India and Russia Strengthen Trade Ties Despite U.S. Tariff Threats?

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Introduction

Amid escalating U.S. trade tensions, India and Russia have reaffirmed their commitment to bolstering bilateral trade ties. In a joint meeting on August 21, 2025, their foreign ministers outlined a roadmap to deepen cooperation across energy, trade, industry, and logistics, pushing back against U.S. tariff threats tied to India’s Russian oil imports.

What Is Happening?

Strengthening Trade and Exports

India vows to boost exports to Russia in key sectors including pharmaceuticals, agriculture, and textiles to help address a significant trade imbalance. Bilateral trade reached a record $68.7 billion for the year ending March 2025, with India running a substantial deficit largely due to oil imports.
India–EAEU Free Trade Talks: India signed a Terms of Reference (ToR) with the Russia-led Eurasian Economic Union (EAEU) to initiate Free Trade Agreement (FTA) negotiations, a move aimed at expanding economic ties beyond Russia alone.

Expanding Energy and Industrial Collaboration

Energy Projects: Russia reaffirmed its interest in joint energy ventures, especially in the Russian Far East and Arctic regions. India continues to import substantial volumes of discounted Russian oil under these agreements.
Sectoral Cooperation: Under the India–Russia Intergovernmental Commission, both countries signed a protocol to deepen collaboration in sectors including aluminum, fertilizers, railways, mining technology, aerospace science and technology, rare-earth extraction, additive manufacturing, and waste management.

Labor and Logistics Initiatives

Skilled Indian Workforce: The partnership includes plans to deploy Indian professionals skilled in IT, construction, and engineering to help alleviate Russia’s labor shortages.
Improving Trade Infrastructure: Russia is exploring ways to facilitate Indian exports by addressing non-tariff and regulatory obstacles, and is supportive of new payment systems and enhanced trade infrastructure, especially as U.S. tariffs constrain access to Western markets.

Geopolitical Messaging

Rejecting U.S. Pressure: India strongly defended its energy choices, calling U.S. tariffs “unfair” and unjustified. It emphasized its right to decide its energy policy independently and pointed out that the U.S. and EU continue trading with Russia themselves.
Russian Retort: Russia criticized U.S. actions as tools of unfair competition, with statements such as “Friends don’t behave like that.” Moscow declared that if Indian goods are restricted from U.S. markets, Russia remains open and eager to receive them.
Trilateral Outlook: Moscow also expressed interest in reviving a trilateral dialogue with India and China to foster regional stability and counter Western influence.

India and Russia Deepen Trade Ties Amid US Pressure: Advantages & Benefits

Strategic Diversification of Energy Sources

India’s decision to continue and strengthen oil imports from Russia helps it diversify its energy basket, reducing overdependence on traditional suppliers like the Middle East or U.S.-linked markets. This move boosts energy security, shields India from sudden price shocks, and ensures stable long-term supply agreements at potentially discounted rates from Russia, especially during geopolitical tensions.

Strengthening Bilateral Relations

Defying U.S. pressure signals a deepening strategic partnership between India and Russia. Both nations have a long history of defense and nuclear cooperation. Expanding into trade and energy solidifies this alliance and enhances mutual geopolitical leverage, especially in a multipolar world where countries seek autonomy in foreign policy.

Economic Benefits & Trade Expansion

By focusing on rupee-ruble trade mechanisms and alternative payment systems (bypassing U.S. dollar hegemony), India and Russia benefit from reduced transaction costs, currency risk mitigation, and stronger bilateral trade volumes. This opens doors to other sectors like agriculture, pharmaceuticals, defence, and infrastructure, promoting balanced trade growth.

Boost to Domestic Industries

Access to cheaper Russian crude oil helps Indian refiners lower input costs, improving profit margins for public and private oil firms. This could eventually translate into lower fuel prices domestically, benefiting the broader economy through controlled inflation and improved industrial competitiveness.

Assertion of Strategic Autonomy

India’s stance reflects its independent foreign policy, resisting external pressure from Western powers. By continuing trade with Russia, India affirms its non-aligned stance, preserving freedom to engage with multiple global powers based on national interests rather than geopolitical alignments.

Pros

1. Enhanced energy security through diversified supply chains.
2. Discounted oil imports help stabilize domestic prices.
3. Greater geopolitical leverage through multi-alignment strategy.
4. Trade in local currencies reduces dependency on US dollar.
5. Stronger India-Russia cooperation in key sectors like defence and space.
6. Support for Indian refiners and economic growth.

Cons

1. Potential sanctions risk from Western nations (CAATSA, etc.).
2. Diplomatic strain with the U.S. and EU, affecting other partnerships.
3. Payment and logistics challenges due to sanctions on Russian banks.
4. Over-reliance on one partner if not managed properly.
5. Reputational risks in aligning with a globally controversial actor (Russia during Ukraine conflict).