India under Pressure

The Free Trade Agreement

This week, top EU negotiators intensified their efforts in New Delhi aimed at concluding negotiations on the planned free trade agreement between the EU and India.[1] Their visit followed one week after Indian Minister of Commerce and Industry Piyush Goyal met with EU Trade Commissioner Maroš Šefčovič in Brussels, where the two agreed to conclude trade talks by the end of this year. According to Goyal, both sides “have agreed to close 10 out of 20 chapters,” and “another four to five chapters have in principle been broadly decided.”[2] Issues related to steel, auto, but also Carbon Border Adjustment Mechanism (CBAM), and other EU regulations still require further discussion. Due to their importance, they are considered “sensitive” by at least one of the two parties. The EU and India have been negotiating the free trade agreement for nearly two decades. The talks had temporarily stalled due to differences on the level of opening up markets. But the global uncertainty, triggered by US President Donald Trump's tariffs, has given the talks new urgency.[3]

The main Points of Contention

Perhaps the most important point of contention between the two sides is the EU’s regulation on Carbon Border Adjustment Measures (CBAM), which is expected to entail an EU tariff of 20 to 35 percent on exports of steel, aluminum, and cement from India. New Delhi argues that, while purporting to be in the interest of the environment, these measures are effectively aimed at protecting European industry.[4] India also accuses the EU of granting preferential treatment to the US, as the trade deal signed between Brussels and Washington in August under the CBAM regulation allows US exports greater flexibility than the exports from other countries. India is also seeking concessions for exports of its readymade garments, pharmaceuticals and its petroleum products.[5] The EU, on the other hand, is seeking tariff reductions for its exports of cars, medical technology, and certain foodstuffs, such as wine, spirits, meat, and poultry. According to current data, trade between the EU and India amounts to US $136.5 billion. This makes the EU India's largest trading partner in goods, i.e., aside from service trade.

Military Pact with the USA

During its free trade negotiations with the EU, India signed its third extension of the defense agreement with the USA.[6] This was announced last week following a meeting between US Secretary of War Pete Hegseth and his Indian counterpart Rajnath Singh in the Malaysian capital Kuala Lumpur. Singh declared on X that the military cooperation between the two countries is “critical for ensuring a free, open and rules-based Indo-Pacific region," “defence will remain a major pillar of our bilateral relations:” In addition, in early Febuary, the two parties launched the “Mission-500” program, aimed at more than doubling bilateral trade to US $500 billion by 2030.[7] However, since then, bilateral relations have deteriorated following Trump’s imposition of 50 percent tariffs on India, including a 25 percent penalty fee on purchases of oil and weapons from Russia. According to the Indian Ministry of Commerce, the higher tariffs are already having an initial impact: India's merchandise exports to the US declined by 11.93 percent to US $5.46 billion in September.[8]

A Balancing Act

The timing of the defense agreement’s extension is considered significant, because India persists in its efforts to acquire Russian military equipment.[9] According to reports, New Delhi plans to buy more Russian S-400 anti-missile systems, supplementing the five it had acquired back in 2018. It is argued that these defense systems had played an important role for India during the four-day military conflict with neighboring Pakistan. According to Vivek Mishra, deputy director of strategic studies at the Observer Research Foundation, a well-known Indian think tank, India’s continued acquisition of Russian systems sends “a strong signal that engagement from both sides continues as normal.” In early October, India and Russia celebrated their 25 years of the India-Russia strategic partnership.[10] Speaking to the media, Randhir Jaiswal, spokesperson for India’s Ministry of Foreign Affairs praised the close cooperation and announced that both countries would deepen their relations further on “trade issues, economic issues, investment issues, defence relations, and science and technology." Russia’s President Vladimir Putin is expected to visit India in early December.

