India-U.S.-Russia trade deal oil dynamics

This report is from this week’s CNBC’s “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.

The big story

A couple of weeks ago, I interviewed India’s Petroleum and Natural Gas Minister Hardeep Singh Puri at Energy Week in Goa, India. I was probing, trying to get a former diplomat of 50 years to give me a straight answer on why a U.S.-India trade deal was proving so elusive.

“I’m not trying to dodge you,” said Puri, repeating once again that discussions were “at a very advanced stage.”

Six days later, U.S. President Donald Trump announced a truce.

On Feb. 2, Trump removed the 25% additional penalty imposed for buying Russian oil, claiming that India had committed to stop these purchases. This claim wasn’t reiterated by India’s Prime Minister Narendra Modi in his post on X, however, and nor was it mentioned in the joint statement issued by the two nations. 

But it marked a much-needed reset.

The relationship had hit a low point, said Vasuki Shastry, a senior advisor to geostrategic advisory firm Gatehouse. “They’re trying to desperately reset. India wants stability, the U.S. doesn’t want to lose India. This is the halfway house solution, the off-ramp for both.” 

India imports 85-90% of its crude oil. Pre-Covid, India wasn’t importing much from Russia, but the purchases ramped up nearly 40% following the Ukraine war, primarily due to the discount on offer.

Post Trump’s 25% penalty, particularly in the past two months, that number has been inching downwards toward the 20% mark, according to data and analytics firm Kpler.

In the nine days since Trump’s claim, neither India’s Commerce Minister Piyush Goyal nor the Foreign Ministry has confirmed it. Foreign Secretary Vikram Misri said India’s energy policy would be determined as always by availability and pricing considerations.

Shastry told me that energy is a national security issue and the Foreign Ministry statement was “absolutely on target.”

And then came another reveal: the U.S. revising its fact sheet on the trade deal.

It removed “pulses” from a list of products it said India would reduce or remove tariffs on, and replaced the word “committed” to say that India “intends” to make $500 billion worth of purchases from the U.S. over five years in the agreement.

Talk about collaborative narrative management. 

It’s this audacity of opacity — that a straight answer isn’t needed — that has seen observers suggest this is a decision to remain “strategically ambiguous.” 

“This is the best way for India,” said the former Indian trade negotiator and founder of Global Trade Research…