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India-US Energy and Defence Ties
The Building Blocks of an India-U.S. Energy Future
Context: The recent statement by the U.S. Vice-President J.D. Vance underscoring America’s intent to deepen cooperation with India in the fields of energy and defence marks another milestone in an evolving strategic partnership.
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- While the announcement made headlines, the core issues—energy security, technological collaboration, and mobility of people—have long underpinned India-U.S. bilateral relations.
- With fresh momentum, both nations are now poised to invest more deeply in these priority areas.
Energy Security: The Cornerstone of India-U.S. Strategic Cooperation
- India’s energy security strategy is driven by three primary goals: ensuring access to sufficient energy resources at predictable prices, reducing vulnerabilities in global supply chains, and accelerating the transition to a cleaner, more sustainable energy mix.
- Critical minerals and nuclear energy will be central to this effort and serve as the foundation for expanded India-U.S. energy and technology cooperation.
Establishing a Robust Critical Minerals Partnership
- MoU: In 2024, India and the United States signed a Memorandum of Understanding (MoU) to diversify critical mineral supply chains—an essential move as the global energy transition hinges on rare earth elements and other strategic resources.
- China’s Stand: China currently dominates over 90% of global rare earth processing capacity and has repeatedly disrupted supplies to serve geopolitical ends.
- Need of Hour: To counter this, India and the U.S. must now operationalise their agreement based on three guiding principles:
- Cross-Sectoral Strategic Integration: Critical minerals should be treated as essential inputs across sectors such as renewable energy, defence, and semiconductors—not merely as mining resources.
- This broad perspective encourages long-term collaboration, innovation, and technology exchange.
- Bilateral and Plurilateral Supply Chain Frameworks: India and the U.S. should establish joint mechanisms for exploration, processing, and assured supply, possibly through an India-U.S. Critical Minerals Consortium.
- Additionally, co-investing in third-country mineral projects—particularly in Africa, South America, and Southeast Asia—can de-risk supply chains.
- Platforms like the Quad (India, U.S., Japan, and Australia) can serve as powerful multipliers for technology sharing and market diversification.
- Building Trust and Traceability: A secure, digital India-U.S. Mineral Exchange could facilitate real-time trade and investment in critical minerals.
- Incorporating blockchain-based traceability standards—modeled on the EU’s Battery Passport—will enhance transparency and protect supply chains for sensitive industries like electric vehicles, aerospace, and electronics.
- Cross-Sectoral Strategic Integration: Critical minerals should be treated as essential inputs across sectors such as renewable energy, defence, and semiconductors—not merely as mining resources.
- Joint Reserves: Additionally, both nations should explore creating joint strategic reserves of critical minerals, leveraging India’s Strategic Petroleum Reserves and the U.S. National Defense Stockpile to weather trade disruptions and price volatility.
- MSP: India’s inclusion in the Mineral Security Partnership (MSP)—the first non-G7 country to do so—demonstrates its proactive stance.
- With India set to host the upcoming Quad Summit, it presents an ideal opportunity to formalise these strategies and deepen engagement with resource-rich nations.
Nuclear Energy: Powering India’s Low-Carbon Future
India’s long-term energy goals include achieving 100 GW of nuclear power capacity by 2047, up from the current 8 GW. With electricity demand rising rapidly, nuclear energy offers a stable, low-carbon alternative to intermittent renewable sources. However, this requires a radical transformation in India’s nuclear ecosystem through three essential reforms:
- Accelerating Project Timelines: Reducing nuclear project build times from nine to six years could lower electricity costs by nearly 8%.
- This will require standardising reactor designs, streamlining regulatory approvals, and enhancing project management capacity.
- Unlocking Private Sector Investment: Small Modular Reactors (SMRs), which offer lower capital costs, flexible deployment, and minimal land usage, become financially viable only with strong policy incentives, credible offtake guarantees, and bankable returns.
- With capital needs projected to reach $180 billion by 2047, India must reform financial frameworks and facilitate collaboration with U.S. firms for technology transfer and joint ventures.
- Amending Legal Frameworks and Prioritising Safety: Reforms to the Civil Liability for Nuclear Damage Act, 2010, are essential to attract private investment in nuclear energy.
- The recent technology transfer deal involving Holtec International and Indian firms such as Larsen & Toubro signals progress.
- However, India must simultaneously implement world-class nuclear waste management and decommissioning protocols, especially as it positions itself as a global hub for SMR manufacturing.
Creating a 20-Year Road Map for Sustainable Cooperation
- The path to a secure energy future demands strategic patience.
- While a battery factory may be operational in two years, developing a new mine or mineral processing plant can take 12 to 16 years.
- Therefore, India and the U.S. must commit to a 20-year roadmap with interim targets aligned with India’s Critical Minerals Mission.
- This long-term cooperation should also focus on the enabling infrastructure—or “plumbing”—of the partnership. Key areas include: Robust data-sharing protocols, Investment tracking tools, Workforce development programs and Joint R&D through platforms like the U.S.-India Initiative on Critical and Emerging Technology (iCET).
