India-Central Asia Relations

Dialogue April-June 2007 , Volume 8 No. 4

India-Central Asia Relations: Quest for Energy Securitytc

Vijay Laxmi

The geo-politics of energy is returning, once again, to the core of international relations. In this context energy is an important element in what is described as the New Great Game of 21st century. In the present times the energy is universally recognized as one of the most critical inputs for economic growth. Therefore, the energy security is emerging as vital issue in the era of fast economic growth. The concept of energy security has thus, become more comprehensive, including both demand and supply side strategies. Although oil continues to dominate the global energy scene, its position of primacy has been eroded considerably with thinking being focused on the alternative sources of energy. The first oil shock, in the aftermath of the 1973 Arab-Israeli war, put energy security, and more specifically security of supply, at the heart of the energy policy agenda of industrialized nations.1 Since then policymakers and analysts have sought to refine the concept of “energy security” and its implications. The European Commission defines energy security as:

the ability to ensure that future essential energy needs can be met, both by means of adequate domestic resources worked under economically acceptable conditions or maintained as strategic reserves, and by calling upon accessible and stable external sources supplemented where appropriate by strategic stocks.2

In the energy security system of today, the focus is no longer on the possibility of global confrontation between the major powers, as was the case during the cold war period, but on the stability of prices, especially oil, and its repercussions for the demand/supply position of energy resources. Though the term “energy” covers the entire gamut of energy resources-primary, renewable and non- conventional - the focus of this paper is on hydrocarbons, as the world today is running, albeit decreasingly, on oil. It was the discovery of oil, and more recently gas that brought the concept of energy security to the fore in the policy-making decisions of nations. The emphasis of this paper is on India’s search for energy cooperation with Central Asian Countries.

The linkage between energy and politics is likely to increase primarily because the majority of the world will continue to be dependent on fossil fuels, especially oil and increasingly gas, both of which are concentrated in a few regions. Though most of world’s major oil fields are nearing peak production levels in the foreseeable future, with no other fuel emerging as a serious contender for the position of the main international fuel of choice, the race for control over diminishing reserves will ensure that geopolitics will continue to dominate the energy game.3 Between 1980 and 2003, annual world demand for natural gas increased on average by three and a half time. The energy demand in the world has grown by nearly 95 percent during the past 30 years and is likely to grow by over 52 percent during the next two decades. The demand for natural gas is expected to grow by as much as 97 percent, with demand for oil and natural gas to increase by over 42 percent and 97 percent respectively.4

Since 1990, the demand for energy has increased at phenomenal pace in developing Asia, particularly China and India.5 India is one of the major energy deficient countries in the world. Oil accounts for about 30% of India’s total energy consumption. The majority of India’s 5.4 billion barrels of oil reserves are located in the Mumbai High, Upper Assam, Cambay, Krishna-Godavari, and Cauveri basins. The offshore Mumbai High field is by far India’s largest producing field, with current output of around 260,000 barrels per day (bb1/d).6 India, the world’s sixth largest energy consumer, plans major energy infrastructure investments to keep up with increasing demand- particularly for electric power. India also is the world’s third- largest producer of coal, and relies on coal for more than half of its total energy needs.

Hydrocarbons constitute 42% of India’s commercial energy consumption. The present trends suggest that it will be the only primary fuel at least in the near future to meet the soaring demands, particularly of the transport and manufacturing industry. According to the vision 2025 document, the share of oil and gas in the total energy supply will be 45% (oil 25% and gas 20%) by the year 2025.7 The pattern of India’s energy consumption has changed over the years. From the dominance of traditional or non-commercial fuels like fuel wood, dung and crop residues, the demand has shifted to commercial sources of energy, out of which coal, oil and natural gas are the main source, with coal dominating the total indigenous energy supply. India also has a large potential for hydroelectric power, estimated at 600 Bkwh (billion kilowatt hour), out of which only a fifth has either been developed or is under development.8 The non-exploitation of such resources in the main reason of India’s heavy dependence on the outside sources.

