India's Energy Gambit and the Art of Walking Away - Lessons from the 2025 US-India Tariff Crisis

Energy has always been political. But rarely has it been this contentious.

In August 2025, the Trump administration imposed a staggering 50 per cent tariff on Indian exports - half of it explicitly linked to New Delhi's continued purchases of Russian crude oil (Covington & Burling LLP, 2025). The move triggered what analysts now call the sharpest trade rupture between the two nations in two decades. And yet, oddly enough, by late October 2025, both sides appeared cautiously optimistic about reaching a deal (CNBC, 2025a).

How did a dispute that seemed destined for escalation begin moving toward resolution?

I wrapped my head around this, not without confusion. But, then looking through the lens of principled negotiation - a framework developed at the Harvard Negotiation Project that emphasises interests over positions, creative options, and objective criteria, India's strategy looked like a masterclass in high-stakes negotiation in the intersection of energy security, geopolitical alignment, and economic interdependence - precisely the kind of multi-dimensional dispute where traditional positional bargaining tends to fail.

Tariff De-escalation Trajectory

There is something important here that transcends the immediate crisis.

The way nations negotiate over energy resources will increasingly determine not only bilateral relationships but also the architecture of the international order itself.

I spent the last decade of my career analysing power systems and energy infrastructure. And, I find myself drawn to this case precisely because it reveals how technical realities - barrel counts, refinery capacities, shipping routes - become entangled with diplomatic imperatives in ways that most international relations scholarship underestimates.

Let's review some basics

Principled Negotiation Theory

Fisher and Ury's (1981) seminal work Getting to Yes established four foundational principles for effective negotiation: separating people from the problem, focusing on interests rather than positions, inventing options for mutual gain, and insisting on objective criteria. The framework emerged from the Harvard Negotiation Project's extensive study of diplomatic negotiations, including the Camp David Accords (Beyond Intractability, 2023). The approach stands in deliberate contrast to positional bargaining, which Fisher and Ury characterize as inefficient, relationship-damaging, and prone to producing agreements that neglect underlying interests.

India's Strategic Alternative Analysis

Central to this framework is the concept of BATNA - the Best Alternative to a Negotiated Agreement. As the Harvard Program on Negotiation explains, a party's BATNA represents the most advantageous course of action if negotiations fail entirely (PON, 2025). Understanding one's BATNA provides both a benchmark for evaluating proposed agreements and, critically, a source of negotiating power. That is not all. A well-developed BATNA allows negotiators to walk away with dignity when offers fall below their threshold, thereby preventing desperate concessions.

Energy Diplomacy and Conflict Resolution

Energy diplomacy occupies a distinctive space in international relations scholarship. Bovan et al. (2020) argue that energy issues exist in a dynamic relationship with foreign policy and national security - what they term the "energy security paradox." This paradox emerges because resource-rich nations can leverage supply relationships for political ends, while import-dependent nations must balance economic pragmatism against strategic alignment preferences.

Recent scholarship on energy transitions adds further complexity. Huda (2024) proposes a "renewable energy diplomacy" framework grounded in environmental peacebuilding, arguing that traditional emphasis on fossil fuel access must give way to collaborative resource governance and capacity building. This perspective is clearly relevant to the US-India case, where underlying tensions involve not just oil imports but competing visions of energy transition pathways and development imperatives.

Fisher Ury Framework

Analytical Approach

My analysis (and this post thereby) employs a qualitative case study methodology, applying Fisher and Ury's principled negotiation framework to analyze the 2025 US-India tariff dispute. Primary sources include executive orders, ministerial statements, and official trade data. Secondary analysis draws from policy research organisations, including the Centre for Social and Economic Progress, the Observer Research Foundation, and the Columbia Centre on Global Energy Policy. The analytical focus centress on three dimensions: the positions versus interests of each party, the role of BATNA in shaping negotiation dynamics, and the potential for creative options that address underlying concerns.

Analysis and Discussion

Positions Versus Interests

The positions adopted by both parties initially appeared irreconcilable. The United States demanded that India cease Russian oil purchases, framing this as necessary to curb Moscow's war funding. India's position was equally firm: energy imports were a sovereign decision based on the needs of 1.4 billion citizens (Indian Ministry of External Affairs, 2025). This is textbook positional bargaining - and predictably, it produced deadlock.

Yet beneath these positions lay more nuanced interests. America's underlying concern was not merely Indian oil purchases per se, but the perception that discounted Russian crude enabled Moscow to sustain military operations (Herbert Smith Freehills, 2025). India's interests were multi-layered: energy affordability for domestic consumers, protection of refinery investments, maintenance of strategic autonomy, and preservation of the Russia relationship that had provided reliable defense supplies for decades. Surprisingly, former Reserve Bank of India Governor Raghuram Rajan suggested that the tariffs were not primarily about oil at all, but rather stemmed from diplomatic friction over credit for de-escalating India-Pakistan tensions (Business Today, 2025). If true, this reveals how apparently technical energy disputes can mask deeper political grievances.

