In Trump’s Visit to India: A Big Boost for Energy Partnership

Dr. Netajee Abhinandan
March 1, 2020

 

The US President Donald Trump’s visit to India, though short, was significant in many ways. It was not merely optics as many would like to believe, but achieved some substantial gains for both the US and India. They decided to remain engaged to sort out all outstanding issues and disputes related to bilateral trade and conclude a long term, comprehensive and mutually beneficial trade deal by the end of the year. Also, Trump and Modi addressed all the important issues related to defence, security, terrorism, technology, health, education, the Indo-Pacific and people to people exchanges and came out with a joint statement that reiterated their firm commitment to enhance the level of bilateral engagement further.

Apart from the defence deal worth $3 billion, both countries signed three memorandums of understanding(MoUs) during Trump’s visit, of which perhaps the most important one was between Exxon Mobil, Indian oil and Chart Energy & Chemicals, that would lead to setting up of a system of transportation infrastructure to expand gas access in India. As per the agreement, the Indian LNG arm of Exxon will supply gas for the purpose while Chart will help create ‘virtual pipeline systems’ that will deliver liquefied natural gas by road, rail, and waterways to the inaccessible areas not connected by physical pipelines. This would help providing good quality and yet cheap liquefied gas to the poor and underprivileged people who are dependent on other forms of hazardous fuel for cooking, contributing to environmental pollution. In a way, this agreement was a win-win deal for both India as well as the US. The deal assumes greater significance in the context of India’s plans to invest around $60 billion over a period of five years in developing infrastructure for a cleaner, gas-based economy. Under this plan, India is rapidly building gas pipelines to connect all the regions including the villages and hinterlands. After the agreement was signed, Oil and Natural Gas Minister Dharmendra Pradhan twitted, “the leaders today have declared energy as one of the four most important pillars of bilateral strategic engagement. India-US strategic energy partnership has been further energized by more emphasis on technology, innovation and capital infusion” (Times of India, 26 Feb 2020). India has been wooing American companies to come and invest in energy technology in the country and thereby help efficient and judicious utilization and distribution of scarce energy resources through creation of enabling infrastructure.

Energy could very well emerge as the most vital and crucial sector that would not only help in bridging the trade gap between India and the US, but may very well be the defining aspect of the strategic partnership. The energy trade between India and the US has grown rapidly in last two years. During 2019-20 alone, India has imported oil and gas worth $6.4 billion from the US. Last year, the total energy trade volume with the US reached $7.7 billion amounting 11 percent of bilateral trade. As per the estimate of the oil ministry, the energy trade volume may go up to $10 billion by the end of this financial year. In fact, India could withstand the volatility in oil market in the aftermath of attacks on Saudi Aramco’s facility and rising tensions between Saudi Arab and Iran by importing required oil and gas from the US. The supplies from the US helped Indian government in containing the prices of oil products domestically. The increase in the import of oil and gas from the US is part of an overall strategy of Modi government to reduce the dependence on the West Asian region, passing through political turmoil, for fulfilling India’s rapidly growing energy requirements. It would also provide more bargaining power to India vis-à-vis the traditional suppliers. Energy security is a key component of India’s evolving security doctrine and diversification of energy import portfolio is the most crucial aspect of achieving energy security.

With considerable decline in the Chinese demand for energy following the outbreak of Corona epidemic, India could emerge as the largest consumer and importer of oil and gas in the next few years. The US is considered as a more reliable and friendly supplier for India than countries of West Asia and both countries can work together to establish a strong and credible energy partnership that would be mutually beneficial. It has supplied 9 million tons crude oil till December 2019, marking an increase of 88 percent compared to 2018. However, both countries are keen to expand the energy ties beyond the mere demand-supply relationship to a more comprehensive arrangement that would entail technology transfer and innovation, creation of infrastructure and greater capital investment. The future of India’s evolving strategic partnership with the US will be determined, to a large extent, by the nature of its engagement in the energy sector. Trump’s visit provided a much-needed fillip to the energy ties between India and the US.

*** The author is Director of Kalinga Institute of Indo-Pacific Studies and currently working as assistant professor of political science at Ravenshaw University ***

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