In January 2023, Guyanaese president Irfaan Ali visited India, meeting Indian prime minister Narendra Modi. The two leaders discussed a broad range of economic opportunities, but the major topic was oil.

Guyana, which has emerged as the world’s newest petro-state, has plenty of oil; India, one of the world’s largest economies, lacks oil. Indeed, India is one of the world’s largest importers of oil, ranking third behind China and the United States. The tempo of Guyanese-Indian relations has accelerated over the past two years and is likely to deepen—an important development that has geopolitical implications not just for Guyana, but also for the Southern Caribbean Energy Matrix and the United States.

India has long had relations with the Caribbean, with many people from the South Asian nation arriving in the region to work on sugar estates in the early nineteenth century. King Sugar has long been dead, but oil is the newest king, pumping up the Guyanese economy, helping to revitalize Trinidad and Tobago’s (more on the natural gas side), and holding out hope for Suriname. India began buying Guyanese oil in 2021.

The January Ali-Modi meeting demonstrated that there is a mutual interest in further developing relations between the two countries, with oil the key issue. However, other areas of potential cooperation were discussed, including agriculture, infrastructure development, pharmaceuticals, healthcare, technology, and defense cooperation. Ali also met with Indian president Droupadi Murmu, and his itinerary included visits to Delhi (the country’s capital territory), Kanpur (a major industrial center), Bangalore (India’s tech capital), and Mumbai (the business and financial capital).

In February, Guyanaese vice president Bharrat Jagdeo arrived in India and met with Murmu. One of the results of the meeting was a memorandum of understanding (pending approval of respective governments) over future oil sales. Additionally, it was reported that there was potential for Indian investment in Guyana’s oil sector. Guyana has indicated that it plans to auction fourteen offshore oil blocks, while taking back 20 percent of the Stabroek offshore oil block from ExxonMobil—which could be sold to Indian oil companies.

The Jagdeo visit also discussed tapping Indian skilled workers to help develop Guyana’s emerging gas industry as well as help in several other sectors, including agriculture. Guyana also indicated an interest in defense cooperation (including potential fast patrol boat purchases from India) and improved transportation linkages between the two countries, which is expected to be backed by an air services agreement (ASA). This would allow airlines from both countries to travel back and forth (currently, travel must transit through New York or London).

The main driver from the Indian side is energy. Despite efforts to develop clean energy, India remains heavily dependent on fossil fuels. Coal is the South Asian country’s leading energy source, accounting for 46 percent of total energy in 2021, followed by oil (23 percent), biomass (21 percent), natural gas (6 percent), and primary electricity—defined as hydro, nuclear, water, and wind (4 percent).

Although New Delhi understands the need to reduce its carbon footprint, it is not likely to make a radical shift away from fossil fuels anytime soon. Modi announced in 2021 that his country would zero out its greenhouse gas emissions by 2070. This means that while India will work on developing clean energy alternatives, it will continue to be a major buyer of oil and gas over the medium term.

India’s energy picture has been further complicated by the Russo-Ukrainian War, which commenced in February 2022 and resulted in Western economic sanctions on the sale of Russian oil and natural gas. To mitigate its lost Western markets, Russia significantly increased its oil exports to “friendly” countries, like China, India, and Turkey.

In late 2022, Russia passed Saudi Arabia as India’s largest source of oil, and in January 2023, the South Asian country’s Russian oil imports rose to a record 1.4 million barrels per day, up 9.2 percent from December. While cheap Russian oil is being soaked up by India’s refiners, New Delhi is under pressure from the United States on this issue. New Delhi needs U.S. support to counterbalance China, with which it fought bloody border disputes in the Himalayas in 2021 and 2022. In this context, positive U.S.-Indian relations are key to balancing China. Enter Guyana.

Although Guyana is far from India, it offers a friendly and less controversial oil source than Russia or, for that matter, Venezuela, which had earlier been an important supplier. Guyana is also friends with the United States; Indo-Guyanese constitute the country’s largest ethnic group (around 40 percent of the total population); and the two countries share a parliamentary form of government. Indian and Guyana also share faiths in Hinduism and Islam, and similar experiences as British colonies.

For Guyana, deeper relations with India offer an opportunity to diversify its trade and investment partners. While the United States has positive relations with Guyana and remains its major economic relationship, especially considering the presence of U.S. energy companies like ExxonMobil and Hess, Indian involvement could broaden the investment base. A fulsome Indian economic engagement could also help contain the influence of China, which is active in trade, the oil industry, and infrastructure development.

Yet there are limits as to what India can offer Guyana, and vice versa. It is easy to take a cynical view and opine that Guyana is after fast Indian money and that the Ali government is pandering to its Indo-Guyanese base. Moreover, India’s trade with Guyana, while on the upswing, remains relatively small; according to the International Monetary Fund’s Direction of Trade statistics for 2022, India was Guyana’s ninth-largest source of imports and twenty-eighth in terms of exports.

Looking ahead, Guyana’s national interests are to maintain its independent role in the global economy, not become a satellite of a large power, and not fall victim to the Dutch Disease (which afflicts oil-producing countries). For India, Guyana could serve as a friendly source of oil and, over time, natural gas. A more developed relationship with Guyana could also help India develop a larger role in nearby Suriname, which has yet to start exporting oil. Indeed, Surinamese president Chan Santokhi also met with Modi in January 2023. A more developed Indian role would broaden the set of economic relationships that have emerged with the Southern Caribbean Energy Matrix. A deeper Indian engagement in Guyana could help counterbalance China’s influence in the Caribbean and Latin America, something that plays well to Washington’s strategic concerns.

Dr. Scott B. MacDonald is the Chief Economist for Smith’s Research & Gradings, a Fellow with the Caribbean Policy Consortium, and a Research fellow with Global Americans. Prior to those positions, he worked for the Office of the Comptroller of the Currency, Credit Suisse, Donaldson, Lufkin and Jenrette, KWR International, and Mitsubishi Corporation. His most recent book is The New Cold War, China and the Caribbean (Palgrave Macmillan 2022).

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