Asymmetric Enforcement of Russian Energy Sanctions

The Power of BATNA

India's response illustrates the strategic importance of alternatives. Rather than capitulating to tariff pressure, New Delhi systematically strengthened its BATNA. Foreign Minister S. Jaishankar travelled to Moscow in August 2025, where both nations pledged to expand bilateral trade toward a $100 billion target by 2030 (CNBC, 2025b). Simultaneously, India accelerated energy partnerships with the United States itself - oil imports from America surged over 270 percent year-on-year in early 2025 (Royal Society for Asian Affairs, 2025). This is elegant BATNA development: India demonstrated it could sustain Russian imports if necessary while signalling willingness to diversify toward American supplies.

The result? By October 2025, reports indicated negotiations had progressed toward a potential deal reducing tariffs to 15-16 percent (CNBC, 2025a). India's consistent approach - described by analysts as maintaining strategic autonomy while protecting key economic interests - appeared to have influenced the course of the talks. From a principled negotiation perspective, this outcome was predictable. A party with strong alternatives never needs to accept unfavourable terms, and the opposing party eventually recognizes that coercion will not succeed.

Options for Mutual Gain

The emerging contours of a potential settlement reveal creative options that address both parties' interests. India reportedly considered raising import quotas for American agricultural products, particularly non-GMO corn (CNBC, 2025a). This addresses American export interests without requiring India to completely abandon energy supply diversification. The proposed mechanism allowing both sides to revisit tariffs and market access over time represents another integrative element - building in flexibility rather than demanding permanent commitments.

India's Oil Import Rebalancing Signal

From an energy systems perspective, I would note that the most sustainable solutions involve expanding the overall resource pie rather than fighting over fixed shares. The US-India COMPACT for the 21st Century, announced during Prime Minister Modi's February 2025 Washington visit, emphasized cooperation on energy security, critical minerals, and emerging technologies (ORF America, 2025). Such frameworks create value that pure zero-sum negotiations cannot achieve. The Quad alliance's focus on clean energy supply chains represents another multilateral avenue for addressing shared energy security concerns (Foreign Policy, 2025).

Objective Criteria and Legitimacy

One weakness in the American approach was the perception of inconsistent application of stated principles. India pointed out that the United States continued importing Russian uranium, palladium, and fertilizers without similar strategic necessity claims (Indian Ministry of External Affairs, 2025). The European Union, while implementing its own sanctions, simultaneously increased Russian LNG imports by 22 percent in the first half of 2025 (CSEP, 2025). China - a larger purchaser of Russian oil than India - faced no comparable secondary tariffs. This inconsistency undermined the legitimacy of the American position and strengthened Indian resistance.

Fisher and Ury (1991) emphasize that agreements should be based on objective criteria independent of either party's will. The G7 Russia Oil Price Cap of $60 per barrel represented one such standard - India had operated within this framework while purchasing discounted Russian crude. The Trump administration's unilateral departure from this policy, imposing penalties on India for doing precisely what the cap arrangement permitted, exposed the absence of consistent objective criteria (Covington & Burling LLP, 2025).

Lessons Learnt

The 2025 US-India tariff crisis demonstrates both the perils of positional bargaining and the possibilities of principled negotiation in high-stakes energy disputes. Initial positions appeared mutually exclusive - America demanding cessation of Russian oil imports, India insisting on sovereign energy choices. Yet by examining underlying interests, developing robust alternatives, and exploring creative options, both parties moved toward a negotiated settlement that neither could have imagined during the August confrontation.

Several lessons emerge for practitioners of energy diplomacy. First, coercive approaches - particularly those perceived as inconsistently applied - tend to provoke resistance rather than compliance. Second, nations with diversified energy relationships possess inherently stronger negotiating positions; BATNA is not merely theoretical but operationally decisive. Third, the most durable agreements expand value through complementary cooperation rather than simply dividing contested resources.

Perhaps most importantly, this case reveals that energy disputes are never purely technical. They involve national identity, strategic autonomy, and competing visions of international order. Negotiators who reduce such conflicts to barrel counts and tariff schedules miss the deeper currents shaping state behavior. The principled negotiation framework, by directing attention to interests rather than positions, provides essential guidance for navigating this complexity. As energy transitions accelerate and new resource competitions emerge - over critical minerals, hydrogen supply chains, and grid interconnections - these lessons will only grow more relevant.