Tit-For-Tat? India Pauses Key P-8I Deal As US Imposes Tariffs On Russian Oil Imports

India puts the Rs 31,500 crore P-8I Poseidon defense deal with US on hold, retaliating against Trump's new tariffs on Russian oil imports.

India Pauses Key P-8I Deal As US Imposes Tariffs On Russian Oil Imports (PHOTO: ZEE NEWS)

In a huge retaliatory step in the face of growing trade tensions, India has allegedly suspended a vital Rs 31,500 crore (around USD 3.78 billion) defense transaction with America. The move is a direct reaction to US President Donald Trump's threat of a 50% duty on Indian oil imports, an action India sees as hypocritical as it compares to parallel US and EU energy purchases from Russia.

President Trump's government had made the announcement of tariffs against India on the grounds of its ongoing purchase of oil from Russia. But India has always mentioned the double standards involved in this move, noting how the U.S. and European countries import large quantities of oil, gas, and fertilisers from Russia as well. A recent CREA (Centre for Research on Energy and Clean Air) report has also allegedly discredited the reasons behind Trump's move.

After maintaining silence for an extended period regarding President Trump's rhetoric, India recently issued a statement clarifying its position and has now seemingly initiated concrete actions.

Major Action: Poseidon Deal Halted

India has agreed to temporarily suspend the buy of six P-8I Poseidon anti-submarine aircraft from American aerospace major Boeing, defense website IDRW reported. The reportedly August 3 decision to suspend the deal came at a time when India is ramping up military modernization against growing Chinese military presence in the Indian Ocean Region and Arabian Sea.

There are 12 P-8I aircraft operated by the Indian Navy. India was Boeing's first overseas customer for the aircraft in 2009 when it ordered eight planes for about USD 2.2 billion (then about ₹19,000 crore). Four more aircraft were bought for about ₹8,500 crore in 2016.

Importance Of The P-8I Aircraft

In May 2021, the U.S. approved the sale of six more P-8I aircraft to India. This transaction for the Eastern Naval Command was initially estimated to be at about USD 2.42 billion (about ₹21,000 crore). The transaction was delayed owing to rising costs, with its worth ballooning to USD 3.6 billion (about ₹31,500 crore) in July 2025. Even as the cost increased, the Indian government was said to be on the verge of completing this year's deal because the Indian Navy strongly commended the aircraft's performance.

The P-8I Poseidon has the latest capabilities, such as NASM-MR anti-ship missiles with a 350 km range, which would be extremely useful for closely tracking Chinese naval presence in the Indian Ocean. Yet, the current tariff standoff seems to have made India hold back on this vital purchase.

Possible Consequences For Boeing And Indian Navy

If this sale is completely canceled, it will be a major setback for Boeing, which has about 5,000 employees in India and contributes about USD 1.7 billion (approximately ₹15,000 crore) to the Indian economy.

While the freeze on the P-8I purchase would affect the Indian Navy's surveillance ability, especially for its huge maritime jurisdiction of hundreds of naval ships and 20,000 merchant vessels, there has been rumor that India might be inclined towards indigenous solutions. With the expense of Poseidon aircraft being very high, India could be inclined towards its indigenous surveillance aircraft development projects, with DRDO and HAL said to be developing such indigenous solutions.