Howdy Modi | India-US ties beyond the optics at Houston

Anand Kochukudy

America’s fourth-largest city of Houston, in Texas, is all set to welcome Prime Minister Narendra Modi for the ‘Howdy Modi! Shared Dreams, Bright Futures’ ‘event on September 22. The confirmation of United States President Donald Trump’s participation has raised its profile further, underscoring the strength of India-US relations and India’s soft power.

India’s bilateral relationship with the US has been on the upswing from the George W Bush era and has prospered through the Barack Obama years. It has only gained in strength after Trump took charge, and the ‘bromance’ between Modi and Trump was recently attested to by the US President himself. For Trump, putting in a special appearance in Houston gives him an opportunity to win over the large contingent of Indian diaspora attending the event, in his bid for re-election in 2020. The Indian voters in the US have traditionally backed the Democrats.

For Modi, such grand events and town halls have served as potent messaging tools right from his days as a prime ministerial candidate in 2013, and the event in Houston is his third such address to the Indian community in the US since 2014. It will also help him tide over the temporary setback following the offensive from many US lawmakers over alleged human rights violations and the clampdown in Jammu and Kashmir post the abrogation of Article 370.

For the US, the participation of Trump in Houston is strategic and goes beyond personal camaraderie. They see it as an extension of the Quadrilateral (Quad) framework involving the US, Japan, Australia and India, to counterbalance the growing clout of China in the Asia-Pacific region. The fact that Trump is traveling to Ohio to attend a meeting with his Australian counterpart following the Houston event before heading to the United Nations General Assembly makes it amply clear.

For India, beyond immediate considerations, fixing trade relations with US is a priority. Trade has been a source of friction between the otherwise friendly nations, and it would be in both India’s and US’ interest to find common cause, especially in the wake of the US-China trade wars. Hence, there might be more to Modi’s Houston event than what is being touted about. Houston is US’ energy capital, and Modi is set to meet with the CEOs of the major energy firms.

Bridging the trade deficit with India, which is more than $20 billion, has been a priority area for Trump. While the US has been traditionally seeking the opening up of the agricultural, dairy and other sectors to US private multinationals and protection of intellectual property rights among other things, energy has added a new dimension to it.

With the drone attack on world’s largest oil processing factory in Saudi Arabia suddenly creating a huge disruption in the market, the two countries could work out some kind of a deal on India importing more shale gas from the US. India imported oil and gas worth close to $4 billion from the US last year and this is likely to go up in its wake.

The US has emerged as the largest producer of oil in the world in the last decade and wants India to import more oil from it. When the US imposed sanctions on Iran and forbid India (and other countries) from pursuing their lucrative oil deals with West Asian country, it had offered discounts on shale gas to attract more buyers.

For India, whose oil basket primarily consists of Dubai/Oman and Brent Crude, it is not a straightforward decision as US shale gas is a costly option that would require recalibration of its processing facilities and ramp up its cost of production. Only a handful of Indian refineries, such as Indian Oil Corporation’s (IOC) Paradip Refinery, can process shale oil as its composition and properties are different from crude oil. Significantly, IOC entered into term contracts (long-term) for the import of crude from the US this year.

A major energy deal with the US might also come with some resolution on other trading standoffs — the US had ended India’s benefits as a ‘beneficiary developing country’ under the Generalised System of Preferences (GSP) in May. Under GSP, the US allows preferential duty-free entry for thousands of products from designated beneficiary countries. In retaliation, India had raised tariffs on 28 categories of imports from the US, including almonds, walnuts and apples among other products. Although Modi and Trump met twice following this in Japan and France on the side-lines of the G20 and G7 summits, trade issues have remained unresolved.

Hence, the statement of Commerce Minister Piyush Goyal on finalising a trade package with the US gains importance as the two countries look set to make an announcement. Trump’s affirmation that he “could” make some announcement at Houston also gains significance in this wake. Modi and Trump are also slated to meet on the side-lines of the UNGA in New York couple of days after Houston, and this deal might get pushed to that meeting.

What India gains from yielding more to American interests in buying oil and making energy investments in the US is being keenly watched and that would ultimately determine if India makes substantial gains beyond the optics at Houston.

Anand Kochukudy is a political commentator and editor, The Kochi Post. Views are personal.