Trump's insistence on lumping India's purchases of Russian crude oil with negotiations to lower trade barriers has provided New Delhi with a strong lever to swing a favourable tariff deal with Washington. If India stops buying Russian oil, where does it buy the stuff from without raising global prices? The US will have to come up with an answer. But it does not control enough of the global energy market to be able to offer a solution. Trump will have to lean on US allies in West Asia to ramp up production, which will upset production agreements reached by Opec and Russia. Alternative supplies can't compensate for Russian oil production, especially if the US wants China to join the embargo.
India's negotiating strategy will favour sacrificing Russian oil imports - provided alternative supply is available at the right price - over allowing increased market access to US farm produce. Food security is a far more politically-sensitive and knottier issue for New Delhi. Over Russian oil, Washington will have to do the heavy lifting, coming up with a formula acceptable to multiple economies. India has displayed its resolve against punitive tariffs. The onus is now on the US to come up with a workable non-coercive plan. Western sanctions against Russian energy exports have their sceptics, including in the US. Enlarging the effort to trade barriers effectively shifts the embargo to the world's largest energy-consuming economies. Since China and India didn't join the blockade in the first place, they'll need even more convincing arguments now. Threatened US tariffs are obviously not among them.
The Trump regime must disentangle its strategic and economic objectives when dealing with India over trade. That will create an easier workaround to bilateral trade expansion without compromising on India's long-held position on protecting its agriculture. Services provide an adjustment mechanism to balance trade between the two. The US has tested the limits of its influence over India's food and energy security. The ball is now in its court.
India's negotiating strategy will favour sacrificing Russian oil imports - provided alternative supply is available at the right price - over allowing increased market access to US farm produce. Food security is a far more politically-sensitive and knottier issue for New Delhi. Over Russian oil, Washington will have to do the heavy lifting, coming up with a formula acceptable to multiple economies. India has displayed its resolve against punitive tariffs. The onus is now on the US to come up with a workable non-coercive plan. Western sanctions against Russian energy exports have their sceptics, including in the US. Enlarging the effort to trade barriers effectively shifts the embargo to the world's largest energy-consuming economies. Since China and India didn't join the blockade in the first place, they'll need even more convincing arguments now. Threatened US tariffs are obviously not among them.
The Trump regime must disentangle its strategic and economic objectives when dealing with India over trade. That will create an easier workaround to bilateral trade expansion without compromising on India's long-held position on protecting its agriculture. Services provide an adjustment mechanism to balance trade between the two. The US has tested the limits of its influence over India's food and energy security. The ball is now in its court.
