As India faces one of its toughest diplomatic crises in over three decades, former foreign secretary, Shyam Saran, explains that India has perhaps seen a worse crisis during the Cold War when the entire Soviet Union market was taken away almost overnight. India, he says, needs to engage more with the developing world and its immediate neighbours. There is an opportunity for India to focus on this constituency, even as it expedites its trade agreement with the European Union. On President Trump, Saran added that Trump’s tariff assault on India has nothing to do with Russia. Edited excerpts.
Shweta Punj: When you look at the diplomatic situation that India finds itself in today, how challenging a situation are we in? We have tariffs, 50% penalty tariffs kicking in, and honestly, it really puts us not only in a diplomatic tough spot but also from an economic point of view.
Shyam Saran: Yeah, so thank you for inviting me to your program. Number one, I just wanted to comment that when you said this is the best of times and the worst of times and you focused only on India, actually this is the best of times and the worst of times for the entire world. So, it is not as if we are singular in that respect. But you are quite right that what we are confronting today is unprecedented, because if you have a 50% tariff on a large number of export goods to the United States, obviously it is almost like a trade embargo—no doubt about that, whether you like it or not.
Shweta Punj: And the largest market is blocked out for us.
Shyam Saran: Absolutely. So, there is no alternative but to try and see, number one, how the government, in this period of crisis, can support the affected industries. Already there should be plans for diversification, because yes, the US is a very important trade partner but it is not the only trade partner. There are other important markets for us. For example, the European Union, the entire East Asia and Southeast Asia market. So, I would certainly hope that we begin the process of looking for diversification. Now, this will not happen overnight, but I think it is important to make a start.
The other point I would like to make is that we are looking at this crisis as something unprecedented—unprecedented in scale and unprecedented because it is something we have not had to face for quite a long time. I would just like to remind your viewers that we went through perhaps an even worse economic crisis, along with a political crisis, in 1991–92.
Shweta Punj: And we came out stronger.
Shyam Saran: So, I was at that time in the Prime Minister's Office. I had a ringside seat to what was happening. Believe me, the economic crisis was much worse than what we are confronting today, because we were nearly bankrupt. You will recall that we had to mortgage our gold reserves in order to survive, in a sense. And that was coupled with a major geopolitical crisis. What was that? 1990, if you remember—the Cold War ended, right? So, the 30-year strategic partnership that we had with the Soviet Union from 1960 to 1990 evaporated overnight because the Soviet Union collapsed.
Secondly, the economic part is perhaps not considered by many people. You will recall that a large part of our exports—take tea for example, or textiles—our market was the rupee-trading area of the Soviet Union and the East European countries. Now, when 1990 happened, the Cold War ended, and this market also evaporated almost overnight. We had to look for other markets.
So, I just want to put this in perspective. One should not think that this is something absolutely new in history. No, we have faced perhaps even greater challenges before, and we have been able to overcome that transition quite successfully. So, if we were able to do that, why not confront the current situation, difficult as it may be? If you put it in that perspective, I think we are underestimating the ability of India not only to overcome this, but, as you said, to come out even stronger.
Shweta Punj: So, there has been this whole debate about why President Trump is targeting India. What do you think? Is he targeting India?
Shyam Saran: Yes.
Shweta Punj: He is targeting.
Shyam Saran: Of course.
Shweta Punj: And why is that?
Shyam Saran: Who knows why he is targeting? Maybe it is because, as you may have seen, every few days he says that he stopped a nuclear war between India and Pakistan.
Shweta Punj: He said that again.
Shyam Saran: You know, you have him saying that he really deserves the Nobel Prize because he has stopped so many wars. Now, he has that kind of ego, and he feels that maybe India, by not acknowledging what he thinks was a critical role he played in bringing about the ceasefire between India and Pakistan after Operation Sindoor, is not properly acknowledging him. You know, personal pique, personal prejudices play a very important role, as you have seen with respect to…
Shweta Punj: Isn't this the irony, Mr. Saran, because so many Indians in India and in America were supporting President Trump, right?
Shyam Saran: Sure.
Shweta Punj: So, somewhere there is a feeling of being very let down, right? Because we thought that President Trump would be good for India. He is good for business. But at the moment, that is not what it looks like. And, as we have just discussed, he is targeting India and citing reasons of buying Russian oil to penalize us. But when you look at the data, it shows that China buys more Russian oil, and it was the United States that had asked us to buy Russian oil in the first place. So, that reason is not it. Is it only an ego issue for President Trump that he is going after India the way he is…
Shyam Saran: I am quite convinced that this tariff assault on India has nothing to do with Russia. I mean, if it had something to do with Russia, then why would Alaska have happened? This is about India, and I think it is important to understand that this is about India. Because, as you said, there is a bigger buyer of Russian oil.
