India's Russia Oil Trade May Dip Again, Stranding Cargoes at Sea

India’s imports of Russian oil may decline further as U.S. tariffs continue to weigh on the trade relationship. Washington has imposed a 50% tariff on Indian goods, including a 25% punitive duty on Russian oil purchases, to discourage the flow of discounted crude to New Delhi. Refiners in India have reportedly begun to cut their purchases from Moscow in response.

The U.S. and India are engaged in trade negotiations, with the new U.S. ambassador to India, Sergio Gor, emphasizing a commitment to resolving the dispute. Gor stated that India will be invited to join a U.S.-led initiative called Pax Silica, aimed at securing a global silicon supply chain.

German Chancellor Friedrich Merz is also pushing for closer economic ties with India, suggesting the EU and India could finalize a free trade agreement by the end of January 2026. The agreement, if reached, would be part of a broader effort to diversify trade networks and reduce reliance on China.

Why Is the U.S. Pressuring India on Russian Oil?

The U.S. views Indian purchases of Russian oil as a financial lifeline to Moscow, supporting its military operations in Ukraine. President Donald Trump has taken a firm stance, signing an executive order in August 2025 to impose additional tariffs on India.

India has defended its position, citing its need to meet the energy demands of its large population. Despite the tariffs, India remained one of the largest buyers of Russian oil alongside China. However, the combined 50% tariffs have reportedly forced refiners to reconsider their sourcing strategies.

How Might Trade Agreements Affect India’s Energy Imports?

A bilateral trade deal with the U.S. could help ease the financial burden of the tariffs, but negotiations have stalled despite multiple rounds of talks.

Meanwhile, India’s trade discussions with the EU are moving forward. Germany, a key EU member, has expressed urgency in finalizing a free trade agreement. Merz emphasized the need to counter a “renaissance of protectionism” and reduce dependence on Chinese and Russian supplies.

What Are Analysts Watching Next?

Investors are closely monitoring whether India will scale back its Russian oil imports in response to U.S. and EU pressures. Any significant drop in purchases could result in stranded oil cargoes at sea, disrupting global shipping and energy markets.

Analysts are also watching the geopolitical implications of these developments. India has maintained close security ties with Russia, despite international sanctions. Germany is pushing for India to reduce its military and energy dependence on Moscow.

The outcome of these trade and security negotiations could shape India’s energy strategy for the coming year. With global oil markets already under pressure from geopolitical tensions, any shift in India’s sourcing decisions could ripple through the market.

India’s ability to balance its economic interests with international expectations will be a key factor in the coming months. U.S. and EU leaders are hopeful that trade deals can help align interests and reduce friction over energy policies.