India, EU brought together by US pressure

At its Republic Day celebrations last month, India had as its chief guests European Commission President Ursula von der Leyen and European Council President Antonio Costa. The next day, Von der Leyen cheerfully announced: “We did it, we delivered the mother of all deals.” She was referring to the finalization of the India-EU Free Trade Agreement.

The agreement had been under negotiation for two decades. This quick finalization in New Delhi was obviously propelled by the hostile posture of the US toward both these erstwhile friends. Over the last year, the White House has frequently threatened EU members with tariffs, consorted with Russian President Vladimir Putin and pressured Ukrainian President Volodymyr Zelensky to accept a humiliating peace.

The administration last month made aggressive statements on taking over Greenland — claims that have firmly united EU members behind Denmark. At Davos, Von der Leyen had referred to problems with the US by speaking about the need for the EU to build “a new form of European independence,” while emphasizing that Europe favored “fair trade over tariffs.”

India has also been badly treated. Chafing under India’s “failure” to credit it with ending the Indo-Pakistan conflict in May last year, the US imposed 50 percent tariffs on Indian exports to the US, which included 25 percent penal tariffs due to India’s imports of Russian oil. It went on to irritate India with robust gestures of friendship toward Pakistan, including a private lunch at the White House for the Pakistani army chief.

Despite the absence of a free trade agreement, India’s trade ties with the EU have flourished: in 2024-25, the trade in goods was $136 billion, while trade in services was $83 billion. Still, the EU’s trade with India was only 2.4 percent of its total goods trade. Both sides feel that considerable potential remains to be tapped.

The looming US shadow encouraged the constructive addressing of contentious issues by both sides

Talmiz Ahmad

While talks with the EU languished, before 2012, India had made slow progress in finalizing free trade agreements with some Asian countries and blocs — the Association of Southeast Asian Nations, Singapore, Japan, South Korea and Sri Lanka. It started looking westward only from 2022, viewing this as essential to fulfilling its aspirations to emerge as a developed nation by 2047.

Before the latest negotiations with the EU, India had finalized deals with the UK, New Zealand and Oman. Given the earlier tardy progress in negotiations, there is little doubt that the looming US shadow encouraged the constructive addressing of contentious issues by both sides. This positive approach culminated in the new agreement, which binds the 2 billion people of India and the EU in a beneficial economic embrace.

Under the deal, duties will be eliminated or significantly reduced on nearly 97 percent of traded goods, alongside reduced barriers in several services sectors. The EU will particularly benefit from reduced Indian tariffs on European automobiles, going from 110 percent to 10 percent, while tariffs on wines will fall from 150 percent to 75 percent immediately and gradually to 20 percent. Tariffs on machinery, chemicals and pharmaceuticals will also be eliminated gradually.

The free trade agreement has been complemented by an important agreement to strengthen security and strategic ties, as the two sides signed a deal titled: “Towards 2030: A Joint India-European Union Comprehensive Strategic Agenda.” It seeks “to further reinforce the strategic partnership” between the two sides. This makes India the EU’s third Asian defense partner, after Japan and South Korea.

The agenda set out in the agreement is both diverse and ambitious. It covers security and defense, regional connectivity, global governance, and technology and innovation. This ensures that economic cooperation will impart resilience and vitality through strong supply chains, a conducive digital environment and more robust security and defense cooperation. European commentators have even suggested that the EU could be making efforts to become “strategically sovereign” by building ties with partners like India that are outside the present European defense framework.

While celebrating these first steps in shaping a mutually beneficial relationship, a reality check is necessary

Talmiz Ahmad

Indian observers are equally enthusiastic. They see opportunities for India-EU cooperation in such areas as counterterrorism, cybersecurity and hybrid warfare, as well as maritime security and maritime domain awareness, with regular military exercises to promote interoperability. The Indian and European navies have been increasingly working together over the last year as part of the EU’s naval projects — Operation Atalanta and Operation Aspides — which have been active in the western Indian Ocean.

This nascent India-EU engagement owes much to the obduracy of the US administration. Not surprisingly, US Treasury Secretary Scott Bessent accused the EU of “indirectly financing a war against themselves,” a reference to India’s continued purchasing of Russian oil. US Trade Representative Jamieson Greer churlishly criticized the EU for importing “low-cost labor” from India and undermining US efforts to isolate Russia, while taunting Brussels that “India comes out on top” as a result of the deal.

Still, while celebrating these first steps in shaping a mutually beneficial relationship between India and the EU, a reality check is necessary. The two sides remain divided on important issues. Thus, the EU remains an integral part of the US-led Western alliance and will be crucially dependent on the US’ security support for several years to come. Flowing from this, it will continue to view Russia as a security threat, while India may be expected to maintain a close strategic partnership with it, with substantial energy, defense and security components.

These realities place severe limits on how far India-EU strategic ties can go. For now, it is the bilateral economic agenda shaped by the free trade agreement that will flourish.

• Talmiz Ahmad is a former Indian diplomat.