Good afternoon, friends. A long-awaited trade pact is setting the scene for the India-MENA corridor this week amid rising geopolitical tensions.
The mother of all pacts has landed, as India and the EU finally inked a long-awaited FTA. We deconstruct the gains, concessions, and the long-term outlook with inputs from former IMF economist Charan Singh, who views the pact as a harmonizing counterpoint in an increasingly protectionist world.
Meanwhile, Washington is still keeping India on a short leash. US Trade Representative Jamieson Greer says New Delhi has “more ground to cover” on Russian oil before any tariff relief. Consequently, the 50% duties are here to stay, for now.
Over in Saudi Arabia, Indian construction giant L&T landed a major extension contract for the Riyadh Metro, as Indian construction firms solidify their presence in Gulf megaprojects.
All of that and more, below.
Watch this space
TARIFFS — India has more ground to cover to secure any tariff relief from the US, with US Trade Representative Jamieson Greer flagging continued concerns over New Delhi’s purchases of reduced-price Russian oil. While India has made “a lot of progress,” weaning off Russian barrels remains difficult given pricing incentives, Greer told Fox News.
Why it matters: Sustained pressure from the US could prompt Indian refiners to further slash Russian crude inflows, allowing a greater market share to MENA producers.
While India has slashed Russian crude imports to their lowest levels in years, the comments suggest any leeway to lower the 50% tariffs on Indian goods remains distant. Russian crude is expected to hold a significant share of India’s imports into 2026, complicating trade talks, Bloomberg reports, citing analysts.
“India is going to have a heyday with this,” Greer said, acknowledging India’s gains from the newly signed India-EU FTA through expanded market access and labor cost advantages. He framed Europe’s renewed push for globalization as a contrast to Washington’s more protectionist stance to fix problems attributed to it.
OIL WATCH — Russian Urals crude is trading close to its widest markdowns to dated Brent in Indian ports since 2022. February-loading Urals cargoes are being offered at a markdown of USD 10 / bbl, up to USD 5 / bbl cheaper compared to 2024, Reuters reports, citing trading sources.
Why it matters: Indian state-run refiners have been tilting back toward Middle East crude as US pressure over Russian purchases intensifies — meaning Gulf producers are closely watching Urals pricing shifts as they compete for a share in one of the largest oil demand centers globally.
Sanctions pressure: The wider markdowns follow Western sanctions targeting Russian energy exports and shipping, prompting sellers to lower prices to place barrels in Asia.
Refiner response: State-run Indian Oil Corporation, India’s largest refiner, has booked about 7 mn bbl of alternative crude for March loading, including supplies from Brazil’s Petrobras, to replace Russian volumes.
INFRASTRUCTURE — Mumbai-based engineering and construction giant Larsen and Toubro (L&T) secured a contract from the Royal Commission of Riyadh City to build the extension of Riyadh Metro’s Red Line, according to a company statement.
The project covers the design and turnkey delivery of an 8.4-km extension of the metro line spanning both elevated and underground sections as well as five metro stations which will be constructed by L&T’s heavy civil infrastructure business. Although the firm did not reveal the ticket size, it is classified by L&T in the major contracts category which are generally valued between USD 600 mn-1.2 bn.
Why it matters: L&T is a major engineering, procurement, and construction contractor in the Middle East executing projects across oil and gas, green hydrogen, power transmission, and civil infrastructure. The firm is also involved in the Neom city covering projects across renewable energy and grid infrastructure with contracts exceeding USD 2.7 bn.
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Data point
3k+ aircraft — that’s the cumulative order backlog held by the UAE, India, and Saudi Arabia with Airbus and Boeing, more than double the size of their current fleets, according to a statement from Avolon. Around 900 deliveries are expected over the next three years.
The global scene: While the aviation sector’s prospects are looking promising, thanks to persistent low fuel prices and growth from markets like the US, Europe, the Gulf, and India, a chronic undersupply of aircraft is weighing on the outlook. Airbus and Boeing’s total backlog now stands at more than 11 years, as the two — along with Embraer — saw 2k new orders last year. Going forward, the aircraft shortage is expected to lead to higher lease rates.
Still, the sector’s earnings are set to come in at USD 41 bn this year, which would make it the fourth year of gains as it looks to recover USD 182 bn in pandemic-induced losses.
Happening this week
India Energy Week is underway and will run through Friday, 30 January in Goa. Senior government officials including energy ministers are attending the event alongside India’s major trade partners, diplomats, and executives from energy majors such as Adnoc and Aramco. Prime Minister Narendra Modi inaugurated the event yesterday, inviting foreign investment into India’s energy sector.
We have a detailed update on Modi’s speech below.
The big story abroad
Global trade is dominating headlines for the second morning running after the EU and India signed a trade agreement. The move can be understood as a strategic buffer against volatile trade announcements by Washington. Markets will be closely watching US President Donald Trump’s reaction to the news.
Trump unfazed by USD slide: The greenback continued its slide on Tuesday, spurred on by comments made by Trump, indicating a lack of concern about the currency’s decline — “the USD is doing great,” he said in response to a question about the currency’s fall. The USD hit its lowest level in four years after a 1.3% dip yesterday, extending its 2026 losses to 2.6%.
AND IN MARKET NEWS- The S&P 500 closed at a fresh high yesterday, with investor optimism about the wave of upcoming Big Tech earnings fueling the rally. Meta, Microsoft, and Tesla will be out with their earnings today and Apple will follow suit tomorrow.
ALSO IT’S FED DAY- The US Federal Reserve will conclude its first policy meeting of 2026 today and markets are expecting a hold. Markets are also closely watching for Trump’s pick for Fed Chair Jay Powell’s replacement, with his nomination expected sometime this week.
WATCH THIS SPACE- Saudi Arabia yesterday said that it would not allow its airspace or territory to be used in an attack on Iran, Reuters reports. The news, delivered on a call between Crown Prince Mohammed bin Salman and Iran’s president, came a day after the UAE made a similar statement.
In context: Trump said last week that an “armada” was steaming toward Tehran.
Circle your calendar
Canada’s Prime Minister Mark Carney is likely to visit India in the first week of March as Ottawa steps up efforts to diversify trade ties beyond the US, Reuters reports, citing India’s High Commissioner to Canada. The visit is expected to focus on trade and investment, with potential agreements spanning energy, critical minerals, artificial intelligence, and nuclear cooperation, as both countries look to restart momentum on a long-stalled freetrade agreement.
Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays, and news triggers.
