India’s Strategic Energy Deal with the U.S.: A Move to Avoid Tariffs and Diversify Energy Sources
India has entered into a significant energy agreement with the United States, marking a pivotal moment in its energy strategy. In a bid to shield itself from potential tariffs imposed by President Donald Trump, India has agreed to deepen its energy trade with the U.S., specifically in the form of liquefied petroleum gas (LPG).
The deal, announced by India’s Petroleum and Natural Gas Minister, Hardeep Singh Puri, involves the U.S. supplying nearly 10% of India’s LPG imports, which equates to approximately 2.2 million tonnes annually. This agreement aims to reduce the trade surplus between the two countries and is a strategic move to diversify India’s energy sources.
Puri emphasized the historical significance of this deal, stating, ‘A historic first! One of the largest and the world’s fastest-growing LPG market opens up to the United States.’ This marks the first structured contract of U.S. LPG for the Indian market, reflecting India’s commitment to securing affordable and secure supplies of LPG for its citizens.
India’s LPG demand has surged by 74% over the last decade, driven by rising incomes and the Ujjwala program, which provides subsidized cooking gas to low-income households. Currently, India sources most of its LPG from the Middle East, with Qatar, the UAE, and Saudi Arabia as the primary suppliers. The deal with the U.S. suggests a strategic shift towards diversifying energy sources, especially in light of disruptions in the Red Sea and OPEC+ cuts.
The potential impact of this deal is substantial. With the U.S. providing 10% of India’s LPG supply, it could amount to around $1 billion in imports. This move is expected to encourage President Trump to reduce U.S. tariffs on Indian goods, fostering better trade relations. However, this may be contingent on India’s willingness to reduce its energy trade ties with Russia.
India’s energy landscape is evolving, with a focus on decarbonization and energy security. The country aims to double its energy demand by 2045 while achieving a net-zero carbon emissions target by 2070. To accomplish this, India must diversify its energy sources and significantly expand its renewable energy capacity, as outlined in its national roadmap for energy transition.
In conclusion, India’s strategic energy agreement with the U.S. is a calculated move to avoid tariffs and diversify its energy portfolio. This deal has the potential to reshape India’s energy security and trade relations, marking a significant step in the country’s journey towards a more sustainable and resilient energy future.