India-US Trade Ties Remain Unsettled After New Russia Sanctions Law, Finance Ministry Says

Trade relations between India and the United States remain unsettled after Washington enacted a new sanctions law targeting Russia and Iran, the Finance Ministry said in its September Monthly Economic Review released on October 1. 

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The Lindsey O Graham Sanctioning Russia and Iran Act of 2026 gives the US president the authority to impose tariffs of up to 100% on countries that purchase Russian crude oil. 

For India, which continues to buy Russian crude, the legislation adds another layer of uncertainty at a time when New Delhi and Washington are working towards an interim trade agreement. 

Finance Ministry Flags Challenge From New US Law 

The Finance Ministry acknowledged the changing trade environment in its latest review, pointing specifically to the passage of the Graham Bill by the US Congress and its subsequent presidential assent. 

The legislation is intended to increase pressure on buyers of oil from Russia and Iran, with the aim of restricting crude revenues flowing to the two countries. 

The ministry said the law has left trade relations with the US unsettled, given the provision allowing tariffs of as much as 100% on countries purchasing Russian crude. 

The development comes as India and the US continue discussions on their trade relationship. 

Goyal Meets US Trade Representative 

The Finance Ministry’s assessment was released on the same day Commerce and Industry Minister Piyush Goyal met US Trade Representative Jamieson Greer in Milwaukee. 

The meeting took place on the sidelines of the G20 Trade Ministers’ Meeting as both countries continued efforts to reach an interim trade agreement. 

Following the discussion, Goyal said the two sides had a productive conversation aimed at an early conclusion of a mutually beneficial interim agreement under the India-US Bilateral Trade Agreement. 

The two officials also exchanged views on discussions taking place under the US G20 chairship. 

India Faces Competition for Global Capital 

Beyond trade, the Finance Ministry also highlighted a tougher environment for attracting global investment. 

It noted that the artificial intelligence investment boom continues to drive capital expenditure and cross-border capital flows. At the same time, developed economies are competing for investment as they pursue renewed manufacturing ambitions. 

These shifts are taking place alongside what the ministry described as the increasing weaponisation of global supply chains. 

Against this backdrop, the ministry said India, like other developing economies, faces a stiff challenge in attracting capital. 

There are some encouraging signs, however. The ministry said indications suggest India’s net foreign direct investment inflows could perform better during the current financial year than they did last year. 

Short-Term Pressure on Indian Assets Remains 

The ministry also cautioned that geopolitical and geoeconomic uncertainty continues to put short-term pressure on Indian assets, including the rupee. 

It stressed that India’s economic performance in the post-Covid period cannot be taken for granted and that growth will need to be sustained quarter after quarter. 

For policymakers, the challenge now comes against a backdrop of shifting global capital flows, uncertainty around India-US trade relations and the potential implications of Washington’s new Russia and Iran sanctions law.