The future of the energy relationship between India and the United States is gaining increased consequences and conflict in 2025. As India tries to find a variety of, and consistent, energy sources, and the U.S. tries to use trade and diplomatic instruments to affect the sourcing choices of India, oil trade becomes the centre of a more comprehensive geopolitical and business tug-of-war.

This paper will discuss the most recent trends, their cause, future projections, and the possible future of the oil business between India and the United States.

Key Drivers and Context

The Energy Demand and Import Requirement of India

• India is among the major economies in the world which have been growing at a very high rate. Its oil consumption is set to skyrocket in the next few decades possibly to 9.1 million barrels per day in the year 2050.
• The imports of the country exceed 80-90 per cent of the oil and gas demand, which makes it highly vulnerable to world supply, bargaining, and political upheavals.

Sanctions & Russian Oil Geopolitics

• Ever since the invasion of Ukraine by Russia, the Western powers have been applying price caps, sanctions, and trade pressure. India has, however, remained an importer of discounted Russian crude, which has now formed a large portion of its imports.
• It is a sourcing choice which has been met with criticism by the United States, which considers the imports of Russian oil by India a means of indirectly funding the war by Moscow.

Leverage of the U.S. through Trade and Tariffs

• In August 2025, the U.S. government levied a 50 per cent tariff on many Indian imports – an increase of an original 25 per cent tariff known as the reciprocal tariff, accompanied by an additional 25 per cent tariff directly linked to the purchase of Russian oil by India.
• The U.S trade negotiators are pushing India to reduce its importation of Russian oil to gain a tariff concession and also facilitate a bilateral trade agreement.
• India opposes the fact that by radically reducing the Russian purchases, without providing alternative supplies, it will destroy the markets in the world and increase expenses.

The Indian Turn towards Energy Imports to the United States

• India is indicating that it is planning on the increase of its energy imports to the U.S as part of its strategy to ease tensions and rebalance trade.
• An Indian state-owned company, Bharat Petroleum Corporation (BPCL), tendered the purchase of 10 million barrels of U.S. crude oil within five months (between November and March) as a result of a deal with Glencore in August 2025.
• The first annual U.S. LPG (liquified petroleum gas) import tender in India has also been postponed (to October 17, 2025) citing intentions to import about 2 million metric tons.

Currently (October 2025)

Trade Negotiations Restarting and Pressure Areas

• India and the U.S. will have a trade negotiation in Washington this week, with energy and gas imports being some of the major agenda items.
• The U.S has restated that cutting off Russian oil payments is at the core of decreasing the tariff liabilities of India and the assistance of a bilateral trading deal.
• India is resisting, saying that a radical withdrawal of Russian oil should be accompanied by adaptability to obtain it from other authorised suppliers (such as Iran or Venezuela) or the U.S.

Sanctions & Risks

• The U.S. has in recent weeks sanctioned eight Indian nationals and 10 Indian companies over alleged connections to the Iranian oil trade – an indication that the energy providers of India are under examination.
• The wider American sanctions campaign also includes corporations and ships contributing to the Iranian oil exports – a step that may impact the logistical tracks in the region and the international crude oil flows.

Currency Adjustments in Oil Payments

Indian state refiners have been coerced by traders who supply Russian oil to pay in Chinese yuan, which is one of the methods to avoid dollar limitations and sanctions. Indian state refiners are said to be paying in yuan cargoes.

Although the oil contracts are still priced in U.S. dollars to align with the international standard, the adoption of the yuan is to facilitate the movement of transactions by bypassing sanctioned transactions.

Challenges & Flashpoints

Supply Flexibility and Entrance Risk

India is highly dependent on Russian crude oil, and therefore, a sudden decision to break will involve an increase in the alternative imports (U.S., Middle East, and others). The cost, logistics, and risk of renegotiating the contract are involved in that transition.

The Indian officials have also contended that a simultaneous ban on Russian and Iranian/Venezuelan imports would put a strain on the global supply and price stability.

Deadlock in Tariff Negotiation

The U.S. is adamant that tariff rollback be conditional on energy sourcing behaviour. India considers it a violation of energy security and policy sovereignty.

There is no time to lose: both nations want to sign the first phase of a Bilateral Trade Agreement by the end of October 2025.

Political and Public Perception

In the domestic scene, the Indian government is under pressure to keep the energy affordable to the citizens and industries. Sudden sourcing shifts may result in backlash in the event of an increase in fuel prices.

In the U.S., selling the Russian oil imports of India as a benefit to a Kremlin war machine reinforces the political case for further pressure.

Sanction Risks & Legal Exposure

Indian firms and trading intermediaries risk being caught in U.S.-imposed sanctions if they engage with Iranian or other blacklisted entities.

The use of yuan or other alternative payment methods may invite further scrutiny and retaliation in trade or financial channels.

Conclusion

The India-America oil trade today sits at a crossroads of energy security, geopolitics, trade leverage, and national sovereignty. For India, the imperative is clear: secure energy at the lowest possible cost while resisting excessive external control over its sourcing decisions. For the U.S., influencing India’s energy path is part of a broader strategic agenda against Russia and to realign global trade.

How far New Delhi is willing to pivot, and how much Washington is willing to concede, will define not just the shape of energy flows but the broader contours of India–U.S. relations in the years ahead.