Production of Primary Energy Sources of Conventional Energy in India

Source 1970/71 1980/81 1990/91 2001/02 2002/03

Coal and

lignite (MT) 76.34 119.02 228.13 352.60 367.29

Cude Oil (MT)

Natural 6.82 10.51 33.02 32.03 33.04

gas (BCM)

Natural power 1.45 2.36 18.00 29.71 31.40

(BKWH)

Hydro power 2.42 3.00 6.14 19.48 19.30

(BKWH)

Wind power 25.25 46.54 71.66 73.70 64.10

(BKWH)-

- - 0.03 1.97 2.1

MT- million tonnes; BCM- billion cubic meter; BKWH- billion hikowatt hour

Source- Background, www.teriin.org.

Energy security may be the biggest security challenge to Indian policy- making in the coming decades. Looking at the future of oil and natural gas demand and consumption, it is clear that India’s import dependency would continue to rise markedly in the coming decade and beyond. Indian Prime Minister Manmohan Singh told the Financial Times “ energy security is second only in our scheme of things to food security”.9 Nevertheless, India has made some visible progress in tapping energy resources within the country, which include oil discoveries in Rajasthan by U.K.-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, O.N.G.C 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 last 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. 10 Thus India’s secure access to oil and gas supplies is top priority for India, as manifested in its energy firms’ quest for equity holding in Russian, Angolan, Sudanese, Venezuelan, and above all, Iranian energy fields. As India’s oil import levels rise to levels above 100 million tonnes over the next couple of years, it will be increasingly difficult for it to meet its energy import requirements without concluding large, long-term contracts for the supply of oil. Like other large Asian energy consumer, India too will have to deepen its energy trading relationships with exporting countries, which in turn may lead to fears that New Delhi is trying to gain a strategic role for itself in energy- rich regions such as the Persian Gulf and Central Asia.11 Mr. Stephen Blank said12:

India’s observer status in the SCO, that includes Mainland China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, and ... is increasingly playing a role in trade and commerce.... New Delhi is seeking access to Kazakh oil and gas and participation in mega- projects like the Iran- Afghanistan-Pakistan-India pipeline and another linking Turkmenistan, Afghanistan, Pakistan and India.

India realizes that a pipeline from Central Asia to its shores would make immense commercial sense, and would fit in with its policy of diversifying its energy supply sources from the Persian Gulf region. Experts point out that in the 21st century, Central Asia will become an important region. India as an extended neighbor of CARs has major geo-strategic and economic interests in this region. The future prospects for cooperation between Central Asia and India in the field of energy security seem to be very bright. Peace and stability in CARs and Afghanistan seems to be the most crucial factor for India’s security.13 An important factor in India’s policy towards CARs is the oil and gas. This is, as already mentioned, because of ever increasing energy requirements of India. This region is thought to contain key global reserves. According to an estimates based on Central Asian sources the confirmed oil deposits are between 13 to 15 billion barrels, which is 2.7% of all the confirmed deposits in the world whereas confirmed deposits of natural gas in Central Asia, are around 270 to 360 trillion cubic feet, which constitute around 7% of world deposits.14

So far as oil and natural gas reserves, are concerned, Kazakhstan and Turkmenistan are among some of the world’s largest depositories of energy. Kazakhstan is the second largest producer of petroleum in the CIS after Russia. In February 2005 , Kazakhstan produced 4.75 million tons of oil and gas condensate, including 362,646 tons of condensate. It raised gas production tentatively by 39.6 percent to 4.211 billion cubic meters (bcm) from January to February 2005. 15 The reports indicate that Kazakhstan with recent recoveries of oil has come to occupy fifth place in the world among the oil rich countries. Discovery of the Mangyshlak oil reserves in Kazakhstan brought it to 5th place in the world.16 Turkmenistan which is known as cotton producer country and is world’s 10th – largest producer possesses world’s third – largest reserves of natural gas and substantial oil resources as well. It extracted 58.57 billion cubic meters of gas in 2004. Its oil product exports increased by 24% in 2005.17 Uzbekistan has immense potentiality of natural gas and is one of the 10 top natural gas producers in the world. Kyrgyzstan and Tajikistan have rich potentiality of hydroelectric energy. Two power stations at Nurek and Rogun on the Vaksh River in Tajikistan produce 2,700 megawatts and 1.1. Millions kilowatts respectively. Similarly, the power stations on the Naryn River in Kyrgyzstan at Toktogul, Shamoldy-say, Kurpsay and Task-kumyr make the republic an exporter of hydro-electricity. The hydro-electricity potential of Tajikistan and Kyrgyzstan can be developed. The feasibility studies have already been conducted indicating the possibility of supply of power to India through overhead transmission lives.18

