India’s energy security goals will have ‘very high’ element of US involvement: Commerce Minister Goyal in New York

“The world recognises that energy is one area where we all have to work together. India is a big player in the energy field. We are big importers of energy from across the world, including the US. We expect to increase our trade with the US on energy products in the years to come. Being close friends, natural partners, our energy security goals will have a very high element of US involvement,” Goyal said at the India-US Strategic Forum event in New York.

India is the world’s third-largest consumer of crude oil with an import dependency of around 88 per cent. The country is also among the biggest importers of liquefied natural gas (LNG), with around half of its natural gas demand being met through imports. For the past few years, the US has been the fifth-largest supplier of crude oil to India. It has also been the second-largest supplier of liquefied natural gas (LNG) to India.

“Another area where India and the US have collaborated, and plan to deepen cooperation, is nuclear energy. We have been discussing this for a long time, and certain issues needed to be resolved. In India, we are supporting private initiatives on nuclear power, particularly small modular reactors being developed in the US, while also working to address the ‘liability’ concerns that have hindered nuclear energy growth between our two countries,” Goyal said.

Goyal’s comments on energy imports comes at a time when the US has imposed 25 per cent additional tariffs on India for its hefty imports of Russian oil. Sources in the Indian government have indicated that India could step up energy imports from the US to reach an agreement with Washington. The past few months have seen Indian refiners increasing oil imports from the US, which has been seen as an indication that New Delhi is willing to buy more American energy amid trade pact negotiations.

In fact, in February, when Prime Minister Narendra Modi met US President Donald Trump in Washington, the latter said that India and the US had agreed to take steps towards making Washington “a leading supplier of oil and gas to India”, which could help bridge the trade deficit between the two countries. Trump had added that the US will “hopefully” be India’s top oil and gas supplier.

According to experts, while ramping up LNG imports from the US would be relatively straightforward from a commercial perspective, that may not be the case when it comes to oil imports. Sources say that Indian refiners would be open to buying more US crude, provided it is priced competitively, as the cost of shipping oil from the US to India is currently more than double of getting oil from West Asia. The other key consideration would be the US crude grades on offer and their compatibility with Indian refineries. This is because different crude grades are suitable for different petroleum products from an operational and efficiency perspective. Indian refineries are currently more accustomed to crudes from traditional West Asian suppliers, and now even Russian crude, although they have the capability to process nearly all types of crude.

As for energy imports from Russia, India has maintained that it will continue to buy oil from Russia—currently its biggest source of crude. Indian refiners’ heavy imports of Russian crude are seen as a lever that the Trump administration believes it can use to force the Kremlin’s hand into ending the Ukraine war. Oil exports are the biggest source of revenue for Moscow, and New Delhi is the second-largest buyer of its oil after Beijing. But despite US rhetoric and imposition of 25 per cent secondary tariff over the 25 per cent tariff imposed earlier on most Indian goods, India has shown no signs of backing down on Russian oil imports.

While July and August saw a decline in deliveries of Russian crude at Indian ports as compared to earlier months, industry insiders attributed that largely to shrinking discounts on Moscow’s oil, and not American pressure, as those cargoes would have been booked weeks before Donald Trump upped the ante against India in July and announced additional tariffs on Indian goods early August. Russian oil deliveries late September onwards are expected to show whether or not Trump’s rhetoric and tariff action have led to a reduction in oil imports from Russia. On their part, India’s public sector refiners have stated that they have not received any signal or directive from the government on the issue, and they will continue to buy Russian oil as long as it remains economically and commercially viable.

New Delhi has termed the Trump administration’s action “unjustified and unreasonable” and said these imports began as its traditional supplies were diverted to Europe, with the US having “actively encouraged such imports by India for strengthening global energy markets stability”. The Joe Biden administration had encouraged India to increase Russian oil imports following Russia’s February 2022 invasion of Ukraine as the West began shunning Moscow’s oil. The reason was simple: Russia is a major oil exporter and if a bulk of its oil goes off the market for dearth of buyers, international oil prices could shoot up, something that the US itself did not desire.

The nuclear energy sector is also being seen as a key area where US-India cooperation can be deepened significantly. The Indian Express had reported in June that legislative groundwork is underway for multiple amendments to two overarching laws governing the country’s atomic energy sector. The changes will align them with global legal provisions, address festering investor concerns and set the stage for opening up India’s civil nuclear sector. The first step is easing provisions in India’s nuclear liability law. Called the Civil Liability for Nuclear Damage Act, 2010 (CLNDA), it sought to create a mechanism for compensating victims of nuclear accidents, while allocating liability and specifying procedures for compensation.

Signs of easing trade tensions began emerging earlier this month when Trump said India and America are “continuing negotiations to address the trade barriers”, and that he was “certain” there would be “no difficulty” in the talks being successful. Responding hours later, Prime Minister Narendra Modi said both countries are “natural partners” and will “work together to secure a brighter, more prosperous future”. It was followed by a visible re-engagement on trade-related issues, which had been hanging fire for a few weeks.

But despite the evident thaw, there have been some mixed signals from Washington on certain issues. The US has asked G7 countries to ramp up pressure on nations buying Russian oil to end the war in Ukraine, and said that it has received “commitments” to that end from them. Moreover, the US has dramatically increased the fee for H-1B visas for professionals, a system in which Indian nationals were the key beneficiaries.