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Tariffs, energy purchases and US engagement with Pakistan are fuelling fresh concerns in sections of India’s strategic establishment.
The India-US relationship has repeatedly appeared to move towards a new phase of strategic and economic cooperation, only to run into another point of friction. From the handling of the Pahalgam terror attack and Operation Sindoor to prolonged trade negotiations, tariffs, pressure over India’s purchase of Russian oil, disagreements over digital payments and now growing US defence engagement with Pakistan, a series of developments has created a sense in sections of New Delhi’s strategic establishment that the relationship is becoming increasingly transactional.
The latest trigger is the US legislation signed by President Donald Trump on Friday that gives his administration the power to impose additional duties of up to 100 per cent on goods from countries meeting specified criteria relating to Russian oil and gas purchases or sanctions evasion. The law does not automatically impose a 100 per cent tariff on India. But India, one of the world’s largest buyers of Russian crude, remains potentially exposed to the mechanism. The latest move also revives an issue that had appeared to have been resolved earlier this year. In February, Washington removed an additional 25 per cent tariff on Indian imports linked to India’s purchases of Russian oil as the two countries announced a framework for an Interim Trade Agreement. The two countries continued negotiations towards a broader for international payment companies. bilateral trade agreement.
The development comes after India and the US announced a framework for an Interim Trade Agreement. The two countries have continued negotiations over market access and other trade issues, even as disagreements over tariffs and India’s economic policy have complicated the process. For sections of the Indian government and the wider Sangh ecosystem, the latest Russian-oil tariff mechanism is being viewed against this broader backdrop.
People familiar with the thinking in these circles said there has been growing concern over the pressure being applied by Washington during the trade negotiations, particularly over demands for greater access to the Indian market and concessions that, in their assessment, could benefit American companies while restricting India’s ability to protect domestic industry and retain policy flexibility. Some of these interlocutors had already told this newspaper that the trade agreement will not be concluded in its present form even as union ministers and U.S officials had announced that the deal would be announced within days.
The latest tariff mechanism, they say, reinforces their view that economic instruments are increasingly being used by Washington as leverage to influence India’s policy choices. Some described the approach as a form of economic pressure or “blackmail”. That is their characterisation of the US approach and not an established finding about the intention of the first major point of reassessment of the relationship came during the crisis following the April 2025 Pahalgam terrorist attack and Operation Sindoor. Washington condemned the Pahalgam attack and expressed support for India. But the Trump administration did not publicly assign responsibility for the attack to Pakistan in the manner New Delhi had wanted. As India and Pakistan moved into military confrontation, Washington increasingly concentrated on preventing further escalation and encouraged both sides to stop fighting.
Trump administration. Some Sangh members who spoke to Read went further in their assessment, alleging that a section within the government had become too responsive to the preferences of Washington and was giving American commercial interests undue priority in policy decisions. They did not name any minister or government official, nor did they provide evidence identifying particular individuals.
Their concern, they said, was that some policymakers were effectively “bidding” for Washington by accepting or advancing positions that they believed could serve American interests at the expense of India’s longerterm economic interests. They said this was particularly worrying because, in their view, pressure over the trade agreement, UPI and Russian oil was increasingly being treated as a series of separate negotiations rather than as part of a larger question of India’s economic and strategic autonomy. The disagreement over Russian oil has added another layer to this argument. India has maintained that its energy purchases are determined by energy security, affordability and market conditions. Following the passage of the sanctions legislation, the Ministry of External Affairs said India remained committed to ensuring energy security through diversified sourcing and was determined to protect India’s trade and economic interests. The issue is not confined to trade. For sections of New Delhi’s strategic establishment, the For India, the distinction was important.
New Delhi regarded Operation Sindoor as a just military response directed at terrorist infrastructure following the Pahalgam attack. The Indian government subsequently maintained that the military action was focused on terrorism and that the cessation of hostilities on 10 May was a bilateral understanding between India and Pakistan rather than an externally mediated settlement. The Trump administration, however, publicly described the cessation of hostilities as the outcome of US diplomatic intervention. The differing accounts added to concerns in sections of India’s strategic community about Washington’s approach to the IndiaPakistan relationship and whether it was sufficiently aligned with New Delhi’s security concerns. The question has acquired another dimension this month with a US defence company’s new arrangement with Pakistan. itself than in the timing and direction of US-Pakistan engagement.