Central Asian energy issue has strong regional dimensions because the republics are tied together by a web of electricity transmission systems, as well as oil and gas pipelines developed during the Soviet period. Energy systems were designed to take account of the location of various energy sources and therefore the Oil refineries were located in the more significant oil producers (Kazakhstan, Turkmenistan and Uzbekistan) with refined products being transported into Kyrgyzstan and Tajikistan. The regional gas pipeline network was designed to allow delivery of gas from Turkmenistan and Uzbekistan to the Southern portion of Kazakhstan, Kyrgyzstan and Tajikistan. Coal consumption was largely tied to local availability and the ability to use the rail network for coal transportation19. The Central Asia power system was designed as a regional power grid, using hydropower exports from Kyrgyzstan and Tajikistan and allowing interchanges of power among all the countries. The dispatch center for this system is located in Uzbekistan. The power rendered surplus in the post-Soviet era can possibly be transmitted to India for meeting its ever-increasing energy requirements.

The Central Asian region is “possibly the last explored or unexplored oil- bearing region in the world” and, therefore, “its opening up generated huge excitement amongst the international oil companies”.20 A number of companies from Russia, United States, Europe, Turkey, Iran and others are competing for the right to extract and ship the Kazakh oil and Turkmen natural gas to worldwide markets. Therefore, the Central Asia has become a critical area in the foreign policy of the West, South and East Asian countries.21 India too is making serious attempts to forge new equations with the Central Asia. It obviously occupies a special place in India’s foreign policy priorities. Unlike in the past, its importance for India today is not merely civilizational, but geopolitical and economic. India’s policy of source diversification has problematic implications. First, many of the countries with which India is dealing are known for severe violations of human rights, sponsorship of terrorist activities, and general misuse of oil revenues. Further enrichment of oil supplying countries like Sudan, Syria and Iran may not be in the interest of India, a country which itself is a prime target of Islamist terrorism. Secondly, the exploration of overseas oil fields, especially in the area of the South China Sea, could bring India in direct competition with fellow Asian countries like China and Malaysia.22

Under the present global scenario, it is natural for India to renew and redefine its relationship with Central Asia which is described as extended neighborhood. It is also prudent on the part of India to think that while Southeast Asia stood as a promising region of economic cooperation, the developments in Central Asia have vital implications for India’s energy security. India’s approach to Central Asia should be that of positive engagement with the region. Therefore, economic diplomacy should remain India’s basic policy thrust towards the region. Not clash but compatibility of interests with the new states is the need of the hour. To achieve energy security, it is being suggested that India should encourage the use of renewable sources of energy like solar, wind and hydroelectricity in large scale; it should take appropriate legal, fiscal and regulatory steps to create a more attractive environment for foreign investors such as streamlining the license approval process for private power producers, offering more incentives for upstream oil and gas exploration and promoting joint ventures; Thirdly, it should improve infrastructure, which includes establishment of new refineries, urban gas transmission and distribution networks, a unified national grid and improved transportation facility and; Fourthly, New Delhi should consider promoting and strengthening its oil diplomacy on a regular basis.23 It should formulate an urgent energy security policy and implement it without delay. However, till such measures become reality India’s dependence on outside sources would continue. In this context Central Asia as energy depositor region would remains a high priority areas at least in the foreseeable future.

India like other energy importing countries is also looking at diverse sources of supply. India’s crude imports account for 72% of domestic consumption. The World Energy Outlook, published by the International Energy Agency (IEA), projects that India’s dependence on oil imports will grow to 91.6% by the year 2020.24 However, India’s quest for more diversified system of imports is being impeded by transit problems emanating from strained relationship with the countries through which transit routes could possibly pass. For example, just as India and China have engaged in competition for leadership in Asia, the developing world and on the world stage, the need for energy security has now raised the possibility of further competition and confrontation. Indian Prime Minister Manmohan Singh had already warned in 2005 that “ China is ahead of us in planning for its energy security- India can no longer be complacent.”25 Manmohan Singh made clear that India couldn’t afford to be complacent in the face of China’s global campaign (including in Central Asia) for secure energy supplies. Therefore, the way forward lay in cooperation The net importers are preoccupied with the security, stability and sustainability of energy supplies, whereas the net exporters are preoccupied with the security, stability and sustainability of energy demand. As such we could secure energy security for all by promoting mutual interdependence in trade and investment in the oil and gas sector to ensure stability, security and sustainability in the Asian oil and gas economy.26

