UAE-India LNG Deal Highlights U.S.’s Strategic Energy Play

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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• The U.S. is using energy policy to advance geopolitical goals.
• Washington sees India as a counterbalance to China by deepening energy ties between India and the UAE.
• The UAE’s expanding LNG and gas investments, including a $13 billion spending plan, present opportunities for greater U.S. energy involvement.

A distinctive feature emerging in the U.S.’s energy policy in Donald Trump’s second presidential term is not just that it penalises Washington’s political, economic, and/or military adversaries but it also does so to the advantage of the country’s own energy sector and its broader geopolitical objectives. A subtle case in point is last week’s signing of a 14-year agreement for the UAE’s ADNOC Gas to supply the state-owned Indian Oil Corporation with up to 1.2 million metric tonnes per year (mtpy) of liquefied natural gas (LNG), with first deliveries scheduled to start in 2026. This followed Washington’s roll-out of a slew of hard-hitting new sanctions on Russia aimed at further weakening the economic base from which it might launch new military forays against the U.S.’s key allies in Europe and elsewhere, following the 2022 invasion of Ukraine. By happy design, this has left India scrabbling around to increase its LNG requirements from other sources, most notably from the U.S. itself. On top of that the deepening of the energy relationship between the UAE and India was always a cornerstone in the U.S.’s strategy to hold the UAE as a key ally for the roll-out of further Abraham Accords across the Middle East to the detriment of China. And finally, the increasing reliance of India on U.S.-led energy supplies has long been seen as the foundation for Washington’s attempts to boost India’s economic and political influence in the Asia Pacific as a counterbalance to Beijing’s dominance in the region. Yahtzee!

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Beginning with the last point first, U.S. efforts to position India as the regional counterweight to China’s increasingly domineering presence in Asia moved up a gear after the 15 June 2020 clash between Chinese and Indian troops in the disputed territory of the Galwan Valley in the Himalayas. Washington believed this marked a new ‘push back’ strategy from India against China’s policy of seeking to increase its economic and military alliances through its multi-generational power-grab project, ‘One Belt, One Road’, as analysed in full in my latest book on the new global oil market order. The U.S. believed that this military push back might also be echoed in India’s economic desire to finally make substantive progress on its ‘Neighbourhood First’ policy as an alternative to China’s BRI programme. However, in order for this to work, India would need access to secure energy sources over the long term, as – like China – it had few oil and gas sources of its own. Indeed, given the potential economic growth projections for India, the International Energy Agency forecast that the Asian sub-continental power would constitute the biggest share of global energy demand growth at 25% in the coming two decades. In fact, the IEA predicted India would overtake the European Union as the world’s third-biggest energy consumer by 2030. It was at this point – in Trump’s first term as president – that the plan was hatched to link this plan to use India to challenge China as Asia’s major power with another plan to use the UAE to promote further relationship normalisation deals (‘Abraham Accords’) between Israel and key Arab states in the equally strategically vital Middle East region.

The Abraham Accords programme that emerged during Trump’s first presidency was an attempt for the U.S. to re-project its power across the Middle East, which had been severely diminished by its overly-extended presence in Iraq and Afghanistan. Washington’s ambitions in the world’s key oil and gas hub had not been helped either by the U.S.’s unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA, colloquially ‘the nuclear deal’) with Iran in May 2018. This allowed China to make its own far-reaching deal with Iran in the shape of the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and also fully detailed in my latest book on the new global oil market order. This, in turn, had allowed China to leverage this new all-encompassing relationship with the Middle East’s key Shia Islamic power into similar arrangements with the rest of the region’s Shia Crescent of Power, including Iraq itself. It also allowed China’s key ally Russia to expand its foothold in Syria, with its strategically crucial proximity to the U.S.’s own strategic partner in the region – Israel – and with a long Mediterranean coastline giving easy access to Turkey, the southern ports of Europe and the ports of northern Africa. The more antagonistic Iran after the U.S. withdrawal from the JCPOA had also left two of Washington’s former major allies in the Middle East — Saudi Arabia and the UAE – feeling so threatened that they too edged much closer to Beijing. Trump’s first presidential team believed that a series of relationship deals between key Aab states and Israel could turn the tide of this drift of Arab states towards Beijing, wit the UAE being one of the first countries to sign such a deal, in August 2020. The ouster for office of Trump in 2021 derailed this plan and eventually resulted in the extraordinary relationship resumption deal between key Shia power Iran and key Sunni power Saudi Arabia being signed on 10 March 2023 – brokered by China.

However, Trump made it clear during his campaigning for his second term that he favoured a resumption of the Abraham Accords, including one between Israel and Saudi Arabia. Despite several reports to the contrary, the UAE never cancelled its own such deal with Israel in spite of the fallout from the Israel-Hamas War. Consequently, the greater the benefits of a renewed relationship between the U.S. and the UAE is seen to work, the more likely Abu Dhabi is to support such a landmark deal between Riyadh and Jerusalem, in Washington’s view. The latest big long-term LNG deal between the UAE and India fits perfectly in this U.S. design, as it builds on an already strong energy relationship between the two countries. Following the awarding of the U.A.E.’s Onshore Block 1 to India’s Bharat Petroleum Corporation in May 2019, the chief executive officer of the Abu Dhabi National Oil Company (ADNOC), Sultan Ahmed Al Jaber, highlighted that he looked forward to exploring partnerships with even more Indian companies across the energy giant’s hydrocarbon value chain. He added that he wanted this to include expanding the commercial scale and scope of India’s vitally-important Strategic Petroleum Reserves (SPR) partnership. This was in line with ADNOC already being the only overseas company allowed to store crude oil in India’s Strategic Petroleum Reserves (SPR). India has also allowed ADNOC to export this oil to allow it greater operational flexibility.

The U.S. also has key players on the ground in the U.A.E., in the shape of energy giants ExxonMobil and Occidental Petroleum. The former has invested heavily Abu Dhabi and is still working closely with ADNOC on the world’s second-largest offshore oil field, Upper Zakum. The latter has a 30-year joint venture with ADNOC in Al Hosn Gas, a 35-year concession for onshore Block 3, and another 35-year concession to explore and develop onshore Block 5. It is also a partner with Mubadala and France’s TotalEnergies on Dolphin Energy Limited, which supplies natural gas produced in Qatar to markets in Oman and the U.A.E. and is working on major new renewable energy projects in the Emirate. According to a senior Washington-based energy security source spoken to by OilPrice.com recently, with the UAE embarking on a big investment programme in its gas operations  — US$13 billion on the next five years — there will be significant opportunities for the U.S. to expand its footprint even further across the country. “This is linked to a big push to boost its LNG [liquefied natural gas] capacity, and they’ve asked India to invest in a big new plant [in Ruwais] connected to this, so we might be able to work something there as well,” he concluded.

By Simon Watkins for Oilprice.com

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