Apr 19, 2008

People’s Daily Online has reported fruitful discussions between the Chinese Vice Premier, Wu Yi and US Secretary of Treasury Mr Henry Paulson on 20 September. The aim was to create a strategic dialogue mechanism to resolve economic issues arising from divergences in two of the biggest economies of the World. The Sino US economic engagement has included such areas as trade, legal rights, science and technology and also sanitary and health work.

Comments
The progress of this strategic framework is likely to be limited as there are various contentious issues involved with both countries wary of each others economic clout. While China is considerably exercised over US influence of the dollar vis a vis the Ren, US is wary of the huge trade surplus that China has build up against it. Evolution of a strategic mechanism under these circumstances will remain contentious.

INDIA PRIME MINISTER MR MANMOHAN’S WIN - WIN ARGUMENT

The win – win argument by the Indian Prime Minister Mr. Manmohan Singh for the Indo US Nuclear Agreement in the Parliament emphatically overcame resistance of many detractors. Ironically the Agreement inked more than a year back on 19 July 2005 is being hotly debated in Indian political as well as nuclear scientific circles as being a surrender of India ’s sovereignty, with the US President rendering a yearly report card on India ’s good performance. No doubt many of the arguments put forth by its critics raise serious doubts about US intentions which may shackle not only the country’s nuclear progress in the years ahead but also impose avoidable restraints on future governments. The other objections related to restraint on fissile material and nuclear testing by the country which were found objectionable. The introduction of the Fissile Material Cut Off Treaty in Conference on Disarmament in Geneva should render some of these protests invalid. Though the Prime Minister emphatically emphasized that any deviation from the clauses of the 18 July Agreement will not be accepted, the soundness of his arguments lay in underlying its strategic necessity in India’s national interest.

The key issue is India ’s need for nuclear fuel, particularly Uranium which can only be supplied by members of the Nuclear Suppliers Group (NSG) after the US has given a go ahead and the International Atomic Energy Agency (IAEA) has established norms for inspection of the facilities, 16 out of a total of 22, where such fuel is being processed. Without these positive interventions in India ’s favor, countries as Australia with large Uranium reserves have very clearly indicated that they would not open up supplies. Thus the Indo US Nuclear Agreement is just the first step in many international requirements before India gets the necessary fuel. The other fuel route open to India , of Thorium is still a long way from being successfully consummated for sustained nuclear energy production, despite large reserves in the country and thus adds to urgency for acquiring Uranium. With an energy target of 40,000 Mega watts from nuclear sources by 2030, there is a sense of urgency with which the Indian government has been seized in the recent past leading to positive interaction with a number of countries and agencies simultaneously for overcoming their resistance to nuclear supplies to the country. The IAEA team has already visited India in anticipation of US approval to save on time once it comes through by the end of the Year. Similarly America is actively engaging members of the NSG to overcome resistance from a number of countries including China . Thus the dice of international approval is heavily loaded in India ’s favor, the first time when a non signatory of the Nuclear Non Proliferation Treaty will be granted such a concession virtually accepting India as a nuclear weapon state. This will undoubtedly enhance the country’s leverage in international as well as regional forums.

The cacophony of nay sayers in the past one month or so has raised serious questions of the deal compromising on India ’s sovereignty including adoption of an independent foreign policy course. These fears are not wholly unfounded. However getting past the powerful non proliferation nuclear lobby of which Richard Lugar, the Chairman of the United States Senate Foreign Relation Committee is a staunch patron was likely to be extremely difficult. Having successfully run the gauntlet, the unexpected resistance at home seemed to have stymied the Indian government albeit temporarily. The Prime Ministers rational and emotional appeal has won over many admirers including the inveterate debater Sitaram Yechury of the CPI (M). The issue however has raised a pertinent flaw in the Indian parliamentary system, wherein the Executive has been granted unlimited powers of undertaking foreign policy initiatives without taking the legislature into confidence. A constitutional amendment may overcome this shortcoming and avoid such embarrassing interjections to future foreign policy initiatives by the government and may need some deliberation.

