US Treasury Secretary Scott Bessent has launched a sharp criticism against the impending India-European Union free trade agreement, scheduled for formal announcement on Tuesday. Bessent, a senior aide to former President Donald Trump, accused European nations of indirectly financing the ongoing Russia-Ukraine conflict through their energy trade practices involving India.
Accusations of Indirect War Funding
In an interview with ABC News, Bessent defended the Trump administration's decision to impose significant tariffs on Indian goods, directly linking these measures to India's energy trade with Russia. "We have put 25 per cent tariffs on India for buying Russian oil. Guess what happened last week? The Europeans signed a trade deal with India," Bessent stated.
He elaborated on what he described as a concerning pattern: "And just to be clear again, the Russian oil goes into India, the refined products come out, and the Europeans buy the refined products. They are financing the war against themselves."
Burden-Sharing Mismatch Between Allies
Bessent framed the situation as a significant disparity in burden-sharing between the United States and its European allies. While Washington has actively pursued energy decoupling from Moscow and implemented punitive tariffs, Europe continues to benefit from what Bessent termed as loopholes in the global oil trade.
The Treasury Secretary argued that President Trump has shouldered disproportionate economic and political costs while working toward a settlement in the Russia-Ukraine conflict. "Under Trump's leadership, we will eventually end the war," Bessent added, emphasizing the administration's commitment to resolving the conflict.
The Historic India-EU Trade Agreement
The criticism comes as leaders from India and the European Union prepare to formally announce the conclusion of negotiations on a comprehensive free trade agreement at a high-level summit on Tuesday. This announcement marks the end of 18 years of complex negotiations between the two economic powers.
The timing coincides with the state visit of European Commission President Ursula von der Leyen and European Council President António Costa to India, where they also participated as chief guests in the country's 77th Republic Day celebrations.
"Mother of All Deals"
Both Indian and European leaders have referred to the impending agreement as the "mother of all deals." Commerce and Industry Minister Piyush Goyal had previously described it as such in January, while European Commission President Ursula von der Leyen echoed this characterization during her address at the World Economic Forum in Davos last Tuesday.
"I will travel to India. There is still work to do. But we are on the cusp of a historic trade agreement. Some call it the mother of all deals. One that would create a market of 2 billion people, accounting for almost a quarter of global GDP," von der Leyen stated.
Agreement Details and Benefits
India's Commerce Secretary Rajesh Agrawal confirmed on Monday that negotiations have concluded on a free trade agreement covering goods, services, and various areas of cooperation. "It will be a balanced, forward-looking deal for better economic integration with the EU. It will propel trade and investment between both sides," Agrawal explained.
The agreement, which gained renewed momentum in 2024 amid global trade realignments including Trump's reciprocal tariff policies, is expected to provide:
- Zero-duty or preferential access for a wide range of Indian exports
- Coverage for textiles, leather, marine products, chemicals, gems and jewellery
- Benefits for electrical machinery, footwear, and automobile sectors
In return, India is anticipated to offer concessions in sectors such as automobiles, wines, and spirits.
Tariff Reduction Goals
European Commissioner for Trade and Economic Security Maros Sefcovic outlined the ambitious targets for the agreement, stating the aim is to achieve full or partial tariff reductions on 97-99 per cent of goods, while accounting for sensitivities in agriculture and dairy sectors.
Regarding the automobile sector, Sefcovic noted: "We are looking at the way which would help us find solutions, create new supply chains and make an even better business case for European car makers, while opening new possibilities for cooperation." He emphasized the agreement's strategic goal of building resilient supply chains and reducing risky dependencies.
Current Tariff Situation and Potential Relief
The Trump administration has implemented tariffs of up to 50 per cent on Indian goods, including a specific 25 per cent levy directly linked to India's purchases of Russian oil. These measures were doubled in August, creating significant trade friction between the two nations.
However, Bessent recently suggested there might be a pathway to easing these tariffs. Speaking to Politico on the sidelines of the World Economic Forum, he noted that Indian refinery purchases of Russian crude have declined substantially.
"Indian purchases by their refineries of Russian oil have collapsed. So that is a success. The tariffs are still on, 25 per cent tariffs for Russian oil are still on. I would imagine there is a path to take them off," Bessent stated.
This observation aligns with Reuters data showing India's Russian oil imports in December fell to their lowest level in two years, while the share of oil sourced from OPEC producers rose to an 11-month high.
Implementation Timeline
The comprehensive trade agreement is expected to undergo several months of legal vetting and ratification by the European Parliament. If approved, the deal could come into force in early 2027, establishing one of the world's largest free trade zones between two major economic blocs.
Bessent's criticism at Davos, where he previously called Europe's purchase of refined products from India "an act of stupidity," highlights the complex geopolitical tensions surrounding global energy trade and international alliances in the current economic landscape.