Why are you not ready to take action? Because it is very openly mentioned—oh, but you know, China is different… You are saying they have the ability to hit back at us. Therefore, we will not act against them. But the Indians are perhaps a softer touch, and so we can hit at them. It's not only China buying oil from Russia. You have Turkey as well. There are several countries in Europe itself that continue to buy not only oil but also gas from Russia. So, it seems as if you are taking a blinkered view, not taking those into account, and singularly targeting India. This is why I am saying it has not very much to do anymore with only the trade war. It is more geopolitical in character.
Shweta Punj: So, we will come to that. We will come to the geopolitical character of it. But I want to get your thoughts in on the new ambassador that's coming to India, Mr. Sergio Gor. He has Trump's ear, of course. He is a favourite in which is why he is being sent to India. How do you view that development? And do you think that would help us rebuild our relationship with the US?
Shyam Saran: Well, that we can only know after he has taken office and see what his mandate is. But two things strike me as rather odd. You see, the diplomatic practice is that when you are appointing an ambassador to another country, you don't announce it before what is called the agreement has been received. That means, you propose confidentially to the receiving country that I intend to appoint so and so as ambassador to your country. And it is only when you receive what is known as the agreement, which means I approve, then only the two sides decide to more or less simultaneously announce the appointment. Okay? So, this is the normal diplomatic practice.
Now, here, as far as I know, this has been announced unilaterally by Trump. And I doubt whether we have gone through the normal diplomatic practice. But then you might say, well, Mr. Trump does these things quite sort of without really worrying about what is the practice or what is the norm. But the fact is that this is rather odd that you should completely bypass the normal diplomatic practice in appointing somebody. Announcing his appointment.
The second thing which I worry about is the fact that his appointment as ambassador to India has also been paralleled with his appointment as special envoy for Southwest Asia and Central Asia. That means he is sitting in Delhi, but he is also kind of whatever Trump wants him to do with respect to relations with the rest of the countries of South Asia, some of the Central Asian countries. So, normally an ambassador to a country, particularly a country as important as India, you are having an ambassador who is in a sense like a part-time ambassador. Isn't it?
Shweta Punj: Wow, and this is the first we have a part-time ambassador?
Shyam Saran: We have never had a situation like this, where a resident ambassador also has, you know, as part and parcel of his appointment as ambassador to India, also has been given additional responsibilities. Now, if you have additional responsibilities, the first question we raise, how much time will you devote to the management of bilateral relations with India? Legitimate question to ask.
Second is, if you are a special envoy to other countries in this region and Central Asia, which is huge, number of countries you are covering is huge. So, you are going to be only spending less time dealing with India bilaterally, which is your main function. And you are looking at other countries. Now, question may arise, you know, are you going to also sitting in Delhi, you know, do shuttle diplomacy between India and Pakistan or India and Bangladesh or India and Sri Lanka? Now, that would not be welcome to us. No, I am not saying that this will happen, but certainly that possibility is there. And therefore, in terms of what this appointment means for India, I think we have to wait and watch. Because, as I said, what he would actually do after coming to India? You said he will have the ear of the president. What will he be whispering into that year, you know?
Shweta Punj: So typically, what would you recommend in a situation like we find ourselves in today? We have 50% tariffs on India, which is massive, unprecedented. A big market has been locked down for us. There are millions and millions of exporters and workers in these factories whose livelihoods depend on these exports. What are our options in working with the US side? We heard Mr Jayashankar say that talks are on. It's not the end. Talks are on. Back-channel conversations are on. Where do we go from here?
Shyam Saran: So, it's a good thing if back-channel talks are on. We have friends in the United States, including in this administration. We have the Indian diaspora in the United States, also quite influential. So, I have no doubt that they are very useful instruments to try and see whether we can bring the relationship back on track. But let us not fool ourselves.
The person who takes these decisions is President Trump himself. Okay? And there is a certain kind of atmosphere that we see having developed within Washington where even the most senior person in the administration does not wish to say or do anything which he thinks will be against what Mr. Trump himself wants. Okay? So, even like, for example, a lot of the Republicans have great suspicion of Putin. You know, they have not been happy with his being given red carpet treatment in Alaska. Okay? But because Mr. Trump decided that he wants to do this, do you hear any senior, you know…
Shweta Punj: What do you think happened in Alaska? There are so many stories during the rounds looking at the body language of the two leaders. President Trump went in looking a certain way, came out looking a little bit, what do I say, maybe looking a little bit tired while Mr. Putin really looked like someone who was steering this whole conversation. How are you reading into that?
