Tanvi Ratna, founder & CEO of Policy 4.0, is a World Economic Forum Young Global Leader and columnist
Until early August, the tariff sparring between Washington and New Delhi looked like another familiar round over soybeans. With China halting purchases and harvests approaching, it seemed like the US was looking for a buyer in India, as soybean farmers are a key MAGA base for Trump. Then, over just three days, the story shifted — from agriculture to a high-stakes game of geopolitics.
On Aug 6, President Trump’s negotiator, Steve Witkoff, met Russian president Vladimir Putin in St Petersburg for over three hours. Though billed as “constructive”, the talks yielded no major breakthrough. That same day, the White House announced an extra 25% tariff on Indian goods — lifting effective duties toward 50% — and framed the decision partly around New Delhi’s continued intake of discounted Russian crude. In India, this was perceived as arm-twisting of its sovereignty, but a larger strategy was at play.
The urgency in Washington comes from geopolitics as much as economics. The Ukraine war remains a key focus. In recent months, Russia has made incremental gains in Ukraine, giving it little reason to compromise. Official data showed a year-on-year rise in oil and gas revenues earlier this year, giving the Kremlin fiscal space to sustain the war. On another front, BRICS members are pushing for local-currency energy trade pilots. July’s Rio summit saw Brazil and others call for “economic sovereignty” from the dollar. If those systems take root, US sanctions will have less bite. It appears the White House wants to hit Russian revenues while the leverage window remains open.
The domestic political calendar makes this even trickier. The midterms are barely a year away and while inflation has eased, it remains sensitive to fuel prices. Even a small Brent crude spike can quickly translate into higher gasoline costs, eroding consumer sentiment and complicating the Federal Reserve’s path to cutting interest rates — a move the administration sees as vital to sustaining growth into 2025. A direct embargo on Russian oil would risk that spike, so Washington needs other channels.
Since 2022, India has vaulted from a marginal buyer to Russia’s largest swing customer, taking roughly 1-1.8m barrels of crude a day. Unlike private refiners tied to long-term contracts, India’s state-owned refiners can quickly adjust their spot purchases when prices or risks change. If India reduces its spot purchases by 200,000 to 300,000 barrels a day, Russia may have to offer bigger discounts to other buyers, cutting its revenue by billions over a year. This would pinch Moscow’s earnings and avoid a price surge that hurts American consumers. China, a larger buyer of Russian oil, has so far been spared to avoid disrupting US supply chains and ongoing tariff talks. Early signs suggest the tactic is having a marginal effect in India. One major state refiner recently reported a lower share of Russian crude as discounts narrowed. This is the kind of fine-tuning Washington is aiming for.
For New Delhi, the irritation is real. It has watched Washington oscillate between warm words and hard edges — like this tariff move that risks raising Indian fuel costs while shielding US consumers. Yet this is also a moment to read beyond the headlines. Pakistan, despite entering this cycle with less leverage, has found its way into Trump’s good books by using a cryptocurrency gambit and backing his bid for a Nobel Peace Prize. This has helped it carve out a tariff deal. India’s own leverage is far greater: market size, strategic geography, technology and defence partnerships, and a pivotal role in energy flows. The smart play is to deploy that leverage to meet Trump’s immediate need in exchange for wins of India’s choosing. When both sides know they hold valuable cards, the game would be to trade them well, rather than escalate.
This standoff is about much more than tariffs or a few oil shipments. For Washington, it is a test of whether it can squeeze Russia’s war chest without spiking global fuel prices, hold China in check, and prevent the BRICS bloc from hardening into a true economic counterweight — all while keeping US inflation low enough for interest rates to fall. For New Delhi, it is about using its position as the swing buyer in the world’s most strategic commodity to protect its autonomy, avoid an unnecessary rupture with America, and still extract tangible gains.
