U.S. and India Trade Talks Stalled Over Russian Oil Purchases and Tariff Disputes

U.S. trade representative Jamieson Greer on Thursday signaled that a deal with India was not on the cards soon, as Washington and New Delhi continue to hash out the finer points of a much-awaited agreement.

"I don't think there is something imminent," Greer said in response to a query by Indian news agency ANI, adding that "we truly have identified the universe of items that are sticking points."

His comments come just a day after U.S. President Donald Trump and Indian Prime Minister Narendra Modi's spoke over the phone, a call that Greer described as "very constructive." He also held bilateral meetings with Indian Commerce Minister Piyush Goyal, who is in the U.S. to negotiate the trade deal and to attend the G20 trade ministers meeting in Milwaukee.

Goyal, in a social media post, seemed more upbeat about the negotiations as he underscored that discussions with Greer were around "early conclusion of a mutually beneficial interim agreement under the India-US Bilateral Trade Agreement."

"Goyal is counting the issues already resolved, and Greer is counting the ones that remain," Ronak D. Desai, visiting fellow at Stanford's Hoover Institution, told CNBC, adding that the last issues in any trade deal were the hardest.

For Washington, India's continued purchases of Russian oil remain an important point of friction, while for New Delhi, the priority is to protect the politically important parts of the agricultural sector and preferential tariffs that give it an advantage over peers, according to experts.

On Wednesday, Modi said his conversation with Trump was "productive," and the two leaders not only reviewed bilateral trade, defense, energy and critical technologies but also discussed "ongoing efforts to advance global peace and security."

While the Iran war has threatened India's energy security, pushing it to increase its reliance on Russian oil, the U.S. administration believes that New Delhi's purchase of Moscow's barrels is funding the Ukraine war.

The ties between the U.S. and India have been under strain for more than a year, and New Delhi faces fresh risk of Washington slapping up to 100% tariffs against it for continuing to buy Russian oil.

That could derail the trade talks, where India is seeking preferential tariffs from the U.S. that make its exports to Washington more competitive.

The U.S. had imposed a 25% punitive tariff on India last August for buying Russian oil, raising the duties on imports from New Delhi to 50%. In February, duties were reduced to 18%, with Trump claiming India had "agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela."

New Delhi did not endorse those details shared by Trump, and it has maintained that ensuring energy security was the sole driver of its purchases.

Since the start of the year, the U.S. and Venezuela combined have become important to India's energy basket, but given the global supply constraints due to the Iran war, India cannot spurn supplies from Moscow.

"We may also be reaching the limits of trade complementarities between the two countries under current circumstances," Arpit Chaturvedi, South Asia advisor at strategic advisory firm Teneo, told CNBC.

Neither side at present appears able to accommodate the other, nor are they yet in a "position to simply agree to disagree and conclude the deal around those differences," he said.

Currently, Indian exports to the U.S. face a 10% tariff, following the conclusion of USTR's investigation into the acts, policies and practices of forced labor in 60 countries.

As per the Indian government, a substantial share of the country's exports to the U.S., such as generic pharmaceuticals and smartphones, remain outside the scope of the 10% duty.