The Pakistan defence arrangement comes after the India-Pakistan confrontation of 2025 and at a time when Washington is simultaneously applying economic pressure on India over Russian energy purchases. US drone company Powerus has signed a memorandum of understanding with the Pakistan Army that includes an initial, undisclosed order relating to unmanned aerial systems, according to the company’s co-founder Brett Velicovich. The Pakistan military confirmed that a Powerus delegation led by Velicovich met Army chief Field Marshal Syed Asim Munir and discussed defence procurement, production and long-term capacity building. The development comes amid warming ties between Washington and Islamabad.
President Trump has publicly praised Munir, while Pakistan has pursued greater economic and defence engagement with the United States. There is also a Trumpfamily financial connection to Powerus, although it would be inaccurate to describe the development as Donald Trump Jr or Eric Trump personally selling drones to Pakistan. Powerus is due to merge with publicly traded Aureus Greenway Holdings. Trump Jr and Eric Trump have investments in Aureus through American Ventures. Regulatory filings indicate the fund is expected to have a 9.9 per cent beneficial ownership stake in the combined company after the merger. Trump Jr’s spokesman has said he is a passive investor, has no role in Powerus management or operations and had no prior knowledge of the Pakistan deal. The White House has said there is no conflict of interest.
The significance for India therefore lies less in the Trump-family investment The development has consequently become another point of discussion among officials and strategic policymakers who believe that the US relationship with India should not be viewed solely through the prism of the strategic partnership. The UPI issue has also entered this debate. India has formally introduced a new Merchant Discount Rate framework for specified UPI merchant transactions. From 15 October 15, a 0.4 per cent MDR will apply to specified person-to-merchant transactions above Rs 2,000, with a cap of Rs 300 for transactions of Rs 75,000 and above. Person-to-person payments remain free, while payments to merchants up to Rs 2,000 and transactions covered by the zeroMDR framework for small merchants also remain free. The government says about 96 per cent of P2M transactions will remain unaffected.
US concerns over the treatment and market access of American electronicpayment providers, including VISA and MasterCard in India’s digital payments ecosystem have also entered the wider trade discussion. The timing has consequently generated a debate in India over whether the MDR decision could eventually create greater space The Indian government has rejected that interpretation. It has said there was no US pressure behind the MDR decision and that the new framework does not give foreign card companies an unfair advantage over Indian payment networks. The government’s stated rationale is that MDR is required to support investment in UPI infrastructure, cybersecurity, innovation and reliability. It has also stressed that MDR is not a tax or a charge collected by the government or NPCI and that providers cannot pass the charge on to consumers. For sections of the government and the Sangh, however, the episode has become another reference point in a broader argument about American economic influence.
Their argument is not that the UPI decision has been proven to have been dictated by Washington. Rather, they point to the coincidence between US concerns over UPI and the subsequent introduction of MDR as part of what they regard as a wider pattern of pressure on India’s economic policy. That interpretation remains contested. There is evidence that Washington has raised concerns about the treatment of US payment companies, but there is no evidence establishing that the US dictated India’s MDR decision.
The Indian government has expressly denied such a connection. The sequence is nevertheless being viewed by some within the government and the wider Sangh ecosystem The prospect of an AIMIMBSP understanding, however, could add another layer of complexity to the opposition’s electoral calculations in Uttar Pradesh. Political analyst Aditya Rathi described AIMIM’s presence as a “double-edged sword” for the SP ahead of the 2027 Assembly polls. According to Rathi, an alliance with AIMIM could expose the SP to criticism over minority appeasement, while the absence of an alliance could leave the possibility of Muslim votes being divided in closely contested constituencies. He said the SP was currently “in radar” of Owaisi after declining an alliance, and that AIMIM could subsequently focus its campaign on constituencies where the SP has a strong organisational and electoral presence.
Such a contest, he argued, could potentially affect the opposition’s vote distribution in those seats. as a pattern: Washington seeking greater access for American companies in India’s market, pressing India over its energy purchases from Russia and simultaneously maintaining or expanding its relationship with Pakistan. The Indian government’s position remains less confrontational. New Delhi continues to describe the United States as an important strategic and economic partner and remains engaged in trade negotiations. The economic relationship between the two countries also remains substantial. This is what makes the present phase of the relationship different from a straightforward deterioration.
On one side, Washington and New Delhi continue to describe each other as important strategic partners and are attempting to build a larger economic relationship. On the other, every new disagreement is increasingly being interpreted in New Delhi through the question of how much economic and strategic policy space India is willing to surrender in return for closer alignment with the United States. The question increasingly being debated within the Indian establishment is therefore not whether India should have a strong relationship with the United States. There is broad recognition of the strategic importance of that relationship. The question is how much economic and strategic autonomy India is prepared to retain as the relationship becomes more deeply intertwined with trade, technology, energy and security.