The politics of sanctions

India counters sanctions by fostering economic self-reliance and domestic production under its Atmanirbhar Bharat (self-reliant India) initiative, diversifying trade partners and supply chains, and developing alternative financial systems like rupee-vostro accounts for international transactions. India also maintains diplomatic channels to negotiate and mitigate the impact of sanctions and may consider counter-measures.

Russia is important for India as a major source of energy, raw materials, and military hardware. The provision of all of these has become increasingly complicated due to ever tightening sanctions on Russia since 2008. While India doesn’t recognise unilateral sanctions, the role of the U.S. in the international financial architecture means that most privately owned Indian corporations prefer not to do business with Russia. As India’s economy is largely driven by the private sector, this reduces opportunities for economic engagement with Russia. India’s dealings with Russia in the defence and energy space are largely carried out by government-owned companies.

Russia imports very little from India, and this is unlikely to change. Given its population and demographics, Russia will be a relatively small market. Other ways are needed to redress the balance. One way to address this imbalance is via movement of labour. The West Asian model can be instructive. India imports over 1.5 billion barrels of oil, much of it from West Asia. Simultaneously, over 8 million Indians work in West Asia, and account for a large chunk of the $90 billion that India gets via foreign remittances. The two flows partly cancel each other out. Apart from the flow of goods and funds, there is also the issue of demographics. In case of the West Asian states, they allow residency without citizenship – addressing the fears of a demographic shift.

The Kremlin said the sanctions risked destabilising global markets, and Moscow would seek to counter them.

"It is clear that the United States will continue to try to undermine the positions of our companies in non-competitive ways, but we expect that we will be able to counteract this," Kremlin spokesman Dmitry Peskov said.

Top US officials, including Vice President JD Vance, have said the US wants to squeeze this revenue stream. That's why they have called the Ukraine conflict “Modi's war”, with Trump himself having accused India of “fueling the Russian war machine”.

Vance has pointedly said the tariffs on India are “leverage” against Putin.

India has questioned the logic of the 25% “penal” tariff — meaning a total US import duties of 50% on most Indian goods — and argued that it's been buying the oil only in its sovereign national interest.

The truth is that even as Western countries sharpened their tirade against trading with Russia and banned direct Russian imports, many of them kept acquiring Russian oil and gas through indirect routes. One of the key trade routes was to get it re-exported from Turkey. According to the Centre for Research on Energy and Clean Air (CREA), EU member states spent €21.9 billion (£18.1 billion) on Russian fossil fuels in the third year of the war, much more than their expenditure on financial aid to Ukraine. In fact, since the beginning of the war, EU countries have bought more energy fuel from Russia than India, with the former accounting for 23 per cent of Moscow’s earnings from fossil fuel exports, in contrast with India’s contribution of 13 per cent.