After 20 years of negotiations and a whirlwind six months of intensive late-stage talks, the EU and India have signed an “historic” free trade agreement (FTA).

The EU has also moved forward with a Russian gas import ban, while the UK’s sanction regime enforcement agency has dished out a large fine for non-compliance with the country’s sanctions on Russia trade.

EU-India deal signed

India and the EU have finalised what both parties are calling a “history-making” free trade agreement, concluding almost 20 years of negotiations and an accelerated round of trade talks over the past six months in response to US tariffs.

The deal is set to eventually eliminate tariffs on most EU exports of chemicals, machinery electrical equipment, aircraft and spacecraft.

Duties on cars, which can be as high as 110%, will also be cut to 10% under a quota of 250,000 vehicles.

Indian exporters of goods including textiles, pharmaceutical products and gems are among those to be granted easier access under the agreement.

European Commission President Ursula von der Leyen described the agreement as the “mother of all deals”, writing today:

“We have created a free trade zone of two billion people, with both sides set to benefit. This is only the beginning. We will grow our strategic relationship to be even stronger."

Gaining access to a market of 1.4 billion Indian consumers should help the bloc double exports to India by 2032.

Indian prime minister Narendra Modi said it is an “historic agreement” and highlighted the benefits to “India's farmers and small business”.

“It will also boost manufacturing and services sectors. It will boost innovative partnerships,” he added.

Highlighting the scope of the agreement, he said it represented approximately a third of global trade.

Russian gas import ban

Alongside the FTA announcement, it’s worth noting that an EU-wide ban of Russian gas and Liquified Natural Gas (LNG) imports was formally adopted by the bloc yesterday.

Importing Russian pipeline gas and LNG into the EU will be prohibited in the next six weeks, once the ban enters into force. Future imports of gas will need to have their origin verified, and non-compliance with the ban could result in fines of up to €40m for companies, at least 3.5% of its total worldwide annual turnover or 300% of estimated transaction turnover.

While Cyprus’ minister for energy, commerce and industry, Michael Damianos, was quoted describing the bloc energy market as “stronger, more resilient and more diversified”, the EU’s energy imports are increasing significantly, with growing dependence on the US in recent years.

The bloc’s attempts to divest from Russia’s fossil fuels since the country’s 2022 invasion of Ukraine are also notable in relation to India, with a number of reports suggesting Russian oil is being transhipped through India to the EU.

Sanctions warning

In other sanctions news, the importance of knowing your customer and having robust screening processes in place was underscored yesterday, as the Office of Financial Sanctions Implementation (OFSI) issued a £160,000 penalty to the Bank of Scotland for breaches of Russia sanctions.

A total of £77,383.39 processed over the course of 24 separate payments, in a personal bank account held by a “UK-designated person”, violated the Russia financial sanctions regime.

According to FT reporting, the individual in question, Dmitrii Ovsiannikov, is a former governor of Sevastopol, the largest city in Russia-annexed Crimea. This and other roles within Russia led to him being placed on the UK sanctions list.

A British national through his father, Ovsiannikov used a British passport with a different spelling of his name to open the account, evading the Bank of Scotland’s screening. A later internal audit, screening for politically exposed persons revealed the bank’s error.

The fine was initially reduced from £320,000 to £175,000 in response to the bank’s voluntary disclosure. It was then further reduced following statements made by the bank, according to OFSI.

In a public penalty notice, OFSI urged organisation to always “consider prompt, voluntary disclosure of potential breaches”.

“OFSI seeks to reward prompt and complete voluntary disclosures through penalty discounts.”

It also urged firms to beware automated screening processes, ensuring they implement “robust contingency procedures and clear escalation routes, particularly in higher risk areas such as those involving politically exposed persons”.

South Korea tariffs

Another day, another tariff threat. US President Donald Trump announced plans to raise tariffs on South Korea to 25% yesterday, claiming the South Asian nation has failed to implement the terms of the trade deal agreed last year.

The 25% rate, if introduced, would apply to all goods covered by the “reciprocal” tariffs he introduced last year, including cars, of which South Korea is a major exporter. Manufacturers including Hyundai and Kia saw hits to their share price yesterday following Trump’s Truth Social post.

South Korea reached a deal to limit its tariff rates to 15% last July in exchange for US$350bn investment into the US. Phased payments of $20bn a year up to $200bn were agreed to ensure currency fluctuations wouldn’t undermine the value of the investment.

South Korea’s leadership has affirmed its commitment to moving forward with the investment plan. Five bills enacting the plan are awaiting parliamentary approval, its Democratic Party have said.

The announcement appears to have taken officials by surprise, as the country’s parliamentary trade committee chairman, Lee Chul-gyu, said no complains were raised in Davos when the countries’ respective trade representatives met.

Elsewhere in the headlines

• A boost to UK exporters as the country’s banks agree to an £11bn lending package targeted at supporting small and medium-sized firms
• Electric vehicle car sales took up greater EU market share last year, with Chinese automaker BYD continuing to advance on US Tesla

Yesterday in Trade

We looked ahead to what the week has in store for trade:

• US-Canada tensions as a result of the latter’s recent trade cooperation with China
• UK prime minister Sir Keir Starmer’s trip to the Asian nation
• European nations commit to up clean energy production through offshore wind