Shyam Saran: Well, I wish I was a fly on the wall who could listen to what they were talking about. But I am judging the outcome from the press conference which was held. And as you see, there also there were some new novelties which emerged. Normally in a visit like this, it's the host who talks first. You know, and then your guest. Here it was rather odd that Putin spoke first and then President Trump spoke. That itself was somewhat unusual. Secondly, Trump spoke for only about 5 minutes, 4-5 minutes and you had Putin who spoke for much longer. And it was a platform which he used to really put forward the Russian narrative on Ukraine. Okay? Secondly, a very important demand from Trump that I want a ceasefire. And if you recall, before landing in Alaska, he said that my demand is ceasefire. And if the ceasefire is not agreed to by Putin, there will be severe consequences. You ended up the meeting by his saying, no, no, no, no, ceasefire is not important. I agree with President Putin that we should go straight for a peace agreement.
Secondly, to me rather, also rather ominous for Ukraine is to talk about territorial swaps. Which is essentially saying, sorry, you have to make some territorial concessions before this war can end. So, it was not, if there was a certain objective that Trump had in having this meeting, thinking that a personal relationship with Trump would deliver a peace agreement, that has not happened. Even so far it has not happened. So, I think, on balance I would say, whatever evidence we have points to Putin having this round is Putin's round.
Shyam Saran: So, you were mentioning for example, relations with China.
Shweta Punj: Yes.
Shyam Saran: So, it is, whether there was a US factor or not, relations with China for its own reasons is very important. Because China is your neighbour. We occupy the same strategic theatre in a sense. We are both large Asian countries. And therefore, even if there are strong differences between the two countries, keeping engagement with China going is very important to manage the relationship. So, even if I feel that the relationship in essence is adversarial. There are many points of confrontation between the two sides.
Border being in fact one of the most important. But at the same time, there are reasons why the two countries need to work together. It's not only from the Indian side. It is also from the Chinese side. And the recent improvement of relations between India and China predates this crisis with the United States. So, we should remember that. That is not a knee-jerk response to, you know, if the Americans are going to be pushing us, then I will turn to China. That's not the case. You have had this process of improvement which started with the meeting between Prime Minister Modi and President Xi Jinping in Kazan in Russia. And there is likelihood of their meeting again at Tianjin where they are going to have the SCO summit. So, there is a certain continuum in the relationship which may be further promoted given greater momentum because of what has happened. But it's not that this is a kind of a reaction, you know, tit for tat reaction to that.
That is one thing. Because as I said, it's important to remember that India-China relations have a significance of their own. That is one. Second is with regard to neighborhood. Now, that's a sore point with me because I have maintained time and time again that the first order of business for you is to secure your own periphery. If you leave doors open, somebody will walk in. Okay? So, it is extremely important that in terms of your foreign policy, the first order of business is your neighborhood. And what you can do to stabilize the neighborhood, what you can do to become the engine of growth for your neighbors.
You know, you are a very large economy. You can. So, why are you not doing that? You have said neighborhood first is your strategy. But that strategy needs to be translated into actual action on the ground. Whether it is in terms of connectivity, whether it is in terms of really opening out your market to whatever your neighbors can produce. How much difference will it make to your market? You are a huge growing market. Even if they were going to sell to you whatever they produce, it will still be a small fraction. Isn't it?
So, I think, and here I would say, the issue of engagement that I was talking about with respect to China applies to all our neighbors including Pakistan. So, we have to maybe reassess our neighborhood policy. That should be the first order of business. Whether it is in terms of material resources that you deploy. Human resources that you deploy. You should have a ministry of external affairs which is not only has the right number of people to really deal with the neighborhood, but there should be also a knowledge resource. How much do we know about our neighbors? We think, oh, he is the neighbor, so I know everything. You don't.
Shweta Punj: We think of them as, you know, some…
Shyam Saran: Appendage. Yes, they are not an appendage. So, I think we need to shift the focus away a bit from our global role to our subcontinental role. Because the realization should come that our ability to play a larger regional role, our ability to play a larger global role is very much dependent upon how successful you have been in securing your neighborhood. Because if it is not secured, every time you are doing a global projection, it will drag you back.
That's why I said, you leave doors open, somebody will walk in.
Shweta Punj: Right. So, you mentioned Pakistan. And with Pakistan, we have seen a steady deterioration, especially after Pahalgam. The rhetoric has been very negative. Where do we go from here in terms of India–Pakistan relations? And how crucial are they in the new global order that's emerging? Why is it so important for us? You mentioned that India could take the lead in bringing this whole region together. That’s right. What India probably needs to do is press the reset button in this engagement. So, how do we deal with Pakistan right now?
