by Chietigj Bajpaee
17-03-05
In the words of Indian Prime Minister Manmohan Singh, "China is ahead of
us in planning for its energy security -- India can no longer be
complacent." These words conveyed the sense of urgency that India holds
over meeting its energy needs. Power shortages and blackouts continue to plague India's major cities and
undermine the confidence of investors and foreign companies operating in India.
These power shortages have been fuelled by a combination of burgeoning growth
rates, inefficiencies by the state-run power sector and power being stolen or
siphoned for votes. The growing popularity of gas-guzzling sports utility
vehicles and multi-purpose vehicles in India is also placing strains on its
energy needs. Indian-owned Oil and Natural Gas Company (ONGC) has invested $ 3.5 bn in
overseas exploration since 2000, while Chinese-owned China National Petroleum
Corporation (CNPC) has made overseas investments of an estimated $ 40 bn. Nevertheless, for the short to medium term India will have to rely on an
increasing amount of imported oil and gas to meet its energy needs. As a result,
India is stepping up energy diplomacy with states in the South Asia region, as
well as states further afield in Central Asia, Russia and the Middle East and as
far away as Latin America and Africa. However, this quest for energy security is being impeded by India's sometimes
tense relations with energy suppliers, energy transit countries and energy
competitors. For example, just as India and China have for centuries engaged in
competition for leadership in Asia, the developing world and status on the world
stage, so the need for energy security has now raised the possibility of further
competition and confrontation in the energy sphere. Festering disputes These disagreements have slowed the progress for discussions on a natural gas
pipeline from Myanmar to India, which will have to pass through Bangladeshi
territory, forcing India to look into the expensive option of creating a
deep-sea pipeline through the Bay of Bengal that would bypass Bangladesh. As part of the deal, Bangladesh will also get access to the gas as well as $
125 mm in transit fees. In exchange for agreeing to the project, Bangladesh is
also pushing for a trade and transport corridor linking Nepal and Bangladesh
through Indian territory, as well as access to hydroelectric power generated in
Bhutan and Bangladesh using India's power grid. While India's relations with Myanmar have seen considerable improvement in
recent years, Myanmar clearly remains within the Chinese sphere of influence.
India has moved from voicing its opposition to the military junta's crackdown on
pro-democracy activists and the arrest of Aung San Suu Kyi, the leader of the
National League for Democracy to a more pragmatic, non-interventionist policy.
This change in policy by India has been prompted by its desire to access the
region's energy resources, gain access to the vast markets of Southeast Asia,
balance the influence of China and counter Indian insurgent groups operating
from Myanmar. However, India's warming relationship with Myanmar is making Myanmar a
potential stage for Sino-Indian energy competition. For example, China is also
in discussions with Myanmar for a 1,250 km pipeline from the deepwater port of
Sittwe in Myanmar on the Bay of Bengal coast to Kunming in Yunnan province. China's involvement has been fuelled by the proximity of the port city to the
Straits of Hormuz, through which 40 % of the world's oil passes. The port would
compete with a port facility at Chabahar in Iran, which is being jointly
developed by India and Iran to access the landlocked states of Central Asia and
Afghanistan. China's "string of pearls" strategy also forms part of a
wider Chinese policy to encircle India. Nevertheless, India has made significant progress in tapping into energy
resources within its borders, including oil discoveries in Rajasthan by UK-based
Cairn Energy and gas discoveries by India's Reliance Industries off the coast of
Andhra Pradesh in the Bay of Bengal. In August 2003, ONGC also announced a
deep-sea project, "Sagar Samriddhi", to look for oil and gas reserves
in the Arabian Sea and the Bay of Bengal. Indo-Iranian energy cooperation However, in the presence of sporadic tensions between India and Pakistan,
both states have often proposed separate pipeline projects with Iran, with India
sometimes pushing for the expensive option of a deep-sea pipeline that bypasses
Pakistan altogether. Rising oil prices and a recent improvement in
Indo-Pakistani relations following a commitment to resume a "composite
dialogue" in January 2004 has revived hopes for the "peace
pipeline", which has now become one of the confidence-building measures
being pursued by both states. At the beginning of 2005, India also completed a $ 40 bn deal with Iran to
import 7.5 mm tpy of LNG over a 25-year period, as well as obtaining stakes in
the development of Iran's largest onshore oilfield, Yadavaran, as well the
Jufeir oilfield. The Yahavaran oilfield is a Sino-Indian-Iranian collaboration
with India holding a 20 % stake, China 50 % and 30 % with Iran. Cooperation in the energy arena is mirroring relations in other arenas,
including trade and military cooperation. Bilateral exchanges of defence and
intelligence officials are routine and in 2003 both states conducted joint naval
