The US-India Deal Is Bigger Than Trade
Last year, America slapped 50% tariffs on Indian goods. Today, the two may be about to ink a trade deal. But this deal isn't about trade or the flow of goods. It's about energy, Russia, and China. If signed, it could return US-India relations to where they stood under Obama, or Trump's first term. But serious risks hang over how Washington and Delhi work together, and the biggest one is no longer Russia. It's Pakistan.
Expert Perspective: Analysis by Abishur Prakash ("Mr. Geopolitics"), one of the world's leading geopolitical speakers and author of six books, advising companies on the fractured world. Prakash delivers keynotes in Toronto, NYC, London, New Delhi, and worldwide.
Full transcript: Abishur Prakash ("Mr. Geopolitics") on the US-India trade deal
Four Months for 1%
In June, America's ambassador to India said that there was 1% of work left to sign a trade deal between the United States and India. That was four months ago. Four months for 1% of progress. And that tells you that the trade deal that India and the US appear to be almost about to sign actually has nothing to do with trade. It's all about reshaping the US-India relationship for the current geopolitical environment.
I recorded a video last year, when the US slapped 50% tariffs on Indian imports, on how the US had jeopardized almost 30 years of foreign policy towards India, and how India was going to view this as a sign that it couldn't rely on America long term. Once again, the ground has shifted. The ground has become even more fluid. And what is about to take place if the United States and India sign a trade deal has global consequences, considering what the United States and India are discussing.
India Refines Venezuela
That includes, number one, the idea of Indian refineries cleaning out Venezuelan oil. The US took control of Venezuela. The US has sought to bring Venezuelan oil online. So far, Venezuelan crude has not been brought online, mostly because American refineries function differently. Yet now, the US is exploring a tie-up with India, where Indian refineries could help process Venezuelan crude that is then exported either to global markets or directly to the United States.
This means that Indian refineries are going to become key to America's next phase of energy independence, to the United States' next phase of ending reliance on Canadian energy imports, and also to global energy security, which has been disrupted by this war in the Middle East, by the weaponization of the Strait of Hormuz, by the fact that out of the 150 vessels that were transiting the Strait of Hormuz before the war began, today it's 5, 10 or 15 transits. Even though some data points to 80% of crude oil flows in the Strait of Hormuz reaching pre-war levels, the reality is that the situation has not been resolved, and the world needs another source of energy.
So the US, through Venezuela, is effectively positioning India to become a new source for energy security. This is a massive geopolitical project that is completely being missed as Secretary of State Marco Rubio visits India and explores the deal with Reliance. It's not just about refining Venezuelan crude. It's about introducing another leg in the global energy security matrix, which in this case would be India.
Russia Stops Mattering
The second reason why the US-India relationship is about to completely change is that since the Russian invasion of Ukraine, the biggest thorn in US-India relations, particularly under the Biden administration and continued by Trump's second term, is Russia. Russia has been viewed by the West as a nation that needs to be isolated, even though it hasn't been isolated. Only 34 nations out of 190-plus nations of the world have attempted to isolate Russia.
The West has sought to decouple from Russian energy, and the West has sought to punish nations who continue to trade with Moscow, namely India and China. And to a lesser degree, countries like Turkey, which are effectively repackaging Russian energy for Europe, because Europe cannot just walk away from Russian energy. TurkStream is effectively Russian energy repackaged as Turkish energy, then bought by Europe. And countries like the UAE have been in the US crosshairs for the shadow fleet and the movement of these vessels to ports in the Middle East.
If, however, the relationship with Russia changes, including the fact that President Putin may very well attend the G20 in the United States, including the fact that America has just purchased diesel from Russia, paused new sanctions on Russia, and halted the delivery of new Patriot missile defense systems to Ukraine, all of this means that, at least from America's geopolitical positioning, it's no longer interested in punishing Russia or punishing those trading with Russia.
