India’s Response to US Sanctions on Russian Oil

India faces growing challenges after the US imposed sanctions on Russia’s top oil producers Rosneft and Lukoil in October 2025. These sanctions limit India’s oil import options and complicate ongoing trade talks with the US. India must balance avoiding secondary sanctions with securing a fair trade deal.

of US Sanctions and Tariffs

Recently, the US introduced a 25 per cent tariff on Indian exports, accusing India of fuelling Russia’s war by buying Russian oil. When this tariff took effect in August, India’s exports to the US fell by 37 per cent. Despite this, India continued buying discounted Russian crude, hoping for tariff relief through trade negotiations. However, the October 22 sanctions on Rosneft and Lukoil, producing 57 per cent of Russia’s crude, threatened India with secondary sanctions that could disrupt its financial and digital systems.

Impact of Secondary Sanctions on India

Secondary sanctions extend US jurisdiction beyond its borders. They can block access to global payment systems like SWIFT and suspend services from US tech firms. Indian companies linked to Russian oil faced service cuts, as seen when Microsoft halted services to Nayara Energy. This risks crippling India’s refining and financial sectors. As a result, a near-total halt of Russian oil imports by late November 2025 appears inevitable.

Complications in US-India Trade Talks

Trade negotiations have stalled due to US demands. Washington wants India to remove tariffs on most industrial goods, open agriculture and dairy markets, accept genetically modified crops, and loosen data and e-commerce regulations. The US also seeks increased purchases of its oil, LNG, and defence equipment. India’s offers to reduce tariffs on its exports from 25 to about 15-17 per cent are limited. The US-Malaysia trade deal serves as a cautionary example, where Malaysia ceded control over its trade and foreign policies to the US.

India’s Three-Step Plan

India’s strategy involves three clear steps – 1. Stop buying oil from Rosneft and Lukoil to avoid secondary sanctions. 2. Press the US to remove the 25 per cent Russian oil tariff once such imports end, reducing total tariffs on Indian goods from 50 to 25 per cent. 3. Restart trade talks only after tariff rollback, aiming for fair terms similar to those granted to the European Union.

Risks of Trade Concessions

India must carefully evaluate demands on genetically modified corn imports, which could harm local farmers and seed diversity. Digital trade clauses proposed by the US could restrict India’s ability to regulate foreign tech firms and promote domestic innovation. Accepting such terms may freeze India’s digital sovereignty and hinder future growth.

Energy Security and Diversification

With Russian oil becoming off-limits, crude prices have risen by 7 per cent in a week. India must diversify suppliers and prepare for a higher import bill. Managing energy security while safeguarding economic and strategic independence is crucial amid weaponised oil and digital sanctions.

Questions for UPSC:

1. Critically discuss the impact of secondary sanctions on the economic sovereignty of developing countries with examples.
2. Analyse the challenges faced by India in balancing energy security and trade diplomacy in the context of US-Russia sanctions.
3. Discuss in the light of India’s trade negotiations with the US, the implications of accepting stringent digital trade rules on national digital sovereignty.
4. Taking the example of the US-Malaysia trade deal, examine the risks of trade agreements that impinge on a country’s foreign policy autonomy.

Answer Hints:

1. Critically discuss the impact of secondary sanctions on the economic sovereignty of developing countries with examples.

1. Secondary sanctions extend US jurisdiction extraterritorially, targeting foreign firms dealing with sanctioned entities.
2. They restrict access to global payment systems like SWIFT, crippling financial operations of affected countries.
3. Examples – India’s Nayara Energy lost Microsoft services due to EU/US sanctions, halting refinery operations temporarily.
4. Such sanctions threaten digital infrastructure by suspending services from US tech firms, impacting business continuity.
5. Developing countries face forced compliance, limiting independent foreign and trade policy decisions.
6. Economic sovereignty erodes as countries must choose between sanctions compliance or risking exclusion from global markets.

2. Analyse the challenges faced by India in balancing energy security and trade diplomacy in the context of US-Russia sanctions.

1. India depends heavily on discounted Russian oil, crucial for affordable energy and economic stability.
2. US sanctions on Rosneft and Lukoil restrict India’s oil import options, risking secondary sanctions and digital/financial disruptions.
3. Stopping Russian oil imports pressures India to diversify suppliers, likely increasing energy costs amid rising crude prices.
4. US demands in trade talks link energy imports and tariff relief, complicating India’s diplomatic leverage and trade autonomy.
5. India must avoid compromising strategic independence while managing short-term economic pain from tariffs and sanctions.
6. The three-step plan prioritizes energy security first, tariff rollback second, and trade negotiations last for balanced diplomacy.

3. Discuss in the light of India’s trade negotiations with the US, the implications of accepting stringent digital trade rules on national digital sovereignty.

1. US demands non-discriminatory treatment for digital services, restricting India’s ability to tax or regulate foreign tech firms.
2. Such rules could block India from promoting domestic digital champions and innovation ecosystems.
3. Binding neutral clauses may freeze India’s digital policy space, repeating past losses like hardware sector decline post ITA-1 pact.
4. India’s digital sovereignty is crucial for security, data privacy, and economic growth in the digital economy.
5. Accepting these rules risks long-term dependency on US tech giants and loss of regulatory autonomy.
6. Careful assessment is needed to avoid one-sided agreements that undermine India’s digital future and governance.

4. Taking the example of the US-Malaysia trade deal, examine the risks of trade agreements that impinge on a country’s foreign policy autonomy.

1. The US-Malaysia deal requires Malaysia to align its trade restrictions with US policies, limiting independent decision-making.
2. It mandates consultation with the US before signing digital or technology agreements with third countries.
3. Such provisions effectively grant the US veto power over Malaysia’s foreign, trade, and digital policies.
4. Risk of loss of sovereignty as external actors influence national policy beyond trade scope.
5. India must avoid similar clauses that could compromise its strategic autonomy and policy flexibility.
6. Trade agreements should safeguard national interests without ceding control over foreign policy or regulatory domains.