On 27 January 2026, the European Union (EU) and India concluded a free trade agreement (FTA), eliminating or reducing tariffs on 96.6% of EU goods and 99.5% of Indian goods, and creating the world’s largest free trade zone. The economic implications of the deal – hailed by European Commission President Ursula von der Leyen as the ‘mother of all deals’ – have been subjected to extensive analysis, and its potential impacts on the economy of Bangladesh have been discussed widely. Yet, the geopolitical ramifications of the deal, particularly in the South Asian context, have not yet been explored much. However, the deal presents the addition of a significant element to the geopolitics of South Asia.

After the decolonization of South Asia in the 1940s, the geopolitics of the region has been marked by three recurring trends: the persistent efforts of India to establish itself as a regional leader or hegemon in the region and as an independent power at the global level, the exertions of other South Asian states, such as Pakistan, Bangladesh, and Sri Lanka, to preserve a delicate balance vis-à-vis India, and the endeavours of external powers, such as the United States (US), China, and Russia, to expand their influence over the region. India has managed to raise its profile as an emerging power owing to its economic growth and multi-vector diplomacy, illustrated by its strategic partnerships with the US and Russia and working relationship with China. However, by mid-2020s, India’s delicate balancing at the global level and aspirant leadership at the regional level have come under complex challenges.

India’s efforts to maintain cooperative relations with both Western and non-Western powers have come under severe strains due to the Donald Trump administration’s imposition of tariffs on Indian products, and resulted in the reduction of Indian purchase of Russian oil, withdrawal from Iran’s Chabahar port project, and non-condemnation of US capture of Venezuelan President Nicolas Maduro. Also, border clashes with China in 2020–2021 and growing strategic competition in the Indo-Pacific region has sharpened the festering conflict between India and China. Meanwhile, India has suffered a string of setbacks in its immediate neighbourhood, illustrated by the election of President Mohamed Muizzu on an ‘India Out’ campaign in the Maldives in 2023 and subsequent expulsion of Indian troops from the tiny island-state, the overthrow of the India-aligned government in Bangladesh in 2024, a kinetic conflict with Pakistan in 2025 in which several Indian aircrafts were shot down, and renewed border disputes with Nepal and Sri Lanka.

Moreover, in the recent years, India’s arch-rival Pakistan has formed a ‘strategic triangle’ with Turkey and Azerbaijan, forged a Strategic Mutual Defence Agreement with Saudi Arabia, strengthened its strategic partnership with China, revitalized its traditionally good relations with the US, and attempted to develop a strategic partnership with Bangladesh in both bilateral and multilateral formats. On its part, India has initiated a rapprochement with the Taliban-controlled Afghanistan, strengthened ties with Israel, Greece, and Armenia, forged a Strategic Defense Partnership with the United Arab Emirates (UAE), and sought to check Pakistan’s moves in Bangladesh. Thus, both India and Pakistan have engaged in the construction of alliances and counter-alliances to strengthen their diplomatic position and outmaneuver each other.

Meanwhile, the actions of the Trump administration towards India and the EU, including the imposition of tariffs on both, irredentist claims over Greenland, and exertions of pressure on India, have put the US at odds with its erstwhile close partners. Consequently, the EU is trying to establish itself as an autonomous geopolitical actor to counter US pressure, while India is seeking to diversify its international economic relations to reduce its vulnerability to US punitive economic measures. These factors have prompted New Delhi and Brussels to conclude the massive trade deal which was under negotiations for nearly two decades. While the deal primarily aims at boosting trade, easing market access, and fostering economic diversification, the situation in which the deal has been concluded indicate geopolitical realignment, formation of new geo-economic blocs, and a new correlation of forces in South Asia. This could have several repercussions for Bangladesh other than economic ones.

First, the economic implications of the EU–India trade deal for Bangladesh, in the form of greater competition from Indian ready-made garment (RMG) industry and possible economic dislocation, have been widely explored. But in this globalized world of interconnected economies, economics is closely connected to politics. The economic alignment between the EU and India signals a potential political alignment as well, and it would strengthen India’s politico-diplomatic position both globally and regionally.

Second, the EU is Bangladesh’s largest trading partner, with the volume of bilateral trade exceeding €22.2 billion in 2024. Yet, Dhaka has not managed to turn the economic partnership into a greater political and diplomatic alignment. Since August 2024, India has waged a relentless pressure campaign against Bangladesh, yet Dhaka received little diplomatic support from the EU, despite the latter’s support for the July Uprising. After the signing of the trade deal with India, the EU is likely to lean towards New Delhi even more, and in case of any future rift between India and Bangladesh, Dhaka is unlikely to receive any sort of support from the EU. This would shrink Bangladesh’s space for manoeuver even more.

Finally, for years, Bangladesh has contemplated the acquisition of advanced military equipment, particularly multi-role combat aircrafts (MRCA), from the EU to bolster its defensive capabilities, and negotiated with the bloc on this issue, but to no avail. Meanwhile, India has consistently opposed Bangladesh’s purchase of advanced weaponry, viewing it as a potential security threat. The closer alignment between the EU and India means that the EU states would be more considerate about India’s sensibilities about this issue, and further complicate Bangladesh’s procurement of EU-made combat aircrafts. Also, so long as Western sanctions on Russia remain in place, Bangladesh would avoid buying Russian arms. This would, however, ironically leave only China, Turkey, and Pakistan as realistic options for Bangladesh’s defense purchase, an option Indian commentators view very negatively.

In brief, the EU–India FTA is not merely a commercial breakthrough; it is a geopolitical inflection point for South Asia. By deepening geo-economic interdependence, Brussels and New Delhi are implicitly reinforcing a political alignment that strengthens India’s regional and global standing at a time of strategic flux throughout the world. For Bangladesh, the implications extend beyond trade competition. Dhaka may face a shrinking diplomatic space vis-à-vis India, reduced leverage with the EU, and growing constraints in strategic arms procurement. As new alignments crystallize and rival blocs consolidate, Bangladesh must recalibrate its foreign policy with prudence and creativity – diversifying partnerships, reinforcing strategic autonomy, and aligning economic diplomacy with broader security objectives – to protect its state sovereignty and national independence in an increasingly polarized regional order.

© Eurasia Review