Canada and India move to reset ties as trust in U.S. falters

India and Canada need new friends and customers. So this week, as U.S. and Israeli attacks on Iran escalated, they put aside painful past differences to promise closer ties during Prime Minister Mark Carney’s visit to New Delhi.

But the commitment is far from being fully reset. This follows the murder of Sikh activist Hardeep Singh Nijjar in Canada in 2023; This incident caused tensions between India and Canada, and both sides expelled diplomats the following year. The Canadian government had accused Indian Home Minister Amit Shah, a close ally of Prime Minister Narendra Modi, of conspiring to target Sikh separatists in Canada. India has categorically denied any involvement in the murder.

Reema Bhattacharya, head of Asia risk insight, enterprise risk and sustainability at Singapore-based risk consultancy Verisk Maplecroft, told CNBC that a “true reset” in the relationship will depend on whether the visit leads to “sustained, working-level collaboration.”

He added that Nijjar’s killing “remains the biggest political constraint on the relationship” and is unlikely to go away because “one meeting went well”.

“I would describe this as a meaningful thaw that is moving in the right direction, but it is not a clean slate,” he added.

Carney and Modi have extra motivation to improve ties as Donald Trump reorganizes global trade and the United States declares war on Iran.

“The United States is extremely volatile, not particularly predictable, and frankly, to be frank about it, destabilizing a lot of institutions and structures in the world,” Evan Feigenbaum of the Carnegie Endowment for International Peace told CNBC on Tuesday. he said.

He said Carney’s trip to India and German Chancellor Friedrich Merz’s recent visit to China were “no small response to instability from the United States.”

“From a strategic perspective, India aims to establish closer relations with Western countries beyond the US,” said Arpit Chaturvedi, Teneo’s South Asia advisor.

“The pain of Nijjar’s case remains but can be ignored if officials under Carney’s direct control (i.e. his cabinet) do not raise the issue,” he added.

The two leaders also welcomed the 2.6 billion Canadian dollar trade agreement between them. cameco Corp and the Ministry of Atomic Energy of India in the long term. supply uranium.

However, at a press conference held to discuss details of the India-Canada meeting, the Indian foreign ministry confirmed that the previous uranium supply agreement signed between Cameco and India in 2015 had not been honored.

The Canadian prime minister said his country is aiming to become a major liquefied natural gas (LNG) supplier to India.

Canada, which aims to increase LNG production to 50 million tons per year in 2030 and 100 million tons in 2040, is looking for new markets.

Meanwhile, India plans to double the share of LNG in its energy mix. A Citi report published on Monday warned that disruption in the Strait of Hormuz, a key waterway for oil and gas, is affecting 60% of India’s LNG imports, amid escalating conflicts in the Middle East.

“India is likely to want to open new routes via alternative routes such as the Pacific and Canada,” Chaturvedi said.

However, experts say any long-term LNG contract with Canada must be “competitive” as India is a price-sensitive market.

“Canada’s LNG capacity is still growing and shipping to India is a long way off,” said Bhattacharya of Verisk Maplecroft. He added that even if supply is available, aligning timelines, price expectations and demand needs “will not be simple.”

Experts said the two countries could see an expansion in trade in sectors such as clean energy, critical minerals, fertilizer and IT services.