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India-US Relations Blog

Natural gas export between U.S and India on the brink of a new dawn

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Natural gas is soon emerging as a highly preferred fuel due to its high efficiency and cost effectiveness. Over the past year, the surplus production of liquid natural gas (LNG) in the U.S. has given impetus to the prospect of LNG exports to strategic allies. The United States and India are two of the world’s top five energy consumers. To date, policy debates have focused on finding sustainable ways to satisfy the ever-expanding demand for energy by advanced economies and big emerging markets such as India and China. Now, as the global energy landscape shifts, and as the Indian economy continues to grow rapidly, increasing U.S. energy exports to the region is becoming a win-win proposition. Taking this into consideration, a bill H.R 2471, the “Expedite Our Economy Act of 2013”, has been introduced by Congressman Ted Poe, Chairman of the Subcommittee on Terrorism, Non-proliferation and Trade to amend the existing Department of Energy Organization Act. The bill aims to completely transfer regulatory authority over exports of natural gas from the Department of Energy (DOE) to the Federal Energy Regulatory Commission.
The bill proposes to make it easier for companies to export U.S. surplus of natural gas, creating new jobs, boosting the economy, and strengthening international trade relationships. For countries like India that do not have a Free Trade Area( FTA) with the U.S., the Natural Gas Act directs the Department of Energy to grant export authorizations unless the Department finds that the proposed exports will not be consistent with public interest. This bill will remove Department of Energy from the LNG export permitting process. Congressman Ted Poe has urged lawmakers to cosponsor H.R. 2471, The heart of the matter is that the U.S. move to free LNG exports to the non-FTA countries is not an “India-centric” move. Let us say, India could be a “stakeholder.” The decision takes into account a variety of factors, which include the persisting demands of competing countries such as China and Japan whose companies have been aggressively participating in shale gas activities in the U.S. through stake purchases and forming joint ventures.
But the decision paves the way for India, which does not have a FTA with the US, to get its companies to seek similar licenses for import of much needed gas from the United States. The existing federal law generally requires approval of natural gas exports to countries that have an FTA with the United States.
“It is time to remove bureaucratic roadblocks and take the Department of Energy out of the approval process for natural gas exports,” said Congressman Poe. “Unnecessary federal red tape is the only thing standing in the way of the United States exporting natural gas. Exporting natural gas would grow our economy and create thousands of new jobs. Washington should be supporting, not stonewalling, the development and exportation of this valuable resource. ”
Dominion Resources Inc. has announced deals with Indian and Japanese companies to export liquefied natural gas from a proposed export plant in Maryland as it hopes it will obtain permission from U.S. authorities to export LNG to these customers by 2017. Affiliates of India’s state-controlled natural-gas processing and distributing company Gail Ltd have signed 20-year agreements to buy half of the proposed plant capacity.

The United States India Political Action Committee (USINPAC) has been constantly working for the past several months with the lawmakers at the Capitol Hill to expedite the export of natural gas between U.S and India. It has been closely working with the Subcommittee on Terrorism, Non-proliferation and Trade that held the recent Congressional Hearing on the LNG export issue in April 2013.

If the bill proposed by Congressman Poe is passed in both the House and the Senate, the India and the U.S. will be able to significantly strengthen their economic and political relations and herald an era of energy security for India.

 

Defence And Strategic Affairs Blog, India-US Relations Blog

A Rocky Road Ahead

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Since the United States has announced its intentions to withdraw its troops from Afghanistan by 2014, leaders in the White House have been looking toward India as an ally in facing the coming strategic and military challenges in the region. For the U.S., the choice of India is an obvious one. Its growing geopolitical presence and commitment to democracy is a strong force among unstable countries, and deep economic ties with Afghanistan (last year, India gave Afghanistan almost $2 billion a year alone in economic and development aid!) all make India a prime candidate to manage postwar reconstruction. Yet what has been heralded as “a full-blown strategic partnership” in shepherding the region’s development is drastically falling short.

On one side is the growing diplomatic tension between the U.S. and India, which has forestalled bilateral commercial trades and sharply highlighted differences in priorities. To be clear, the U.S. and India have dramatically improved their relationship following the Cold War, when the U.S. sided with India’s rival, Pakistan, and India maintained economic and military relations with the Soviet Union. Since then, economic interests were better aligned, as bilateral trade has reached almost $100 billion just last year alone. Still, India is defiantly opposed to complying with U.S. demands if they were to compromise its own economic interests. In Iran, for example, the U.S. has called for sanctions against Iran’s growing nuclear capabilities, and has asked India to cease its commercial transactions with the country. But India views things differently, stating that oil and natural gas purchase from Tehran are vital to its economy. Moreover, Indian diplomats assert that it is “in India’s interest to maintain good ties with Iran, with whom it shares deep historical, cultural and religious connections.” They also believe that purchasing Iranian oil will “strengthen ties with Iran as a hedge against an uncertain future in Afghanistan after the U.S. withdrawal,”, and are thus reluctant to rebuke Iran’s nuclear purchases.

Differences in priorities in China are also a source of contention between Indian and U.S. lawmakers. The U.S. has made strides in containing what it perceives to be a geopolitical threat by China, due to its growing military strength and influence in Asia. Indeed, leaders in Beijing have even suspected that the U.S. is attempting to partner with India in containing China, claims that the U.S. staunchly denies. But India is not interested in upsetting China and has worked very hard in cooperating in areas of mutual interest and opportunity and believes than an alliance with the U.S. will fracture that relationship.

Finally, currency problems in India are hampering its ability to provide stable finances for Afghanistan’s reconstruction. High interest rates have destabilized India’s investment climate, forcing it to focus inward and shrink expenditures.

The future of the U.S.-India relationship will depend heavily on who wins this November. The Democratic Party will likely continue on its current trajectory, gently pushing India to open its markets for investment and to align with the U.S. The Republican Party’s foreign policy is traditionally more aggressive, and will probably reiterate demands for Indian liberalization and compliance with Iran sanctions.