Shyam Saran: It has always been difficult to deal with Pakistan. This is not a new challenge. We have plenty of experience in handling it.
Shweta Punj: And how does one deal with Mr. Bhutto making random statements?
Shyam Saran: Well, we have dealt with Mr. Bhutto before, with Pervez Musharraf, and with many Pakistani leaders. Not all those experiences have been pleasant. But there has always been a realization—and I think it still exists—that unless you are engaged, unless you have dialogue, how do you even begin the process of normalizing the relationship? Even at the height of the Cold War, the Soviet Union and the US were talking to each other, despite all-round confrontation. Both considered it important to remain engaged, because conversations also give you insight into what the other side is thinking.
If you don’t engage, how do you know what the other side is thinking? How do you adjust your own position accordingly? Yes, today it is very difficult to see how we can resume talks. After all, these are still early days after Pahalgam and after Operation Sindoor. It may take some time. But we should not lose sight of the larger objective—that for India’s own interests, for securing our neighborhood, we cannot keep Pakistan out.
Shweta Punj: India has more at stake.
Shyam Saran: Yes, it does.
Shweta Punj: We are a promising economy. We have a more important role.
Shyam Saran: Exactly. Why let Pakistan drag you down? After all, Pakistan has practiced cross-border terrorism against India since the 1980s. Where is Pakistan today, and where is India today? It’s not as if Pakistan has managed to pull you down. You are now ten times the size of Pakistan’s economy—or more. You are growing at 6.65% per annum, the fastest-growing large economy in the world. Where is Pakistan? So why treat it as a great rival?
Shweta Punj: Do you think India has taken a strong-arm approach toward its immediate neighborhood?
Shyam Saran: The stakes are very high. And the essence of diplomacy is careful deliberation and reflection before reacting. “Twitter diplomacy” may sound upbeat, but as a diplomat I would say it does not enable good diplomacy. Yes, you may need to react quickly because that is today’s standard mode of behavior, but behind that, there must always be careful thought.
Second, about our relations with neighbors—I would not say the record is bad. Look at how quickly we bounced back with Sri Lanka. At a time of great crisis, when Sri Lanka was on the ropes, which country came to its aid? It was India. And we see the results today. Even with a JVP government, the relationship remains positive.
With the Maldives, yes, they started with an “India Out” campaign. Yet by keeping a sober approach and avoiding a tit-for-tat response, we turned the situation around. The Maldivian president visited India, and our Prime Minister visited there as well.
Even with Bangladesh, after the change of government, our foreign secretary went as an envoy and met the chief advisor, conveying that whatever the issues, we are willing to continue the strong connections we have built—whether in transit, trade, or movement of people.
But it always takes two hands to clap. Yes, as the bigger country, India should be more forthcoming. But we should not forget that the other side also needs to respond. Neighbors are not always ready to reciprocate positively. That is also a reality.
Shweta Punj: How do you see the new power blocks emerging in this new post-Trumpian global era?
Shyam Saran: Number one, we don't have a global order. We have global disorder. We do not know where the chips are going to fall once this period of turbulence comes to an end. That's a big, big question mark. What I see and this is just a personal perspective.
I see that this Trump era is going to severely, severely impact on the credibility of the United States as a global power, on its influence around the world. On balance, this should add to the influence and power of China. You know, we would hope that Europe having understood that the American connection is not as solid as they thought it would be. Look at the way in which Trump has gone for them with the tariffs. It is not even very clear whether that agreement which has been reached, whether that is going to be implemented. So, we have always said our preference is for a more multipolar order. That is not a global order which is dominated by one or two countries.
Shweta Punj: We have a Prime Minister who has travelled extensively—so many countries have seen an Indian Prime Minister visit for the first time. We have been engaging a lot more. But you are saying we need to do even more.
Shyam Saran: Not only more. One of our problems is that we focus far too much on events and much less on process. Process is as important—if not more important—than the event. An event takes its significance from where it fits into the process.
So, one visit is over and we are already planning the next, without really focusing on the decisions taken during the visit and how to ensure the system delivers on those commitments. Events are important because they give visibility, but process is the hard, unglamorous work behind the scenes. That’s a larger weakness—we focus too much on events. The Prime Minister has done very well in terms of outreach. Look at how he reached out to neighbouring countries right after his inauguration. He can’t be faulted on that. But the system must take advantage of the opportunities he has created.
Shweta Punj: So, is it the bureaucracy, Ambassador Saran?
