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New US sanctions bill on Russia puts Modi in a bind

By Sohail Khan 18 September 2026, 7:55 pm

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Business News›News›Economy›Foreign Trade›New US sanctions bill on Russia puts Modi in a bind

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New US sanctions bill on Russia puts Modi in a bind
Synopsis

India faces a difficult energy policy choice regarding Russian oil imports. Potential US tariffs threaten Indian exports and bilateral trade relations. Maintaining Russian oil purchases could increase domestic fuel prices before elections. New Delhi emphasizes ensuring energy security for its large population. This situation complicates ongoing trade talks with Washington.

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Trump praises PM Modi’s opium crackdown as India remains on US drug list — New U.S. tariffs and sanctions legislation create a new flashpoint for India-U.S. relations

Prime Minister Narendra Modi is caught in an energy policy bind with no easy exit. Cutting Russian oil imports to avoid potential new US tariffs could increase fuel prices ahead of key regional elections, or stress government finances. Maintaining such purchases could cripple Indian exports to its largest market.

India, the world's third-largest oil importer and among the biggest buyers of Russian crude, reacted unusually strongly on Thursday to a US congressional bill that would allow Washington to impose tariffs of up to 100% on countries, including India and China, for major purchases of Russian oil.

Also read: Replacing Russian crude near impossible for Indian refiners as US sanctions bill threatens 100% tariff, say executives

The sharp response showed how an energy trade that has delivered India billions of dollars in savings since Russia's invasion of Ukraine in 2022 is now colliding with its broader strategic and commercial interests.

New Delhi said it had warned the United States that the measure could damage bilateral relations and disrupt global energy markets, vowing to keep "ensuring energy security for its 1.4 billion people" by buying from diversified sources.

But holding firm could further strain ties with Washington after a turbulent year marked by repeated disputes over trade and tariffs under President Donald Trump. A planned trade deal between the two countries has already faced multiple delays.

TRADE TALKS AT DELICATE STAGE

Two Indian sources said the latest tensions did not mean New Delhi would abandon hopes of striking a trade deal with Washington, though they said India may increasingly need to lean on deals elsewhere if additional US tariffs hit exports.

Since last year, India has signed a trade deal with Britain, finalised one with the EU and is looking to conclude talks on another one with Canada by the end of the year.

New Delhi is hoping for a breakthrough when Modi travels to the US for the G20 summit in December, where he could meet Trump on the sidelines, said one of the sources.

The White House and the Indian government did not immediately respond to requests for comment.

"The US-India relationship has suffered over the last year for a range of reasons, including US tariffs," said Michael Kugelman, a senior fellow at the Atlantic Council in Washington.

"But this new legislation, which enjoyed strong bipartisan support and takes the most maximalist position possible on punishing India for its Russian oil buys, may be the biggest blow yet."

If Washington delayed implementing tariffs or applied them only lightly, the damage could be manageable, he said, adding the legislation nevertheless could widen the trust gap in Delhi for a trade deal and make it harder for Indian negotiators to agree to last-minute concessions needed to secure a deal.

"From the perspective of the trade talks, this new legislation couldn't have come at a worse time," he said. "The two sides are not far from the finish line, but getting there will require careful diplomacy."

POLITICAL HEADACHE FOR MODI

The bill has already become a political issue in India, with the opposition urging Modi to adopt a tougher stance. Any hike in pump prices would be risky for Modi, whose party faces elections in India's most populous state, Uttar Pradesh, in Punjab and in Modi's home state of Gujarat starting early next year. Modi's BJP runs both Uttar Pradesh and Gujarat.

Also read: India warns that Washington's Russia sanctions bill holds implications for bilateral ties, energy market

Before Trump, India was courted by the United States for decades as a strategic counterweight to China, but the world's fifth-largest economy has repeatedly been left reeling over the past year by decisions taken in Washington.

After Russia's invasion of Ukraine, India sharply increased purchases of discounted Russian crude, which now account for more than 40% of India's overall oil supplies. The stepped-up purchases were partly the reason Trump imposed tariffs of as much as 50% on Indian goods in August 2025, among the steepest levied on any country.

In February, Trump rolled back those duties in exchange for what he said was India's commitment to halt Russian oil purchases and lower trade barriers.

But New Delhi only briefly reduced purchases from Russia in early 2026. They have since jumped, especially since the supply shock that followed the US and Israeli attack on Iran.

New Delhi has repeatedly resisted pressure to scale back purchases, arguing that its large population and growing economy need secure, affordable and reliable energy supplies. Indian refiners have already secured crude supplies for September and October that include Russian oil, sources familiar with the matter have told Reuters.

Indian analysts said the country's purchases of Russian oil were not financing the Ukraine war, but only helping stabilise global supplies and keeping domestic prices in check.

"Tariffs of up to 100% would punish Indian exporters and American consumers, disrupt trade and give the US president excessive power over major partners," said Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative and a former trade ministry official.

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India Russia oil sanctionsUS tariffs on Russian oil importsModi energy policyUS India trade relationsIndian elections oil pricesRussian crude oil importsG20 summit Modi TrumpIndia energy securitytrade negotiations India USUttar Pradesh elections 2024

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