'Russian oil was not the central issue': Raghuram Rajan on Trump's 50% tariff on India

Former RBI Governor Raghuram Rajan said the steep tariffs imposed on India by US President Donald Trump had little to do with New Delhi's Russian oil purchases, arguing instead that the dispute stemmed from "personalities" and a diplomatic disagreement over credit for de-escalating India-Pakistan tensions. 

"I don't think Russian oil purchases were ever the central issue. You just saw yesterday, he (Trump) waved the purchase of oil by Viktor Orbán in Hungary - that's okay. I don't think that was the central issue," Rajan said while responding to a question on whether India was cutting Russian oil imports to please Trump. 

Rajan said the trigger lay elsewhere. "The central issue was more personalities, and especially a personality in the White House and how they treated certain comments made by India after Trump claimed credit for stopping a conflict between India and Pakistan," he said while speaking at the UBS Center Forum for Economic Dialogue. 
 
He explained that Pakistan publicly credited Trump for halting the crisis, while India took a different line: "Pakistan played it the right way. Pakistan said that it was all because of Mr. Trump. India tried to argue that the two countries had reached an agreement without Mr Trump. The truth is probably somewhere in between. But, the net effect was India got 50% tariffs, Pakistan got 19."

Rajan also noted reports about Swiss leaders attempting to clarify tariff decisions to Trump. "I understand that there was some comment about how your leader in Switzerland tried to explain the tariffs to Mr. Trump and that didn't go well. We don't know what happened between India and the US, but hopefully in the longer run sanity prevails on all sides and we all reach reasonable deals. There's no reason for either Switzerland or India to be out on a limb with higher tariffs."

What angered Trump?

Several analysts have long argued that Trump's reaction was rooted in the India–Pakistan ceasefire episode, where the US President repeatedly claimed he had prevented a war that "could have gone nuclear". New Delhi has maintained that the ceasefire came about after Pakistan's Director General of Military Operations contacted his Indian counterpart - not through US intervention.

In September, noted analyst Anas Alhajji said on X that US and EU pressure on India had nothing to do with Russian oil imports, arguing instead that the West sought deeper access to India's market.  

"EU sanctions and US tariffs on India are unrelated to Russian oil imports," he said. "The objectives are now clearer: for one, they seek access to the world's largest market. Historically, European powers colonized countries for raw materials and markets for their final products. Same goal, different methods! EU eyes deeper India partnership despite concerns over Moscow ties."

Alhajji also dismissed claims that India was profiteering from discounted Russian crude. Speaking to CNBC, he said, "It seems that there is more to the story than Russian imports. Because the EU imports a significant amount of natural gas and LNG from Russia. No one said anything. Turkey imports significant amount of oil from Russia, and Turkish exports of petroleum products to Europe are higher than that of India."