exercises. Central Asia However, the presence of two unfriendly regimes standing between India and
Central Asia has slowed the progress of Indo-Central Asian cooperation in the
economic, transportation and energy spheres. For example, progress on the $ 3.3
bn US-backed Turkmenistan-Afghanistan-Pakistan (TAP) or Trans-Afghan pipeline
that is to supply gas from the Dauletabad fields in southeast Turkmenistan has
been delayed by instabilities in Afghanistan and poor Indo-Pak relations. With
the ousting of the Taliban regime in Afghanistan, the instalment of a pro-US
regime and improving Indo-Pak relations, the TAP project is back on the table. India's increasing interest in Central Asia's energy resources has been
accompanied by a growing involvement in the region's security. India has
expanded military contacts in Central Asia, allegedly establishing a military
and medical facility in Tajikistan. Other major world powers have followed
similar trends. Meanwhile, Russia has reasserted its presence in Central Asia under President
Vladimir Putin, as seen most recently with Russia becoming a member of the
Central Asian Cooperation Organization. Russia has also established a permanent
military presence in Tajikistan, replacing its 201st division and border guards,
who had been in the region since the 1992-1997 Tajik civil war, as well as
maintaining a military presence at Kant airbase in Kyrgyzstan. Revival of the “strategic triangle” The controversy over the sale of the Yugansk, which produces 60 % of Yukos'
oil output and pumps 11 % of Russia's oil, has also highlighted India's growing
interest in Russian energy assets. While the mysterious buyer, BaikalFinansGroup,
ended up selling its stake in Yugansk to Rosneft in December, which has been
acquired by Russian state-owned Gazprom, this does not preclude the possibility
of Yukos' assets being acquired by India's ONGC. ONGC has been considering a $ 2
bn investment for a 10-15 % stake in Yugansk. In fact, growing Indo-Russian energy cooperation resurrects former Russian
prime minister Yevgeny Primakov's idea for a strategic triangle between Russia,
India and China. These states are bound together by their shared interests in
the fight against terrorism, the push for a multipolar world, and respect for
the principles of state sovereignty and non-intervention with regards to their
respective separatist movements in Chechnya, Kashmir and Taiwan. With India and China vying for assets in Yukos, Sino-Indian-Russian
collaboration in the energy sphere could be further cemented. Conclusion Furthermore, India's and China's attempts to engage "rogue states"
such as Myanmar, Iran and Sudan in order to access their energy resources is
undermining attempts by the West to isolate these regimes. The quest for energy
resources on the world stage could eventually be added to the outsourcing debate
as an area of contention between India and the West. Conversely, India's plans for generating hydroelectric power through
rerouting several river systems adds an additional element of instability in
relations between India and downstream and upstream states such as Bangladesh,
Nepal and Pakistan. India faces this same volatile combination in many of its disputes with
neighbouring countries. Chietigj Bajpaee is Hong Kong-based energy analyst.
Source: Asia Times OnlineIndia and China locked in energy game
India is playing catch-up with other major players in the global energy game.
This realization has not come a moment too soon, given the advent of rising oil
prices, India's unprecedented growth levels, lack of energy-efficient
technologies and reliance on energy-heavy industries for its development.
India, as the world's number six energy consumer, is also in a more desperate
situation compared to its peers. For example, oil imports account for two-thirds
of India's oil consumption, while China imports a third of its crude oil
consumption. Furthermore, China's proven oil reserves stand at 18 bn barrels,
compared to 5 bn barrels in India.
Indian policymakers have initiated numerous policies to address the country's
growing energy needs. For example, India is pushing for the creation of 15-45
days of emergency reserves in Rajkot, Mangalore and Vishakapatnam. India is also
diversifying beyond oil to access other energy resources, such as nuclear power,
coal, natural gas and renewable energy resources, as well as stepping up
exploration activities within its borders.
ONGC, for example, has invested in offshore gas fields in Vietnam, as well as
energy projects in Algeria, Kazakhstan, Indonesia, Venezuela, Libya and Syria,
while Indian Oil Corporation is looking to invest in deepwater exploration in
Sri Lanka. Reliance Industries, India's largest private sector oil firm, also
has stakes in an offshore field in Yemen and a LNG project in Iran, and is in
talks to acquire energy assets in Nigeria, Chad, Angola, Cameroon, Congo and
Gabon in Africa, as well as in South America and the Middle East.
India's tense relations with Pakistan also have an added dimension with the
question of a gas pipeline from Turkmenistan or Iran to India, which will have
to traverse Pakistani territory. Nationalism and oil are proving to be a
volatile mix. Resolving territorial disputes and improving relations with
traditional adversaries will become increasingly important for India if it is to
meet its energy import needs by peaceful means.
