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Maguire: US energy exporters are likely to be disappointed by any US-Indian trade deal.

Many people see the new 25% tariffs on Indian goods imposed by U.S. president Donald Trump as a negotiation tactic to force India into buying more U.S. goods and energy in the future.

India's energy importers have less flexibility than it may seem, despite the fact that India's economy is growing fast and ranks fifth in the world.

India is limited in its ability to buy large quantities of U.S. coal, oil, LNG and refined products due to tight corporate margins, cost sensitive consumer markets, long-term import agreements and a slowing economy.

India is located at the base Asia, so it's much closer to other energy exporters. However, it is not as close to the United States. This would result in higher shipping costs for India if it switched to U.S. origin products.

The upcoming trade talks will no doubt be used to entice some Indian companies into making major U.S. investments and purchases, which could boost the mood in Washington D.C.

The Indian market is unlikely to provide the massive and binding commitments of purchase that U.S. oil, gas, and coal exporters are looking for.

TOUGH SPOT

India's import requirements are not the only thing that it has to be concerned about.

According to data from the International Monetary Fund, India's biggest export market is the United States. It accounted for almost 20% of Indian exports over the past few years.

India's exports in 2024 to the United States will be just over $80 Billion, and its imports of the U.S. will total just under $45 Billion.

It will be difficult for India to replace the lost U.S. customers with other buyers, as the U.S. market is twice the size of the United Arab Emirates, India's second largest export market.

This means that the trade negotiators are committed to repairing trade ties as quickly as they can, and they will look at all possible ways of reducing trade imbalances.

CRUDE CUT-PRICE

India's rapid increase in its purchases of Russian crude since mid-2022 was a major concern for the U.S., Europe and other countries. It also became a focus during recent trade negotiations.

Kpler data shows that the average monthly crude oil flow from Russia to India has jumped from 3.2 million barrels per month between 2018-2021 to 50 millions barrels per month since mid-2022.

The more than 15-fold increase in Russian oil purchased by India has provided Moscow with vital import earnings as it deals with the fallout of its war in Ukraine and has seriously undermined efforts to reduce funding to Moscow.

India's refusal of joining Western-led sanctions was a source of anger for the international community. However, India's willingness to increase imports from Russia ensured that refiners in India and their fuel consumers would be protected from any global oil price rise.

In fact, it was the reverse as Indian importers managed to get steep discounts from Russian oil suppliers who were desperate for sales.

These cheap barrels imported from Russia allowed refiners like Reliance, a major Indian company, to increase their supplies and drive the economic growth of India since 2020.

Indian officials have said that they are only acting for their own benefit when it comes to the new tariffs, as the country has not acted in the best interests of its 1.4 billion people.

Any aggressive shift away from cheaper Russian crude to more expensive U.S. oil would have a drastic impact on the Indian economy and would likely lead to an increase in fuel prices, which would be harmful for Indian consumers and refiners.

Data from LSEG show that since 2022 the official price of the main grade Russian oil imported by India has averaged $70 a barrel, which is about $10 less than the main U.S. Crude for export during the same period.

The real discount is probably greater than the U.S. price, as Indian importers are likely to have secured their Russian oil at lower prices.

This means that Indian refiners will not be able to switch to U.S. Crude anytime soon, even under pressure.

LONG SHOTS OF COAL & LNG

U.S. negotiators have cited liquefied gas as a way to reduce trade gaps. A single LNG cargo costs several million dollars.

Indian importers of energy products have less room to change the current U.S. suppliers.

Indian gas importers have already signed long-term contracts with suppliers like Qatar and United Arab Emirates and are subject to stiff penalties if they break the contract.

Even if Indian buyers were willing to cancel those deals and buy from the U.S., they could face an increase in shipping costs which would make the overall cost of cargo uneconomical.

It takes around 30 days for an LNG tanker to travel from the U.S.A. to India, six times as long as the trip from Qatar.

The U.S. coal industry will face similar challenges in removing Indonesia from India's coal pipeline.

The shipping time from Indonesia to India is approximately 11 days. This compares to the 27-day trip on the East Coast of the United States.

India's trade negotiators will have to look for other ways to reach a deal with the U.S. due to the gap between journey times and shipping prices.

These are the opinions of a columnist who writes for.

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(source: Reuters)