if talks succeed, or intensify it if they collapse. On August 15, while the tricolour rises over the Red Fort, another independence test for India may be unfolding thousands of kilometres away. A breakthrough could open space for New Delhi to keep its Russian ties intact, providing a freedom from the pressures being exerted on it to stop dealing with Russia.