While China has either resolved or shelved its border disputes, India has active
conflicts on almost all of its borders with neighbouring states. Apart from
India's poor relations with Pakistan on its western borders, the ongoing
violence in India's northeast with sporadic attacks on pipelines and India's
poor relations with natural gas-rich Bangladesh and China-friendly Myanmar have
prevented it from fully exploiting its proximity to a region rich in energy
resources on its eastern borders.
Frosty relations between Bangladesh and India are rooted in accusations by India
that Bangladesh is fuelling terrorist movements in India's northeast in the
presence of rising Islamic fundamentalism and anti-India sentiment in Bangladesh
under the Bangladesh National Party (BNP)-led coalition government, illegal
migration between both states, and Bangladesh accusing India of rerouting the
Ganges and Brahmaputra river systems that traverse both states.
Disagreements have recently given way to progress as a joint statement was
issued at a meeting of the energy ministers from India, Bangladesh and Myanmar
in Yangon, which agreed to the construction of a 900 km gas pipeline from
Myanmar's offshore Shwe field to Kolkata, passing through Myanmar's Arakan
state, the Indian states of Mizoram and Tripura, and Bangladesh.
Nevertheless, several potential glitches remain. Given that the pipeline will be
traversing insurgency-infested areas across the three states adds an element of
instability to the project. Furthermore, relations between Bangladesh and India
remainstrained, as seen most recently with Bangladesh's disappointment to India
unilaterally withdrawing from the 13th South Asian Association for Regional
Cooperation (SAARC) summit, which was due to be held in Dhaka. India cited the
suspension of democracy in Nepal and the deteriorating security situation in
Bangladesh as its reasons for withdrawing, which ultimately resulted in the
postponement of the summit.
Notably, Myanmar has helped Indian security forces to crack down on northeast
Indian insurgent groups on at least three occasions over the past 10 years.
India's more conciliatory approach with Myanmar's military regime was
demonstrated most recently when India became the first country to host General
Than Shwe, the hard-line chairman of Myanmar's ruling State Peace and
Development Council, since the ousting of moderate premier Khin Nyunt at the end
of October.
China is also looking at the possibility of pipelines traversing Pakistani and
Bangladeshi territory, as part of its "string of pearls" strategy to
bypass the narrow Strait of Malacca, which experiences 40 % of the world's
piracy and through which 80 % of China's oil imports flow. Construction has
recently been completed on a deep-sea port in Gwadar in the Pakistani province
of Balochistan, in which China has provided technical expertise and financing.
India's plans to generate hydroelectric power through damming and rerouting
several river systems have also been delayed by changes in state and central
governments and disputes with upstream and downstream states such as Nepal,
Bangladesh and Pakistan. Most recently, Pakistan has been pushing for
international arbitration to resolve a dispute overthe Baglihar dam, which India
is constructing to generate power across the Chenab river running through
Kashmir. Pakistan claims this project is a violation of the 1960 Indus Water
Treaty. The dispute now threatens to derail the peace initiatives between India
and Pakistan.
In the past two years, India has reported 21 oil and gas discoveries amounting
to 800 mm tons of oil and gas, although domestic oil production has still been
stagnant at about 32 mm tpy for the past few years.
The inability to resolve the Kashmir dispute between Pakistan and India has
undermined the viability of an Iran-Pakistan-India natural gas pipeline. A
memorandum of understanding was signed between Iran and India in 1993 for a $ 4
bn 1,700 km pipeline from Iran's South Pars field with 700 km passing through
Pakistani territory. Pakistan stands to benefit with gas to meet its own energy
needs and $ 500 mm in transit fees.
The international community has also shown growing interest in the
Iran-Pakistan-India pipeline, with the World Bank and Japan's Sumitomo Mitsui
Banking Corporation willing to finance the project. Russia also supports the
project, although the US opposes it, instead pushing for the competing
trans-Afghan pipeline project.
Notably, Pakistan has offered security guarantees for the pipeline, vowing that
gas flow will not be "switched off", even during periods of Indo-Pak
tensions or hostilities. However, the future of the pipeline project is once
again in doubt due to periodic violence across the Line of Control in Kashmir
and rising tensions in Pakistan's Balochistan province, with attacks by the
Baloch Liberation Front on energy infrastructure.
In exchange for Iranian gas, India is investing in Iran's ports and energy
infrastructure. Iran and India have agreed to jointly develop the Iranian port
at Chabahar as well as the road linking the port to Afghanistan and Central
Asia, and grant India exclusive rights to the port.
These developments have not only concerned India's traditional adversaries,
China and Pakistan, but also its newly found allies, Israel and the United
States, who fear that military technology supplied to India could be diverted to
Iran.
India is at a geographic disadvantage in Central Asia when compared to China.
While China shares borders with Kazakhstan, Kyrgyzstan and Tajikistan, as well
as Russia, India does not share a land border with any of the Central
Asianstates. That being said, however, India's warm relations with the Soviet
Union during the Cold War have provided it with influence in Central Asia.
