Oil's fair in love and war

May 07, 2005 02:00 AM

by Rajeev Srinivasan

Trade wars were once about spices. Now, the new great game is being played to access oil and gas. But India still hasn’t woken up
In an interesting echo of European colonialism two centuries ago, there is a new geo-political race going on today in search of energy. Military might and a technological edge will determine the winners in this new game as it did in the old. This is a cut-throat, no-holds-barred battle for economic dominance in the current hydrocarbon-based industrial economy. China realises this; the US certainly does; but India appears naive.

Consider: oil and gas “interests” in far-flung places acquired by MNCs championed by various powers; the threat of instability, war and nationalisation; the arrival of “peace-keeping forces” to smooth the flow of oil. It’s deja vu, much like colonial justifications for conquest: Euro-Americans protecting Shell, Exxon and Amoco just as they protected East India companies.
Sceptics say this is exactly what is goingon in Afghanistan, Iraq, and possibly soon in Iran as well: Americans defending their “rights” to oil and gas that happens to sit, inconveniently, under the soil of some other nation. Unocal has a long-running plan for the Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline: whence American tenderness towards Pakistan, and involvement in Afghanistan.

Iraq has the world’s second largest oil reserves; Iran has the world’s largest natural gas reserves; hence, one might deduce, they are in the “axis of evil”. The US, cannily, keeps its own oil in the ground as a giant Strategic Petroleum Reserve, while using up others’ assets.
Chinese sabre-rattling in the South China Sea (against Vietnam, the Philippines) and the East China Sea (against Japan) is predicated on the same principle: grab someone else’s hydrocarbon assets. Eventually China will attempt to take over Russian Siberia, citing dubious history as usual. China’s colonisation of Tibet had an eye on water resources there in addition to potential oil and gas in the old, high plateau.

The military implications of energy are many, but mostly revolve around a blue-water navy that can project force far afield. Thus, when ONGC Videsh spends fortunes on assets in Sudan, Chad, Cameroon, Venezuela etc., the question arises: does India have the wherewithal and the will to assert its rights in case of breach of contract? Will it have the aircraft carrier groups that can pull off the requisite gunboat diplomacy? China and the US are imperial at heart: can pacifist India compete with buccaneers?
China has its so-called “string of pearls” strategy of gaining access to friendly ports that just happen to -- quite innocently, mind you -- encircle India: e.g. Myanmar’s Cocos Islands in the Andaman Sea, and most egregiously, Gwadar in Pakistan at the mouth of the Straits of Hormuz. Gwadar kills two birds: China could possibly impede the flow of Persian Gulf oil (that is 40 % of the world’s oil shipments), and Pakistan can hide its navy there, far from India’s reach.

Gwadar is also a counter-gambit to Chinese vulnerability in the Straits of Malacca: the US and Indian navies have been patrolling these piracy-prone straits, and they could potentially embargo 80 % of China’s oil imports by closing the straits, strangling China’s economy instantly.
The strategic aspects of energy are critical, since both India and China suffer from energy insecurity. China has invested $ 40 bn, and India $ 3.5 bn recently in overseas assets. China has proven domestic reserves of 18 bn barrels of oil, and India, 5.5 bn. China’s imports shot up 33 % last year, India’s by 11 %. India currently imports two-thirds of its needs, and China, a third. China has 53 tcf of gas reserves, India 30 tcf.

China is close to Central Asia’s energy-rich nations, as well as to Russian Siberia. It is attempting to build pipelines, for instance from Kazakhstan to its own restive Xinjiang. A plan for a Russian pipeline from Lake Baikal to depleting Chinese oilfields at Daqing has been foiled by Japan with an alternate pipeline to the port of Nakhodka.
India faces hostile neighbours (encouraged by China) in Pakistan and Bangladesh. Bangladesh has proven resources of 38 tcf of natural gas, which it won’t sell to India; nor will it agree to a gas pipeline from Myanmar to Kolkata. Similarly, a proposed gas pipeline from Iran to India traverses Pakistan’s restive Baluchistan province. Deep-sea pipelines bypassing Pakistan and Bangladesh may be necessary. A better alternative may be LNG imported by ship.

China is also looking to hydroelectric power. There is the proposed gigantic project that would divert the Brahmaputra northward in Tibet. This would turn northern India into a desert, and therefore is of vital national security importance to India.
Besides, despite thunderous noises about nuclear non-proliferation, the US recently supported a $ 5 bn loan guarantee to China to buy pressurized-water nuclear reactors from Westinghouse. This is despite China’s dismal record of covert and open proliferation to North Korea, Pakistan, Libya, and others. When it comes right down to it, mercantilism wins in the US over sensible long-range strategy.

Therefore, despite all the flowery speeches made by the Chinese strongman on his recent visit to India, and the wild optimism in certain circles about Iran-Pakistan-India-China energy grids, the best plan to deal with China would be to speak softly and carry a big stick: they do not intend to cooperate; and they are already competing aggressively.
India should also put in place a crash programme for alternative energy means, developing promising leads such as bio-fuels, solar energy, hydrogen/fuel-cell technology, and fast-breeder nuclear power. Indeed, if clever Indian researchers were to make solar-electric panels economical, India would be transformed. Alas, India is a slow starter in the new Great Game of energy imperialism.

The writer is a technology consultant in the US and India. He is a Stanford MBA and former guest faculty at IIM Bangalore. He can be reached at rajeev.srinivasan@gmail.com

Source: Indian Express Newspapers
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