Highlights:
- India signs its first major structured LPG import deal with the U.S., covering nearly 10% of annual demand.
- The move aims to reduce India’s large trade surplus with Washington and diversify energy sources.
- US–India trade tensions escalated after reciprocal tariffs of up to 50 per cent earlier this year.
- India’s imports of US crude hit their highest level since 2021, even as Russian oil remains significant.
- Analysts disagree on the economic impact, with potential tariff relief weighed against a rising import bill.
India is deepening its energy trade with the United States in an effort to rebalance bilateral trade and reduce tensions triggered by recent tariff escalations. The shift marks a strategic recalibration of New Delhi’s energy sourcing as it seeks to diversify imports and strengthen diplomatic ties with Washington.
On Monday, India’s Minister of Petroleum and Natural Gas, Hardeep Singh Puri, announced a landmark deal under which U.S. suppliers will provide nearly 10 per cent of India’s annual liquefied petroleum gas (LPG) imports.
State-owned oil companies have entered into a one-year agreement to import around 2.2 million tonnes of LPG from the US Gulf Coast. Puri described the agreement as “a historic first,” noting that it represents the first structured, benchmark-linked contract for US LPG in the Indian market, with prices tied to Mount Belvieu.
Industry analysts say the initiative is designed to diversify India’s heavily Middle East–dependent LPG supply and address Washington’s long-standing concerns about trade imbalances.
Nomura analyst Bineet Banka noted that while the additional $1 billion in LPG imports is modest compared with India’s $40 billion trade surplus with the U.S., it signals meaningful cooperation at a sensitive moment.
Bilateral ties have been strained since August, when the US imposed a 50 per cent tariff on certain Indian goods. New Delhi retaliated with a 25 per cent tariff on American products, and an additional 25 per cent linked to India’s imports of discounted Russian crude.
The tariff standoff unfolded against the backdrop of U.S. efforts to pressure nations to reduce purchases of Russian oil.
Despite tensions, energy trade has emerged as a stabilizing factor. Indian Commerce Minister Piyush Goyal emphasized during a recent visit to the US that energy will be central to India’s future trade expansion with Washington, calling the two nations “natural partners” in energy security.
President Donald Trump struck a more conciliatory tone in early November, referring to Indian prime minister Narendra Modi as “a great man” and recalling the warm reception during his previous visit to India.
Trump also claimed that India had “largely stopped buying Russian oil,” though tanker-tracking data contradicts this. As of November 17, India was still importing around 1.85 million barrels per day of Russian crude, up from October’s 1.6 million barrels per day—according to Kpler.
Analysts expect Indian refiners to maximize Russian purchases before a November 21 deadline for transactions with major suppliers like Rosneft and Lukoil.
However, India’s imports of US crude have risen sharply, reaching 568,000 barrels per day in October—its highest level since February 2021.
Nomura estimates that changes in India’s crude mix, particularly a decline in Russian imports, could add approximately $1.1 billion to the country’s import bill.
Experts remain divided on the economic implications. Nomura’s Asia Economics team argues that India could ultimately benefit if increased US energy imports pave the way for reduced tariffs and a broader trade deal.
But Rystad Energy’s Pankaj Srivastava warns that India’s import costs will continue to rise unless domestic production increases, especially as refinery and petrochemical capacity expands over the next several years.
