Every Door India Opens Leads Back to Washington

On July 17, two assessments of India's position landed within hours of each other.

It's (India-US relations) in bad shape....what is lacking is a trusted channel between India and Washington — Fareed Zakaria GPS

That same day, a separate report showed India's tech deal volumes hitting a five-quarter high. ^[1] The dissonance is not a contradiction. It is the visible surface of a structural problem India has spent five months living inside. In February, the bet looked sound. On February 10, India and the United States formalized a technology partnership: a bilateral AI task force, a trade pact cutting US tariffs on Indian goods from 50% to 18%, a $500 billion bilateral trade target, and a meeting between India's technology minister and the US ambassador on "semiconductors, electronics manufacturing and supply chain resilience." ^[2] The premise was straightforward: the United States would be India's technology partner and its security guarantor, and the two roles would reinforce each other. Eighteen days later, the US launched Operation Epic Fury against Iran. The Strait of Hormuz — through which 25% of India's oil and 30% of its LNG flow — became a combat zone. ^[3] By March, India was cutting natural gas supplies to its industries after drone attacks on Qatari energy facilities stranded LNG tankers in the strait. ^[4] The conflict disrupted $11.8 billion in Indian exports, hitting Gujarat's diamond trade, ceramics in Morbi, and agricultural shipments. ^[5] The same government that had launched the AI task force was now conducting naval operations in waters India's economy depends on. In June, the US Navy killed three Indian sailors on the MT Settebello. ^[6] India restricted seafarer deployment to Gulf conflict zones and began reviewing its strategic tilt toward the US-Israeli axis. By mid-July, after a second escalation killed more seafarers and stranded nearly 6,000 crew members in the Persian Gulf, India banned deployment through Hormuz entirely — nine Indians dead, 3,932 evacuated, 17 vessels still awaiting extraction. ^[7] The technology partnership kept producing its own dissonances. On June 15, the US government forced Anthropic to disable its AI models for all foreign nationals — a general restriction that swept up Indian IT firms including TCS and Infosys, disrupting their operations. ^[8] India responded by tasking NITI Aayog with reviewing the AI ecosystem to reduce dependence on foreign cloud providers. On June 28, the two governments deepened their strategic technology partnership across AI, semiconductors, quantum, and critical minerals, with India's ambassador declaring that "the opportunity extends from chips to neural networks." ^[9] Two weeks later, the US re-escalated the Hormuz conflict, Iran announced the strait's closure, and Trump proposed a 20% fee on goods transiting the waterway. ^[10] The pattern is not that the US is targeting India. It is that the US government is large enough to contain both impulses — partnership and disruption — and India is exposed to both. India's responses have been serious and in many cases effective. But trace each one and watch where it leads. Energy diversification: Indian state refiners are trimming Middle Eastern contracts and expanding sourcing from 20 to 41 countries. The new suppliers include Brazil, Guyana, and — most significantly — the United States. ^[11] Russia has offered increased oil and LNG supplies via Vladivostok and Ust-Luga, a genuine hedge on the energy front. ^[12] But energy is only one dimension of exposure. Russian oil does nothing for the AI supply chain, the semiconductor pipeline, or the two-thirds of India's trade that is not energy and still moves through maritime corridors the US Navy operates in. The hedge is real; it is also narrow. Sovereign AI: after the Anthropic disruption, India's AI startups raised nearly $1.5 billion in the March quarter. They are increasingly pitching for funds in San Francisco, where venture capitalists monitor Indian innovations. ^[8] The capital that is supposed to build Indian technological independence flows through the same financial system whose government just demonstrated it can revoke access to AI models with a regulatory order. Domestic chips: India's first domestically produced semiconductors shipped from Sanand, Gujarat on July 5 — a milestone. But the facility is producing basic chips at one million units per day, and Grade 1 qualification — the standard for automotive and industrial applications — is still 18 to 24 months away. ^[13] Meanwhile, India's electronics imports hit $116.17 billion in the last fiscal year, up nearly 18% from the year before. ^[14] The gap between ambition and capability is measured in years, and the supply chain runs through the same strait. The alternatives are narrowing. China is considering stricter export controls on AI models and chip designs, consulting Alibaba and ByteDance on restricting overseas transfer of model weights and training data. ^[15] Taiwan has offered expanded semiconductor ties — its deputy secretary-general called India an "oasis of peace and stability" in March — and 350 Taiwanese companies have already invested. ^[16] That is a real pillar, but it does not resolve the maritime problem: chips from Taiwan still cross waters the US Navy patrols. In April, Foreign Minister Jaishankar framed the moment in terms that have only grown sharper since.

Building robust national capabilities is the most effective way of de-risking and indeed even developing leverage. — S. Jaishankar

He was describing the partner, not just the adversary. ^[17] None of this means the disruptions were absolute. Oil flows through Hormuz rose to an estimated five to seven million barrels per day by June, with some ships paying tolls to Iran's port authority. ^[18] Shipping firms adapted within weeks, using land corridors through Iraq, Turkey, and Kuwait. ^[19] India absorbed Rs 1.7 lakh crore in excise losses to cap domestic fuel price increases at seven to eight percent, and expanded its strategic reserves. ^[11] The adaptation is genuine. The point is that it deepens dependence on the same government whose naval operations killed Indian sailors as collateral, whose general foreign-national AI restriction swept up Indian firms, and whose president proposed taxing the waterway India's economy flows through. ^[6][8] Five months in, India has built a de-risking map whose every route passes through Washington.