New Delhi has offered Washington a revised “final” trade proposal while making the removal of an additional 25% tariff tied to purchases of Russian crude its central demand, according to two people familiar with the negotiations. The move reflects an effort to stabilise a strategically important economic relationship even as energy security and geopolitics complicate trade talks.Officials say the updated offer refines market-access commitments and regulatory assurances put forward earlier, but the emphasis has shifted decisively towards rolling back the punitive levy imposed by the United States under its sanctions framework related to Moscow’s energy revenues. The tariff, applied over and above existing duties on selected exports, has been cited by businesses as a growing cost burden that blunts competitiveness in the American market.
The talks come against a backdrop of steady growth in bilateral trade, which crossed $190bn last year, and an expanding defence and technology partnership. Yet frictions have persisted over market access, digital trade rules, and the impact of sanctions regimes on third-country commerce. The oil-linked tariff has emerged as the most immediate irritant, with officials arguing it undercuts supply-chain resilience at a time when both economies are seeking to reduce inflationary pressures.
Energy officials maintain that crude purchases are guided by price stability and supply reliability rather than political alignment. With global markets remaining volatile, refiners have leaned on discounted barrels to keep domestic fuel prices in check. Trade negotiators now argue that penalising downstream exports because of lawful energy imports distorts trade and risks collateral damage to consumers.
Washington’s position has been shaped by its broader sanctions architecture, which aims to constrain revenue streams funding Moscow’s military activities. American officials have signalled that exemptions or adjustments require clear assurances on compliance and transparency, alongside progress on other trade priorities. The revised proposal is understood to include enhanced reporting mechanisms and commitments on customs cooperation designed to address those concerns.
Businesses on both sides are watching closely. Exporters of engineering goods, pharmaceuticals and textiles have warned that the extra levy erodes margins and could prompt order diversions. Importers in the United States, for their part, have raised concerns about price pass-throughs and supply disruptions if duties persist. Industry groups have pressed for a time-bound resolution that delinks energy policy from unrelated trade flows.
Strategically, the negotiations are taking place amid a push to deepen cooperation in critical minerals, semiconductors and clean energy. Both governments have touted joint initiatives to build trusted supply chains and expand manufacturing ties. Trade analysts say removing the oil-linked tariff would send a confidence-building signal, clearing the way for progress on a limited trade package that could later be broadened.
At the same time, sensitivities remain over agricultural access, data governance and intellectual property. The revised offer reportedly narrows differences by proposing calibrated tariff reductions and clearer rules on standards, while stopping short of concessions that could trigger domestic political backlash. Officials involved stress that the package is framed as a pragmatic bridge rather than a comprehensive free-trade agreement.
Geopolitics looms large. As conflicts reshape energy routes and alliances, middle powers have sought room to manoeuvre without jeopardising growth. The tariff dispute illustrates the tension between sanctions objectives and the realities of globalised supply chains. Economists note that blunt trade measures can have spillover effects that complicate inflation control and industrial planning.