After Tariffs, Trump Courts India With Energy and Defense Deals

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Yves here. We feature Simon Watkins from time to time despite the extremely thick neocon spin (or worse, successful brainwashing) on display in his articles. Readers will no doubt have fun calling some of his howlers out. That includes the implicit thesis of this post, that the US has good odds of success in getting India to stop buying Russian oil, not by playing up Russia as a threat but by somehow keeping India from mending fences with China.

So this article demonstrates, sadly, that there are still a lot of true believers in the US Inevitable Supremacy cult. With India, one can see that the US thinks it’s perfectly reasonable to attempt to humiliate a near Great Power, by trying to dictate its trade and economic relationships, and then having set out to inflict harm, expect India to carry on as if everything was fine. This is what abusive spouses do, beat the shit out of their partner, then engage in elaborate shows of affection, as if that made the pummeling OK.

By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. He has written extensively on oil and gas, Forex, equities, bonds, economics and geopolitics for many leading publications, and has worked as a geopolitical risk consultant for a number of major hedge funds in London, Moscow, and Dubai. Originally published at OilPrice

• After doubling tariffs on Indian goods to 50%, U.S. President Donald Trump is offering India expanded U.S. oil and gas supplies as part of a broader deal.
• The move builds on the U.S.–India Comprehensive Global Strategic Partnership, which includes defense co-production, technology cooperation, and a goal to double bilateral trade to $500 billion by 2030.
• While Washington seeks to align India against both Russia and China, New Delhi remains cautious.

U.S. President Donald Trump’s core financial strategy for ending Russia’s war in Ukraine is to starve it of oil and gas revenue. The initial focus of this from Washington’s perspective in the immediate aftermath of the 24 February 2022 invasion was to stop Europe, especially its de facto leader Germany, from continuing to import the huge quantities of cheap gas and oil that had powered its economic expansion from the late 1990s.

The U.S.’s efforts at that point were broadly successful, and the pressure is now on Europe to reduce these imports to zero as soon as possible. To do so, Washington has offered Europe U.S. gas and oil as replacements, in addition to the ongoing deals with other countries that stepped in during 2022 with replacement gas and oil supplies for those lost from Russia.

In recent days, U.S. Energy Secretary Chris Wright has made the same offer to India about substituting Russian energy supplies with American ones, only shortly after Washington doubled its tariffs on Indian goods to 50% on 27 August due to New Delhi’s continued importation of Moscow’s oil and gas. President Trump has also hinted at a faster rollout of the wide-ranging agreements made in February between his country and India as a further enticement to toe the line on Russia. So, will India stop buying Russian oil and gas, so putting enormous pressure on Moscow to sit down at the negotiating table over Ukraine?

One element that works especially well with Europe in favour of Trump’s strategy on Russia-Ukraine, but not so well with India, is that he can legitimately highlight the absurdity of the continent continuing to bankroll Russia’s war machine with ongoing oil and gas imports. This is a war machine that is highly likely to be turned on the rest of Europe itself, should Moscow be triumphant in Ukraine.

However, Russia is not likely to turn its military on India anytime soon — indeed, relations between Moscow and New Delhi have been good for decades. During the Soviet years, India was largely reliant on Russia for the mainstay of its weaponry, as well as for sizeable imports of cheap oil and gas. These two key elements for India were also included in the extraordinary series of deals signed between the two countries in December 2021 to the great shock of the then-President Joe Biden, as fully analysed in my latest book on the new global oil market order. One of those deals centred on heightened energy cooperation, including Rosneft supplying Indian Oil with almost 15 million barrels of crude to the end of 2022. The deal took on even more significance as it was just one part of 28 investment deals between Russia and India signed during the earlier visit of Putin himself to Indian Prime Minister, Narendra Modi. These covered a broad range of subjects, including not just oil, gas, and petrochemicals, steel, and shipbuilding, but military matters too. Specifically, according to further official statements from one or both sides, Indian would produce at least 600,000 Kalashnikov assault rifles and, even more disturbing for the U.S., India’s Foreign Secretary, Harsh Vardhan Shringla, said that a 2018 contract for the S-400 air defence missile systems was in the process of being implemented. At that point, Modi said: “We have set a target of US$30 billion in trade and US$50 billion in investment [with Russia] by 2025.” In a joint statement from Russia and India around the time, it was also agreed that both leaders: “Reiterated their intention to strengthen defence cooperation, including in the joint development of production of military equipment.”