To sustain its economic growth, India needs vast amount of energy. In this context, Central Asia can be future source of energy for India. The cheap hydel energy available in this region can be of use to India if it can reach through viable route.27 The Central Asian oil and gas will travel either through China or through Afghanistan and Pakistan if and when that can be possible, or through Iran. Thus, India cannot ignore the importance of the Central Asia for energy supply in the changed context to fulfill its increasing demands. India’s recent diplomatic thrust into Central Asia keeping in view its future energy requirements and strategic positioning, through bilateral visits and trade and understated military agreements with some of the Republics, is also triggered by the security realignments in the region following the Taliban’s ouster. The ensuing conflict of interest in the area between India’s old ally Russia and the U.S., its new found “long-term, strategic partner,” and nuclear rival China is also fuelling Delhi’s “forward” Central Asian policy.28 India is also pursuing relations with Kazakhstan, Azerbaijan and Iran. In this era of faster economic growth, energy security has emerged as a critical component in redefining policy priorities. In this scenario, Central Asia energy sources are high on India’s agenda, the harnessing of which will critically depend on the politics of pipelines.

India is, fortunately, placed close to countries with huge gas reserves, both established and potential. In this context, the proposed trunk gas pipeline, Iran- Pakistan-India (IPI), Qatar- Pakistan-India(QPI), Russia-Kazakhstan-Turkmenistan-Afghanistan- Pakistan – India (RKTAPI) and Myanmar- Bangladesh-India(MBI) are extremely important for this country both from the point of view of energy security, as well as sustainable development.29 India is currently in an advanced stage of negotiation with Iran for the import of natural gas via an offshore or onshore pipeline. For India, the import of natural gas from Iran is a vital element in India’s quest for energy security. As early as1993, it was argued that the $ 3 billion project was based on the basic assumption that Iran has plenty of cheap gas and India needs the gas, as its growing economy will be consuming more energy. According to the Iranian sources, “The pipeline can save India up to $ 300 million every year in energy costs.”30 Iran considers its territory to the best suited and most economical for lying of oil and gas pipelines from Caspian region and Central Asia. With Iran’s strategic location between the Caspian Sea and the Persian Gulf and its relatively advanced energy infrastructure, Tehran sees itself as a natural transit route for oil and gas exports from the landlocked Central Asian countries to the world markets. Iran offers a much lower cost as compared with the existing routes to the Black Sea and with the proposals to the Mediterranean.31 In the present scenario, political hurdles notwithstanding, transporting Central Asian energy resources and other goods through Iran is taken as best available option for India. Moreover, it would provide India some leverage in an area that is fast becoming hot bed of power politics. The strained relationship between Iran and the US is becoming a major hindrance in the materializing of the proposal because of which US is opposed to any pipeline passing through Iran. As noted earlier, because of its reservations and apprehensions about Iran’s nuclear programme, the US is opposed to India going ahead with the proposal.32

Conclusion

In the era of fast economic growth, energy has emerged as the vital input for industrial development and day-to-day requirements. India is one such country, which has embarked upon on the agenda of fast economic growth. This is more so in the post-liberalization phase traced to 1991. The country has been brought to such a situation where diversification of energy resources has become one of the top priorities of the government of India. The same priority gets reflected in India’s policy of going ahead with nuclear deal with the US, in spite of reservations in many quarters in the country. The same urge explains India’s interest in post-Soviet Central Asian countries, especially oil rich Kazakhstan and gas rich Turkmenistan. True, there are varying estimates about oil deposits of Central Asian countries including the Caspian Sea, the importance of the region for meeting the energy requirements of India in the foreseeable future cannot be denied. Moreover, the oil resources of Central Asian countries, as reports suggests, may be of limited quantity, the same cannot be said the gas deposits of the region because Turkmenistan along with Russia and Iran are among the richest gas owning countries of the world. Therefore, India’s interest in Central Asia apart from historical and political factors, would continue to revolve around economic diplomacy, where oil and gas are the key propositions for the makers of India’s foreign policy.