Oil Sanctions

Washington seeks to torpedo Indian-Russian relations by attacking India’s importation of Russian oil. Last month, following months of speculation, Trump declared that India would not buy any more oil from Russia, but added that India may not be able to cut the procurement immediately.[11] In response, Foreign Ministry spokesperson Jaiswal declared that India will continue to “safeguard the interests of the Indian consumer” and ensured “diversification” of its  energy sources.[12] In response, on October 22, the Trump administration imposed sanctions on Russia’s two largest oil companies, Rosneft and Lukoil.[13] Confronted with the threat of secondary US sanctions against Indian enterprises purchasing oil from these companies, Jaiswal announced that India would study the implications.[14] Since mid-2022, Russia is India’s largest supplier, frequently accounting for nearly one-third of its crude inflows. At its peak, India was sourcing around 1.75 million barrels per day from Russia, largely from Rosneft and Lukoil.[15] When the recent US sanctions were imposed, Rosneft had a contract to supply 500,000 barrels per day to India’s Reliance Industries’ refinery.

The Companies’ Reactions

According to Bloomberg, three Indian oil refiners accounting for more than half of the nation’s imports of Russian crude have paused purchases for the coming months.[16] Bloomberg names Reliance Industries, Mangalore Refinery & Petrochemicals Ltd. – a smaller state-owned company – as well as HPCL–Mittal Energy Ltd. Combined, the three accounted for about 920,000 barrels a day of Russian crude imports in the first half of the year – or 52% of India’s total, according to data from analytics firm Kpler. Bloomberg predicts that this will now likely fall to zero, with Reliance now importing ten million barrels of oil from the Middle East and the US, to cover the difference. Indian Oil Corp, India’s largest state-controlled refinery operator, has declared that it will continue to buy Russian oil from non-sanctioned enterprises, but has since sought as much as 24 million barrels of crude from the Americas in a term contract.[17] The impact on the long-term relations between the two countries of a possible Indian withdrawal from the Russian oil market is uncertain.

[1] India-EU negotiators begin final round of FTA talks as December deadline nears. cbnctv18.com 03.11.2025.

[2] T.C.A. Sharad Raghavan: India-EU FTA: 10 out of 20 chapters concluded, 4-5 more ‘broadly decide’, says Piyush Goyal. thehindu.com 29.10.2025.

[3] Shruti Srivastava: India and EU to Hold Talks Next Week in Race to Seal Trade Pact. bloomberg.com 29.10.2025.

[4] RV Anuradha, Prachi Priya: India-EU FTA: Europe’s protectionism has shades of green. hindustantimes.com 03.11.2025.

[5] India-EU negotiators begin final round of FTA talks as December deadline nears. cbnctv18.com 03.11.2025.

[6] Cherylann Mollan: India-US sign 10-year defence pact amid tariff turmoil. bbc.co.uk 31.10.2025.

[7] “Mission-500”: India, US Aim To Double Bilateral Trade To $500 Billion By 2030. ndtv.com 14.02.2025.

[8] India, US holding continuous discussions for bilateral trade agreement: Goyal. economictimes.indiatimes.com 05.11.2025.

[9] Biman Mukherji: Why India maintains a balancing act between US and Russia in defence. scmp.com 31.10.2025.

[10] India, Russia enjoy special, privileged strategic partnership: MEA on 25 years special partnership. newskerala.com 04.10.2025.

[11] Rhea Mogul: Trump claimed India had agreed to stop buying Russian oil. New Delhi says it knows nothing about it. edition.cnn.com 17.10.2025.

[12] India prioritises consumer interests in oil and gas imports, says MEA amid Trump’s Russian oil comments. thehindu.com 16.10.2025.

[13] US imposes sanctions on Russian oil companies Rosneft and Lukoil. reuters.com 22.10.2025.

[14] Keshav Padmanabhan: India studying implications of US's Russian oil sanctions, reiterates energy sourcing stance. theprint.in 30.10.2025.

[15] Koustav Das: Russian oil taps turned off. What it means for Indian refiners. indiatoday.in 30.10.2025.

[16] Rakesh Sharma, Yongchang Chin: India Refiners Set Stage for Near-Term Slump in Russia Oil Deals. bloomberg.com 30.10.2025.

[17] Nidhi Verma, Siyi Liu:Indian Oil buys Russian crude from non-sanctioned entities, sorces say. reuters.com 31.10.2025.