So instead of Russia being a thorn in US-India relations, Russia may be irrelevant to US-India relations from the standpoint of sanctions, tariffs and punishment. And this creates the conditions for the US-India relationship to return to where it was under the Obama administration or during Trump's first term. The single biggest sticking point that has limited, disrupted and cracked the US-India relationship, Russia, may no longer be valid.
This is also important considering that just a few weeks ago, the US signed into law a new sanctions bill which, among its many applications, gives President Trump the power to impose 100% tariffs on buyers of Russian energy like India. Instead of using that against India and catapulting the entire trade deal and relationship, the US is buying Russian energy. It's its own irony that the US is effectively voiding and breaking the rules of its own sanctions bill. Nonetheless, Russia as an obstacle to US-India relations may no longer be present.
America Needs a Win
And then, of course, is the big question of whether America needs this trade deal more than India, or India needs this trade deal more than America. As it stands right now, it's the United States that needs this trade deal more than India does, because it's the US that is struggling to sign a trade deal with any major economy.
The USMCA in North America is broken. The US and Canada are in a trade war. There could very well be friction between the US and Mexico. The trade deal between the US and Europe has been put under review. The Koreans and Japanese are constantly forced to cough up more money so they're not hit with tariffs, or worse, America pulling back its security. And of course, there can be no long-term trade deal between the US and China. This means the world is in the middle of a trust deficit towards the United States.
If the US and India can sign a trade deal, it could very well give other major economies the confidence to also return to the negotiating table. And if America stands by its trade deal with India, meaning that in three months America does not impose new tariffs on India, even though this trade deal is supposed to ensure no changes happen in the future, then again, it could encourage others to return to the negotiating table. The Europeans may view this as a sign that a long-term trade deal with America is possible. The Brits may view it. The Canadians may view it.
And speaking of Canada, the relationship between the US and Canada is changing. The relationship between India and Canada, which was in tumultuous waters for a number of years, is starting to improve. But if Indian refineries are being used to process Venezuelan crude in a way that allows America to slowly or rapidly cut its reliance on Canadian crude imports, then the relationship between India and Canada will be in focus as well. So there's a lot of ricochet taking place that needs to be considered.
The Israel Factor
The last reason why the US-India relationship may be about to fundamentally change, and why this trade deal is not just about trade but about the broader geopolitics and great power competition taking place right now, has to do with Israel. US commitments to Israel are unlikely to change, even as the political situation in America towards Israel changes.
In the backdrop of that, Israel and India have signed a hexagon alliance. This is an alliance to combat regional security threats, and it's effectively India's counter to the Mecca pact between Pakistan, Turkey and Saudi Arabia. Those nations are turning to each other. Israel and India are turning to one another. So the conditions are forming for a new trilateral setup between the US, India and Israel.
India's relationship with Israel could bring America and India closer together in ways they haven't been brought together, potentially since President Bush authorized the nuclear energy deal with India. Since then, there hasn't been a great leap forward like that, but it could very well be on the horizon from a defense and security standpoint if the US, India and Israel officially join hands in some capacity. That's why this trade deal is actually not about trade.
The Catch: Pakistan, China and BRICS
But even with all that said, even though there are a number of signs that the US-India relationship is about to dramatically change if this trade deal is inked, there are also serious obstacles, serious hindrances to how far the US and India can go because of this new geopolitical environment.
One of the biggest has to do with India's pursuit of sovereignty. Secretary of State Rubio has said he wants India to purchase more American technology and more American energy. This is going to be part of the trade deal. But India, on the other hand, wants tech sovereignty. It doesn't want to be beholden to the Americans, to the Chinese, or to anybody else. India also wants energy security. That's why India is allowing ADNOC from the UAE to increase its oil reserves in India's strategic stockpiles by 500%. That's why India has a very diversified energy basket, importing from Gulf states and from Russia. India is unlikely to change that position, and an America seeking a more transactional relationship across the world, including with countries like India, may view that as a new issue and new pressure.