Shyam Saran: No, I wouldn’t blame the bureaucracy alone. It is the governance system. And this applies not only to foreign policy but to governance within the country. There are successes, but we could achieve much more if the system were more efficient and better organized.
Shweta Punj: What advice would you give Indian policymakers, especially diplomats, who are dealing with a temperamental Trump and the Russian administration? Three things you would tell them?
Shyam Saran: First, even though our foreign service is small compared to the size of the country and its engagements, we are fortunate to have a highly professional, well-trained group of people who understand India’s interests and objectives. That is a huge asset. I don’t say this only as a former Foreign Secretary; I genuinely believe we have one of the finest foreign services in the world. Leadership must recognize this and utilize it fully.
Second, on dealing with Trump: this core of diplomats has overcome equally, if not more, difficult crises in the past. They should be given the confidence that what we face today is not the end of the world. We have handled equally serious challenges before, and we can do so again.
Third, this is not only a diplomatic crisis—it is also an economic one. Diplomats can smooth the rough edges and create a more congenial external environment by reaching out to major powers, developing ties with the EU, and fast-tracking the free trade agreement. The EU is the world’s largest market. We must also engage the developing world—countries like Brazil, Argentina, and several in Africa and Southeast Asia. I would even suggest re-examining RCEP or considering membership in the CPTPP. Yes, it is a high-standard agreement, but we should be aiming high, not settling for the minimum.
Shweta Punj: Absolutely. In hindsight, could we have taken a more open approach towards RCEP?
Shyam Saran: From my point of view, the most economically dynamic region of the world today is East and Southeast Asia. We often think of our neighbours as poor, but they also present opportunities. Strengthening trade and investment relations with them reconnects us to the most dynamic economic region. That makes sense. Of course, continue negotiations with the EU and, if possible, with the US—though we must protect our red lines. Once breached, concessions become permanent. But yes, pursue the EU deal and consider fast-tracking Mercosur. Most importantly, we must integrate better with our own region and East Asia. Japan, for example, remains an excellent partner.
Shweta Punj: India could become a leader of this bloc.
Shyam Saran: Even if not immediately a leader, these countries have an interest in India because we are the only large emerging economy growing at this pace. Which other large economy is expanding like us? Naturally, global players want to be in India. We should take advantage of this—but not with a complacent attitude that the world is waiting for us. We are competing with other investment destinations and trade partners. We must be proactive.
By staying out of RCEP, we have moved to the margins. In Southeast Asia, we may have good bilateral ties with some countries, but we are not seen as a major factor in regional trade and investment. To be regarded as a critical player, we need to put in hard work.
In the short term, we must shield affected sectors and begin diversification now so that results come over time. But looking ahead, our economic and commercial interests clearly lie in East and Southeast Asia, the fastest-growing region right next to us. Many of these countries want us to play a bigger role. That is an opportunity we have not fully leveraged.
Shweta Punj: Perhaps because our sights have been set on the big markets.
Shyam Saran: True. We have looked at the US and Europe, and perhaps hesitated in Asia because of China’s dominance. But remember, China is already your largest trade partner. By staying outside RCEP, you deal with China bilaterally, where your leverage is limited. Within RCEP, you would deal with China alongside 15 other countries, many of whom share your concerns. They wanted India in precisely because we provide balance. Outside it, we face China alone. That dynamic has not sunk in fully.
Shweta Punj: What about a bilateral trade agreement with the US? Will it still happen?
Shyam Saran: It could—President Trump is mercurial. Tomorrow he may decide he wants a deal on terms acceptable to us. Nothing is excluded, but everything is uncertain.
Shweta Punj: But we have already given so much to the US.
Shyam Saran: Exactly. We have made significant concessions that we would normally not. The danger is thinking these are temporary. Historically, such concessions become sticky and hard to reverse. We must keep the long-term view in mind.
Shweta Punj: One final question, Ambassador Saran. President Trump’s tariffs are hitting India’s poor the hardest—the factory workers. Yet we continue to engage with the US, buy its defence equipment, and let its big tech firms use our data. Tesla, Starlink—they are all here. Isn’t this unequal?
Shyam Saran: It is indeed an asymmetrical relationship. We must recognize that. I believe we have already made important concessions, though I don’t know the details. I would caution against making more simply to secure a trade deal. This is not just about trade. Politics, geopolitics, and President Trump’s ego are also at play. More concessions will not necessarily change that.
That said, in areas like defence and technology cooperation, we should continue, because they are in our own interest. As long as those remain unaffected at the top level, we should not do anything to undermine them. Otherwise, we must use every available channel—back channels, friends, and perhaps even the Indian diaspora—to influence the situation.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
