The US trade deal with India: consequences for Ukraine

Tuesday 3 February 2026

On 2 February 2026 the United States and India announced a new trade arrangement whose most geopolitically consequential term is not a tariff line at all but an energy promise: India is to cease purchasing crude oil from Russia. In exchange, Washington is set to reduce tariffs on Indian goods to 18 per cent and to lift a separate Russia-related penalty tariff, while India is reported to be offering significant market-opening concessions and large-scale purchases of American goods. 

If that bargain holds in practice, its greatest effects will not be felt in customs houses but in the war economy that sustains Russia’s invasion of Ukraine. Since 2022 India has been a principal destination for discounted Russian seaborne crude, at times becoming the single largest buyer, and even after recent slippage Russia still accounted for roughly a third of India’s crude imports across 2025. In January 2026, India was still importing about 1.2 million barrels per day of Russian crude, over one-fifth of its total imports, according to Kpler data (a think tank) cited by Reuters. 

Yet the political announcement is not the same thing as operational reality. Ratings agencies and industry sources have already cautioned that an abrupt stop would be economically disruptive for India and that refiners will seek a wind-down period rather than a cliff edge.  That distinction matters for Ukraine: a slow taper constrains Russia at the margin, whereas a rapid cessation would strike closer to the heart of Moscow’s wartime cashflow.

How India’s decision changes Russia’s war finances

Russia’s state finances are unusually sensitive to oil revenues. When India buys Russian crude, she does more than keep tankers moving: she helps hold up the export volumes that translate into tax receipts, hard currency earnings and budget resilience. The strategic value to Moscow has been twofold.

First, India has provided demand that could replace the European market that largely shut after 2022. Second, India’s refiners have been able to process Russian crude and sell refined products into global markets, cushioning Russia from isolation. European policymakers have increasingly focused on that second channel, debating and adopting restrictions aimed at fuels produced from Russian crude even when refined outside Russia, precisely because it blunts the intended impact of sanctions. 

If India truly ceases buying Russian crude, Russia faces an unattractive choice-set.

She can attempt to re-route barrels to other buyers, most obviously China, but that usually requires steeper discounts, longer voyages, greater shipping risk and more dependence upon sanction-evasion logistics. She can reduce production, which protects price but shrinks volume. Or she can accept lower revenue per barrel, which keeps fields running but hollows out the fiscal base that pays for ammunition, drones, mobilisation bonuses and the quiet social contract by which the Kremlin asks for sacrifice without admitting she is sacrificing.

None of this ends the war by itself. Russia has proved willing to spend deeply on the conflict and to squeeze domestic consumption. But oil is the least replaceable source of scale revenue. Losing India as a buyer would not simply inconvenience Russia; it would erode one of the few remaining pillars propping up her external accounts and her ability to fund a long war at high tempo.

What it means for Ukraine’s battlefield and negotiating position

For Ukraine the most immediate effect is indirect. Fewer Russian oil earnings do not translate overnight into fewer Russian shells. The Kremlin has buffers, can reprioritise spending and can run deficits. The military machine, moreover, is fed by domestic repression and wartime mobilisation as much as by cash.

However the second-order effects are significant.

A tighter Russian budget tends to force choices. If Moscow must pay more to keep oil moving, she may pay less elsewhere: procurement quality falls, readiness declines, and the state’s capacity to compensate losses is stressed. Over time that can show up in training, maintenance and the purchase of imported components. It can also show up socially: late payments, inflationary pressures and regional budgets squeezed by war demands. None is decisive alone, but the war is now as much about sustainability as manoeuvre.

There is also a diplomatic dividend. If India, a state that has been careful to avoid appearing aligned with Western coercion, publicly accepts an oil constraint tied to the Ukraine war, it alters the atmosphere around enforcement. It signals that energy trade is no longer a neutral corridor but a contested space. That makes it easier for Ukraine’s partners to argue, in capitals that are sceptical of sanctions, that continued purchases are not merely commerce but participation in a war economy.

The risks for Ukraine are real, and they deserve candour. If removing Russian barrels from India’s intake lifts global prices, Ukraine pays more for fuel and logistics. If India replaces Russian crude with American or other supplies, shipping patterns and insurance costs may shift in ways that briefly tighten the market. A victory for sanctions enforcement can, paradoxically, impose short-term costs on the very states Ukraine relies upon. That is manageable, but it requires planning.

India’s calculus, and why it matters to the conflict’s trajectory

India has never been a party to Russia’s invasion, but she has benefited from the price arbitrage created by it. Discounted crude has supported her refining sector and helped manage domestic inflation. That is why commentators doubt she can, or will, stop instantly. 

So why agree at all?

Because the agreement with the United States is not simply about tariffs. It is about India’s industrial strategy, access to the American market and the avoidance of escalating economic penalties linked to Russian oil. The deal reported this week is framed explicitly as a swap: lower tariffs and improved trade terms in exchange for an end to Russian crude purchases and a pivot towards US energy supplies. 

That makes India’s decision a geopolitical signal as much as an energy one. It suggests that the cost of association with Russia’s war economy has risen to a point where even a carefully non-aligned power prefers a managed decoupling. For Ukraine that is strategically valuable: it widens the coalition of states that, for their own reasons, are willing to constrain Moscow’s revenue.

What Russia is likely to do next

Russia will attempt adaptation rather than surrender. Expect intensified discounting into Asia, more complex routing of cargoes, and renewed emphasis upon shipping practices that reduce transparency. Expect, too, a louder information campaign aimed at portraying the arrangement as American bullying and India as a reluctant victim rather than an autonomous actor.

But the core fact remains: energy is Russia’s strategic export, and India has been one of its strategic customers. If that customer truly steps away, Moscow must either find another of comparable scale or accept a smaller, poorer war.

That does not guarantee peace. It does, however, change the arithmetic of time. Wars end not only when armies break but when one side can no longer afford the continuation of its objectives at the price demanded. If India’s cessation of Russian crude purchases becomes real, monitored and durable, it moves that moment closer.