BHARAT, CHINA LOCKED IN ENERGY GAME
From: Dr. Jai Maharaj (usenet_at_mantra.com)
Date: 03/19/05
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Date: Sat, 19 Mar 2005 21:33:39 GMT
BHARAT, CHINA LOCKED IN ENERGY GAME
Forwarded message from "Hindu Sitah" <hsitah9@yahoo.com>
[ Subject: India, China locked in energy game
[ From: "Hindu Sitah" <hsitah9@yahoo.com>
[ Date: Thu, 17 Mar 2005
India, China locked in energy game
By Chietigj Bajpaee
http://www.atimes.com/atimes/Asian_Economy/GC17Dk01.html
HONG KONG - 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.
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.
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 fueled 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.
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 billion barrels, compared to 5 billion
barrels in India.
Indian-owned Oil and Natural Gas Company (ONGC) has
invested US$3.5 billion in overseas exploration since
2000, while Chinese-owned China National Petroleum
Corporation (CNPC) has made overseas investments of an
estimated $40 billion.
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.
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.
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 liquefied natural gas
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.
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.
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.
Festering disputes While China has either resolved or
shelved its border disputes, India has active conflicts
on almost all of its borders with neighboring 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 fueling
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.
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.
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 kilometer 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.
As part of the deal, Bangladesh will also get access to
the gas as well as $125 million 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.
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 remain strained, 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.
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.
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 hardline
chairman of Myanmar's ruling State Peace and Development
Council, since the ousting of moderate premier Khin Nyunt
at the end of October.
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 kilometer pipeline from the
deepwater port of Sittwe in Myanmar on the Bay of Bengal
coast to Kunming in Yunnan province.
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.
China's involvement has been fueled 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.
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 over the 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.
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. In the past two
years, India has reported 21 oil and gas discoveries
amounting to 800 million tons of oil and gas, although
domestic oil production has still been stagnant at about
32 million tons annually for the past few years.
Indo-Iranian energy cooperation 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 billion
1,700 kilometer pipeline from Iran's South Pars field
with 700 kilometers passing through Pakistani territory.
Pakistan stands to benefit with gas to meet its own
energy needs and $500 million 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.
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.
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.
At the beginning of 2005, India also completed a $40
billion deal with Iran to import 7.5 million tons of
liquefied natural gas annually 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. 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.
Cooperation in the energy arena is mirroring relations in
other arenas, including trade and military cooperation.
Bilateral exchanges of defense and intelligence officials
are routine and in 2003 both states conducted joint naval
exercises. 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.
Central Asia 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 Asian states. 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.
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 billion US-backed Turkmenistan-Afghanistan-
Pakistan (TAP) or Trans-Afghan pipeline that is to supply
gas from the Daulatabad 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 installment of a pro-US regime
and improving Indo-Pak relations, the TAP project is back
on the table.
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.
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. 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.
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.
Numerous formal and informal overlapping power blocs are
emerging in the region, which spillover 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.
Revival of the 'strategic triangle' 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 billion, which is set to begin
production this year eventually generating 2.3 billion
barrels of oil and 17.3 trillion cubic feet of gas. India
is also looking to invest in the Sakhalin-3 project,
which is estimated to hold 4.6 billion barrels of oil and
770 billion cubic meters 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.
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, Baikal Finance Group, 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 billion
investment for a 10-15% stake in Yugansk.
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".
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.
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. With India and China vying for assets in
Yukos, Sino-Indian-Russian collaboration in the energy
sphere could be further cemented. On December 3, during
Putin's meeting with Indian Prime Minister Manmohan Singh
in New Delhi, a joint statement was released which
included a proposal for greater cooperation with China,
stating that "the sides express their conviction in favor
of a progressive increase in trilateral cooperation,
which also leads to social and economic development
amongst the three countries".
Conclusion As India has made limited progress in
accessing energy resources on its doorsteps due to poor
relations with neighboring 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 billion.
In July 2004, India's OVL signed a $194 million contract
with the Sudanese government for the construction of a
741 kilometer 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.
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.
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.
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.
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 billion 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.
India faces this same volatile combination in many of its
disputes with neighboring countries. Thus, the jury is
still out over whether India's quest for energy security
will undermine international security.
Chietigj Bajpaee is Hong Kong-based energy analyst
End of forwarded message from "Hindu Sitah" <hsitah9@yahoo.com>
Jai Maharaj
http://www.mantra.com/jai
Om Shanti
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The terrorist mission of Jesus stated in the Christian bible:
"Think not that I am come to send peace on earth: I came not so send
peace, but a sword.
"For I am come to set a man at variance against his father, and the
daughter against her mother, and the daughter in law against her mother in
law.
"And a man's foes shall be they of his own household.
- Matthew 10:34-36.
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