References

1. Opec Bulletin, Vol.36, No.1, January 2005, www.opec.org. , p-14.

2. Gawdat Bahgat, “Central Asia and Energy Security”, Asian Affairs, Vol.37, No.1, March 2006, p-1.

3. Shebonti Roy Dadwal, Rethinking Energy Security in India (New Delhi: Knowledge World, 2005), p-54.

4. Jasjit Singh, Oil and Gas in India’s Security (New Delhi: Knowledge World, 2001), pp. 10-29.

5. Akhilesh Chandra Prabhakar, “Regional Energy Security Cooperation and Geo-Politics-An Alliance between India, China and Russia”, Journal of Ocean Studies, Vol. 12, No. 3, Dec.2004, p.425.

6. Country Analysis Briefs, October 2004, www.eia.doe.gov.india.html.

7. S.D Munni & Girijesh Pant, India’s Search for Energy Security (New Delhi: Rupa & Co., 2003), p-14.

8. Shebonti Roy Dadwal, Energy Security: India’s Options, Strategic Analysis, Vol.23, No.4, July 1999, www.ciaonet.org.

9. Stephen Blank, India’s Energy Offensive in Central Asia, Central Asia-Caucasus Analyst, March 9, 2005, www.cacianalyist.org

10. Chietigj Bajpaee, “India, China, Locked in Energy Game” available from www. atimes.com, March 17, 2005.

11. Shebonti Roy Dadwal, n.3, p-122.

12. India Looking for Energy Supplies in Central Asia, Asia News, 13 September, 200

13. Meena Singh Roy,” India’s Interests in Central Asia” Strategic Analysis, Vol.XXIV, No. 12, 2001. p-2273.

14. Meena Singh Roy, “India-Central Asia Relations Changing Dynamics and Future Prospects”, in Kuldip Singh (ed.), South-Central Asia: Emerging Issues,(Amritsar: Guru Nanak Dev University, 2005) p-63.

15. The Times of Central Asia, Vol.7, No.10 (313), March 10, 2005.

16. P.L Dash, “Caspian Oil Politics and Pipeline Options”, in Kuldip Singh (ed.) South-Central Asia: Emerging Issues (Amritsar: Guru Nanak Dev University, 2005), p-99.

17. The Times of Central Asia, Vol.7, No.3 (306), January 20, 2005.

18. Suryakant Nijanand Bal,Central Asia: A Strategy for India’s Look-North Policy (New Delhi: Lancers Publishers, 2004), p-42.

19. Central Asia: Human Development Report, (Bratislava: UNDP Regional Bureau for Europe and the Commonwealth of Independent States, 2005) pp-93-94.

20. Amitabh Matto, “United States of America and Central Asia: Beginning of the Great Game” in Nirmala Joshi(ed.) Central Asia: The Great Game Replayed (New Delhi: New Century Publication, 2003), p-56.

21. Dashdorjin Bayarkhuu, “Geopolitics of the New Central Asia”, World Affairs, Vol.8, No.1, January-March 2004, p-58.

22. India’s Energy Security Challenge, Energy Security, January 21, 2004, www.iags.org.

23. Bhupendra Kumar Singh, “India’s Energy Security”, The Hindu, 9 June 2003.

24. n.22

25. India Looking for Energy Supplies in Central Asia, Asia News, September 13, 2006.

26. Mani Shankar Aiyar, Asia’s Quest for Energy Security, Frontline, vol. 23, no.3, feb 11-24, 2006

27. Meena Singh Roy, n.14, p-64.

28. Rahul Bedi, India and Central Asia, Frontline, vol.19, no.19, sept 14-27, 2002

29. Alexander’s Gas &Oil Connections, “India’s Energy Security is not about Gas and Oil Only”, Vol.10, No.24, December22, 2005.30 http:// www.iranexpert.com

31. Kuldip Singh, “Iran-Pak-India Gas Pipeline and Energy Security”, Punjab Journal of Politics, Vol.30, No.1, 2006, p-13.

32. Ibid., p-12.