Then there's the new thorn. If Russia was the thorn of the past, Pakistan is the thorn of the future. The US-Pakistan relationship, to the surprise of many, including India, has entered a new golden period, if you will. This shocks a lot of folks in India who thought that America had permanently picked India over Pakistan for the 21st century. And suddenly Pakistan and the US are in the middle of a new romance.
If the US continues to advance its relationship with Pakistan, from investment to energy to security to other partnerships, India will not advance its relationship with America. The relationship between the US and Pakistan directly connects with how far the US and India can go. So this is a big test for the current administration in Washington. They opened the door to a new chapter between the US and Pakistan. They thought this was the direction to move in, and now, 18 months later, they will have to grapple with the fact that their relationship with Pakistan will limit their relationship with India. It may be the US that has to either walk back from Pakistan or pick one over the other. The ball is in America's court.
Then there's the question of China. China is the big elephant in the room when it comes to the US and India, because India has been viewed by the US and the West for decades as perhaps the most important counterbalance to China. If the US and India could stand shoulder to shoulder, they could balance out the might and rise of China.
In the past, the US was moving to block China. The US was happy to anger China and help India: de-risking, ripping supply chains out of China and diversifying them to places like India and Vietnam, supporting the Indian military, renaming the US Navy's Asia-Pacific Command to the Indo-Pacific Command to give the spotlight to India. The US did all these things and was not concerned with how it might anger Beijing.
But today, America is deeply concerned about stabilizing its relationship with China.
This means the Americans are unlikely to go as far as they might have five or ten years ago with the Indians, out of fear of angering China. Angering China is now something the Americans care about, and it's a big variable in US-India relations and in how America uses its geostrategy to take on China. America is now saying it wants to take on China, but in a controlled descent. Neither side wants the situation to fall out of control and go back to where it was last April, after the Liberation Day tariffs and the tariff walls the US and China imposed on one another. In many ways, neither side can afford that, considering the economic situation in both countries.
The last obstacle has to do with India's own sense of non-alignment, a position it has held since independence, through the Cold War and up to this moment. It's part of the reason why India attends the G7 and hosts the BRICS summit. It's part of the reason why India shakes hands with the President of the United States and the President of Russia and holds dialogue with the leadership of Iran, all at the same time. India is not aligned.
Yet this non-aligned position, in a fractured world where the US and China are trying to get nations to pick sides, only leads to more friction for India and for everybody else. What India is doing, from BRICS to de-dollarization to its relationship with Iran, could put the US-India relationship into hot water again. President Trump, when he was campaigning and shortly after taking office, warned that he would hit BRICS nations with 100% tariffs if they attempted to de-dollarize. Those projects are not being paused, even with a recoupling with Russia, even with a US-India trade deal, even if the war in the Middle East gets resolved and stability returns, which it won't. The old landscape of the Middle East is not returning. So the point is, India's current initiatives threaten to anger the United States, and India is not going to back away from them, nor should it.
The New Reality
So that's the new reality of the US-India relationship. Both sides are on the precipice of monumental change. It's a fragile relationship, a sensitive relationship. If this trade deal can be pushed through, it will change the global economy and the geopolitical stage of Asia, Europe, North America, and the world.
But there are serious obstacles, and many of them are on the shoulders of the United States. It's on the US to figure out whether it wants to be friendly with India or Pakistan. It's on the US to figure out whether it's worth destabilizing the relationship with India over BRICS. It's on the US to figure out, if it cannot end the war in Ukraine, whether because it decides it's not in its interest to stop supporting Ukraine, or the Europeans step up in some surprising manner and the war continues for the next year or two, or worse, expands, whether going after India is the right move.
A lot of it depends on the US. And in the backdrop of that, the biggest question facing America right now is whether it will stand by a deal with India, or whether it will approach the deal with India the same way it has approached deals with Europe, Canada, Mexico, Japan, South Korea, and the list goes on: no long-term thinking, everything up for renegotiation. In the blink of an eye, the trade deal could be scrapped.
I hope this video resonated with you. Leave your thoughts below on whether you think a new dawn is about to begin for US-India relations.
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