The leaders of China, Russia, and India tried over the weekend to signal their unity at the annual meeting of the Shanghai Cooperation Organization (SCO), even as strong differences remain among the three powerful nations. Many of those areas of unity – and differences – revolve around energy and energy geopolitics.
The New York Times reports that “China wants to seize on the unpopularity of America’s trade policy to drive a wedge between Washington and the rest of the world, arguing that it can serve as a more stable global leader.” It is no surprise that Russian leader Vladimir Putin continues to sidle up to Chinese President Xi Jinping since he has leaned in that direction for many years, no doubt spurred along by the Democratic Party’s hysteria campaign to poison U.S./Russia relations with its Trump collusion hoax.
The more troubling development out of the weekend’s summit was the posturing by India’s Prime Minister Narendra Modi, who appears to be increasingly moving his own country into this China/Russia orbit. While Mr. Modi made no mention of his country’s increasingly cooperative relations with both China and Russia in his formal remarks to the SCO’s planning committee, his engagements with both Putin and Xi during the rest of the event created speculation that he may be moving towards a higher degree of cooperation with India’s fellow BRICS members as his government remains entangled in trade and tariff disputes with the Donald Trump administration.
Last week, President Trump raised the U.S. tariff on goods imported from India to 50%, a doubling of the 25% tariff he had implemented just a few weeks earlier. This new rate, effective Sept. 2, brings America’s tariff levy on India to among the highest of any country, no doubt raising tensions with the Modi government.
President Trump views the move as simply leveling the playing field with one of the world’s two most populous nations. “What few people understand is that we do very little business with India, but they do a tremendous amount of business with us,” Trump wrote on his Truth Social feed on Sept. 1. “In other words, they sell us massive amounts of goods, their biggest ‘client,’ but we sell them very little – Until now a totally one-sided relationship, and it has been for many decades. The reason is that India has charged us, until now, such high Tariffs, the most of any country, that our businesses are unable to sell into India. It has been a totally one-sided disaster!”
The aggressive U.S. posture towards India has been largely motivated by the Modi government’s decision in the past three years to become the biggest importer of Russian crude oil. Mr. Trump hopes he can pressure Putin to end his war with Ukraine by penalizing his largest customer, thus impeding Putin’s ability to continue funding his military operations.
The tactic doesn’t appear thus far to be working, possibly because the U.S. 50% tariff comes with a whopping loophole: It doesn’t apply to India’s sizable exports of refined products to America. Those refined products – largely processed by big Indian refiners like Reliance Industries from their purchases of Russian crude oil – make up a big portion of India’s overall U.S. exports. This ability to buy crude from Russia at highly discounted prices and then sell the refined products at full market prices has become a big growth industry in India in recent years.
This massive loophole no doubt exists due to the White House’s priority of keeping energy costs to consumers as low as possible, but it also lessens any real leverage the U.S. might derive from using energy to influence India’s posturing towards Russia. This reality, combined with India’s increasing trade ties with both China and Russia through its leadership in the BRICS trade alliance, creates a powerful incentive for the Modi government to retain strong relations with those peer nations.
President Trump has often boasted that America “holds all the cards” in its trade and tariff negotiations with other countries. While that is true in most cases, the equation is more tenuous and complex where India is concerned, and it showed last weekend in Shanghai.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
(Featured Image Media Credit: Trump White House Archive/Creative Commons/Flickr)
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