Why in news
- The UAE has announced an additional $25 billion investment plan in India targeting strategic petroleum reserves and subsea energy pipelines.
- Bilateral trade between the two nations has reached $100 billion with a revised target of $200 billion by 2032.
Key terms
Strategic Petroleum Reserve
Underground crude oil storage facilities maintained to shield the economy against supply disruption risks.
Comprehensive Economic Partnership Agreement
A broad free trade agreement lowering tariffs on goods and opening service sectors between signatory nations.
Local Currency Settlement System
A bilateral mechanism allowing trade transactions in local currencies rather than third-party currencies like USD.
Subsea Pipeline
An underwater energy transportation conduit laid along the sea floor to transport gas or crude oil.
What is the India-UAE Strategic Partnership?
- Comprehensive economic partnership anchored by the Comprehensive Economic Partnership Agreement (CEPA) signed in 2022.
- Covers strategic energy security, crude oil stockpiling, infrastructure funding, and local currency settlement systems.
- UAE serves as a critical supplier of crude oil and liquefied petroleum gas while investing in Indian infrastructure assets.
Key pillars of the new investment drive
- Participation in India's Strategic Petroleum Reserve (SPR) facilities for crude oil storage and emergency buffers.
- Exploration of subsea gas transportation pipelines and associated energy storage infrastructure.
- Expansion of the Local Currency Settlement System (LCSS) to settle cross-border commercial transactions in Indian Rupee and UAE Dirham.
Why it matters
- Strengthens India's energy security by securing long-term supply commitments and strategic storage.
- Reduces foreign exchange transaction costs and foreign exchange risk through non-dollar bilateral settlement mechanisms.
Prelims facts
- India and the UAE operationalised a Local Currency Settlement System allowing direct Rupee-Dirham trade settlement.
Mains discussion
- Analyze how strategic petroleum reserves and local currency trade arrangements enhance India's economic resilience against geopolitical shocks.
Source: Economic Times
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