Consequently, there is nothing new about India’s oil and gas imports from Russia, nor its close military cooperation with it either, although recent events may have galvanised Washington into action. In particular, according to Russian state news agency TASS, Indian troops took part in the 12 September-16 September Russian-led ‘Zapad’ military manoeuvres, along with Belarus. These drills also included rehearsals for the use of tactical nuclear weapons for the first time. Also taking part in these manoeuvres were servicemen from several key units of the Iranian armed forces, a senior source from the European Union’s security apparatus exclusively told OilPrice.com at the time. This in turn is part of the wide-ranging 20-year comprehensive strategic cooperation deal between Iran and Russia (actually entitled, ‘The Treaty on the Basis of Mutual Relations and Principles of Cooperation between Iran and Russia’) that was agreed in January 2024 and fully ratified in all respects around a year later. It replaced the previous 10-year deal signed in March 2001 (extended twice by five years) and was expanded not only in duration but also in scope and scale, particularly in the defence and energy sectors. In several respects, the new deal complements key elements of the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my new book on the new global oil market order.

Although Russia poses no true threat to India, China is a different matter, and a key part of the U.S.’s long-term strategy regarding New Delhi was to leverage these fears into establishing India as the regional economic and military counterbalance to Beijing. The catalysts for enhanced action by Washington in this regard came at the time of the 15 June 2020 clash between Chinese and Indian troops in the disputed territory of the Galwan Valley in the Himalayas. The U.S. believed this evidenced a new pushback strategy from India against China’s policy of seeking to increase its economic and military alliances through its multi-generational power-grab project, the ‘Belt and Road Initiative’ (BRI). The U.S. further believed that this pushback might also be echoed in India’s economic desire to finally make substantive progress on its ‘Neighbourhood First’ policy as an alternative to China’s BRI programme.

However, for this to work, India would need access to secure energy sources over the long term, as it has few oil and gas sources of its own. Indeed, given the potential economic growth projections for India, the International Energy Agency (IEA) forecast that the Asian sub-continental power would constitute the biggest share of global energy demand growth at 25% in the coming two decades. In fact, the IEA predicted India would overtake the European Union as the world’s third-biggest energy consumer by 2030. It was at this point that the plan was hatched to link the plan to use India as a challenge to China as Asia’s major power to a parallel corollary objective to use the UAE (which would be used by the U.S. as a major oil provider to India) to promote further relationship normalisation deals (‘Abraham Accords’) between Israel and key Arab states in the Middle East. This plan remains in effect, but the U.S. has now added its own oil and gas supplies into the mix, as the UAE, on its own, would be unable to meet all of India’s future oil and gas requirements without Russian supplies factored into the mix.

To counter the huge and wide-ranging cooperation agreements signed between India and Russia, the U.S. has augmented its oil and gas supply offer with the enactment of several key elements of its own broad ‘India-U.S. Comprehensive Global Strategic Partnership’ plan that was sketched out in February this year during meetings between President Trump and Prime Minister Modi. One of these elements is to be formalised in a new initiative — the ‘U.S.-India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century’. On the defence side, the two sides agreed that Washington would expand its defence sales and co-production with India to strengthen interoperability and defence industrial cooperation. On commerce, the two sides set a new goal for bilateral trade –to more than double the current figure, to US$500 billion by 2030. Making good on these, and the many moving parts of these broad agreements, is the U.S.’s next challenge in keeping India on side.