Are we trading away our autonomy to buy Trump’s coal?

The Big Lens

The much-acclaimed Indo-US civil nuclear deal signed in 2008 (UPA-Democrats) was touted as a game changer and an important component in meeting India’s energy requirements. Ten years later, the NDA-Republican deal on energy was formalised as the US-India Strategic Energy Partnership in 2018.

Under this partnership, the US and India were expected to engage mainly in primary areas of cooperation like oil and gas, power and energy efficiency, renewable energy and sustainable growth, and coal.

Coal has become the new Achilles heel for Trump in the election year as he has to win back the coal belt, especially Wyoming, Montana and West Virginia where he defeated Hillary Clinton with a good margin last time. Trump has to increase coal exports to India, Europe and target markets like South Korea and Japan looking for replacement to nuclear energy. From one of the major sources of pollution, coal is suddenly the cleanest form of energy for the Trump administration. Why should New Delhi pay for the highly polluting coal and endanger the lives of our urban populations?

India’s total imports of crude, LNG and cooking coal, which was at $7.2 billion in 2018-19, may go up to $10 billion in the current fiscal. Thus, India’s energy trade with the US will rise by more than 42%. According to the minister for petroleum and natural gas, “India-US bilateral energy partnership should naturally scale the next higher step considering the rise in US production, India’s demand and the emerging geopolitical uncertainties.”

The Modi government’s energy balance sheet got a shock when Saudi Arabia’s Aramco oil facilities at Abqaiq and Khurais were hit in a drone attack that destroyed more than half the country’s crude output. The Saudi government, which was planning a retaliatory strike on Yemen’s Houthi rebels, was stopped by the US, which said Iran was behind the attack on Aramco. So, Tehran came under another round of sanctions.

India was Iran’s biggest oil customer in 2018-19. As part of a waiver on Iranian oil supplies to eight countries, including India and China, Delhi stepped up oil imports from Iran to $111.9 billion. With the waiver period ending in May, Delhi was forced to reduce exports from Iran to zero and turn to the next big supplier, the US.

Riding on its own unilateral sanctions on Iran, the US hopes to increase its market share and add the Indian market to its export basket. For Delhi, US supplies are a means to reduce the dependence on Gulf and West Asian crude suppliers as also other OPEC member countries. They account for about 65% of our oil imports, or some 82% of our total energy requirement.

India’s state-owned GAIL signed a 20-year contact for US shale gas in 2013, the first shipment of which arrived in 2017. The same year, Indian Oil Corporation did spot-buying from the US market withdrawing itself from Iran, much to Tehran’s ire.

Should Delhi allow itself to be arm-twisted to shut its door on Iran? After all, during the last round of sanctions, India was similarly forced to shun Iran while China continued to deal with Tehran, which helped it step into the strategic space vacated by Delhi. With great difficulty and deft diplomatic manoeuvres, India still secured the deal for Chabahar port in Iran, which is extremely strategic as our gateway to Afghanistan and in providing greater elbow space to play a larger role in the regional power balance.

Now, by aligning with the US on oil imports and divorcing Iran, Delhi runs the risk of not only increasing its dependence on the US for energy needs but also alienating a country with which we share civilisational and historical links and trade relations for centuries.

It is important to remember that even as India-US relations overcame decades of rough weather and the two countries drew closer after 2000-2001, the US would still not forget India’s 1998 nuclear tests. Now, given the constant advancements in nuclear technology and changing geopolitical situation, in the event of a show of strength (or desperation) by another country in our neighbourhood, if Delhi decides to respond with a test of its own, what would be the response of the US? What will happen to the oil supplies and our energy security?

The private industry in the US will not respect the official view of the White House and keep oil price low in the event of a spike in global crude prices. In such an event, and coupled with a week rupee, our current account deficit could very well go beyond recovery limits, resulting in catastrophic consequences for an economy already in trouble.

It is time to impress upon the US that unilateral sanctions have lost salience in a multi-polar world in which countries closely guard their autonomy but keep changing their position on global issues to suit their national interest. For long, India has put forward its best foot in defending its strategic autonomy and national interest but at the same time remained steadfast in promoting global peace and sustainable development.

It is nobody’s argument that we should cold-shoulder the US, especially at a time when its relationship with China is in a phase best suited to our advantage. But we cannot pawn away our autonomy to trade with Iran or China, enter into defence deals with Russia or Israel, and to chart an independent course to our economic, security and strategic advantage.