Further, India also has its soft power to exercise, with historical links that
go beyond the Indo-Soviet Treaty of Friendship to the Mughal period and Silk
Road, as well as the popularity of Indian mass culture in the region, such as
Bollywood films and music.
Nevertheless, progress has been impeded by the competing Iran-Pakistan-India
pipeline, sporadic violence in Afghanistan, Turkmenistan's isolationism and
questions over whether Turkmenistan has sufficient gas to meet India's and
Pakistan's needs, given its competing energy agreements with Ukraine, Russia,
Iran and its own domestic consumption needs.
Since September 11, 2001, the US has forged closer relations with Central Asia
and established a military presence in Afghanistan, Tajikistan, Kyrgyzstan and
Uzbekistan. China has led in the creation of the Shanghai Cooperation
Organization, which is fighting the "three evils" of extremism,
terrorism and fundamentalism and promoting greater economic integration and
development in Central Asia and China's West.
Numerous formal and informal overlapping power blocs are emerging in the region,
which spill over into the energy arena. For example, Iran, Russia and India are
pushing for a north-south oil and gas pipeline and transportation corridor to
link Asia with Europe, which is in competition with a US-led initiative to
create an east-west corridor on the historic Silk Road through Baku, Tbilisi and
Ceyhan. A growing military presence in the region coupled with increasing
desperation to access the region's energy resources makes Central Asia a stage
for potential great power conflicts.
India has recently stepped up efforts to access energy resources in Russia, the
world's second largest oil producer and leading gas producer. India's ONGC
Videsh Ltd (OVL) holds a 20 % stake in Sakhalin-1 of $ 1.7 bn, which is set to
begin production this year eventually generating 2.3 bn barrels of oil and 17.3
tcf of gas. India is also looking to invest in the Sakhalin-3 project, which is
estimated to hold 4.6 bn barrels of oil and 770 bn cm of gas as well as
investing in the joint Russian-Kazakh Kurmangazy oilfield in the Caspian Sea.
During Putin's visit to India in December, the two countries also signed a
memorandum of understanding for joint exploration and distribution of natural
gas from the Caspian basin as well as building underground gas storage
facilities in India.
Indo-Russian energy cooperation is being further cemented by political and
military cooperation. Just as India increasingly relies on Russian energy
resources, so it also constitutes one of the biggest buyers of Russian military
hardware. During Indian Petroleum Minister Mani Shankar Aiyar's visit to Moscow
in October 2004, he voiced similar sentiments stating that "in the first
half-century of Indian independence, Russia has guaranteed our territorial
integrity, and in the second half it may be able to guarantee our energy
security".
Now the energy sector can be added to this list of shared interests. India and
China are already collaborating in the development of the Yahavaran oil field in
Iran and India's leading state-owned gas company, Gas Authority of India Limited
(GAIL), has acquired a 10 % stake in China Gas Holdings.
On December 3, during Putin's meeting with Indian Prime Minister Manmohan Singh
in New Delhi, a joint statement was released which includeda proposal for
greater cooperation with China, stating that "the sides express their
conviction in favour of a progressive increase in trilateral cooperation, which
also leads to social and economic development amongst the three countries".
As India has made limited progress in accessing energy resources on its
doorsteps due to poor relations with neighbouring states, it has shown a growing
interest in accessing energy resources further afield, including in Africa and
Latin America. In many cases, India is vying for energy resources in some of the
most unstable parts of the world, such as Sudan, where India has invested $ 1.5
bn.
In July 2004, India's OVL signed a $ 194 mm contract with the Sudanese
government for the construction of a 741 km petroleum product pipeline from
Khartoum refinery to Port Sudan. Khartoum refinery is currently owned by the
Sudanese government and China's CNPC. While India has made nowhere near the
progress of China on the international energy stage, it is conceivable that
India could become a major player in the near future, thus bringing it into
competition with other major energy consuming countries.
However, conflict over increasing energy needs is not inevitable. The need to
access energy resources on the world stage can be as much a catalyst for
cooperation as it can for conflict. For example, the Iran-Pakistan-India and
Myanmar-Bangladesh-India natural gas pipelines raise the stakes for regional
states to resolve their differences.
Furthermore, the increasing interdependence between China and India as a result
of their burgeoning trade relationship reduces the possibility of conflict over
energy resources. Sino-Indian bilateral trade reached $ 13.6 bn in 2004, making
China India's second-largest trading partner. It should be noted, however, that
expanding trade relations do not necessarily preclude the possibility of
conflict, as seen by the fact that China is Japan's largest trading partner,
with trade up 26 % in 2004, while relations in the political and security arena
have continued to plummet over historical animosities and territorial disputes
rooted in nationalism and energy resources.
Thus, the jury is still out over whether India's quest for energy security will
undermine international security.