India’s Energy Security

A Profile

By

Brig Rahul K Bhonsle (Retd)

Security-risks.com

 Energy security will be a key factor in the New Great Game. Energy security entails long term measures to adequately maintain the required supply of energy resources both domestic and imported in the country at all times and at minimum cost. This includes not just security of the sources of supply but other issues such as extraction and refining, economical purchase through buyer’s power, distribution, environmental effects and avoiding manufacturing fraud. The US spends $ 50 billion a year on oil security deployments in the Gulf Region. India ’s energy requirements are gigantic. The requirement of power by 2031-32 is estimated to be 7, 70,000 MW. With oil price threatening to breach the $ 100 per barrel mark and depleting resources of coal, the energy mix of hydro, oil, gas, coal, nuclear and unconventional sources has to be carefully strategized to enable stable long term energy security. Alternate energy sources will provide 8300 MW by 2009 while nuclear energy is targeted at an ambitious 40,000 MW by 2030. Not with standing the above, gas and oil will be the prime constituent of the energy mix with gas forming 25 percent of this overall combination.

70 percent of India ’s crude is imported and all of it comes by sea. India is expected to be the largest importer of oil by 2050 and our oil consumption is expected to rise to 150 million tons by 2020. India ’s gas requirements by 2024 are said to be 125 billion cubic meters (BCM) of this 52 BCM are likely to be available locally while the balance of about 75 BCM will have to be obtained from abroad. 70 percent of the gas reserves in the World are said to be in North and Central Asia and the Gulf countries. The same is true of oil reserves. Russia is another important player in the oil and gas energy space. World polity is increasingly focused on the energy resources in the Caucasus with the BTC (Baku-Tbilisi-Ceyhan) Pipeline commissioned on 28 May 2006 and the United States politically undercutting Russian influence amongst CIS nations with the formation of the Organization for Democracy and Economic Development in Ukraine . Thus we see the opening stages of the new Great Game unfolding.

Building strategic relations with the countries of Central Asia and the Caucasus along with West Asian states to include Iran, Iraq when it gets going fully, Kazakhstan and Turkmenistan is thus of critical importance. Myanmar too will be a key energy ally of the country. While our focus has also been in obtaining oil rights in countries as Syria where a 50:50 partnership between ONGC and China National Petroleum Corporation marked a new beginning as also in Sudan , Sakhalin and the Nam Con Son Basin in Vietnam , these will only enlarge our strategic capability and are too far out to provide continuity in supplies. For this we have to depend on the immediate neighborhood. Thus the SAARC region including Afghanistan is of considerable significance to the country for oil security. Transportation of oil and gas will be multi modal. If it comes by sea, the security of the sea lines of communications assumes importance. In case it comes through oil pipe lines and this appears to be the way ahead, these pass through antagonist states as Pakistan to the West and Bangladesh in the East, more over Balochistan, a province of Pakistan is seeing rising insurgency which is beyond the control of the Government in Islamabad . Under such a situation energy security assumes critical importance. The experience in Assam where oil pipelines have become a target for anti national elements also rings an alarm. The vulnerability of pipe lines in other countries some of which are antagonist is also a cause of concern. While diplomatic measures may provide a modicum of security, some of it would involve physical guarding of assets which may have to be carried out through proxy forces as the Americans have done in BCT. The key pipe lines which are in the offing in the Indian context are as follows:-

(a) TAPI. The Turkmenistan – Afghanistan – Pakistan gas pipe line project. The length is 1921 Kms to Multan . This has the backing of the Asian Development Bank. The cost is $ 3.5 billion and the extension to India is likely to cost $ 600 million. It will deliver 55 MCM. 1200 Kms of the route is sensitive.

(b) IPI. This is the Iran – Pakistan – India gas pipe line which is 2720 kms long with a cost of $ 4 Billion and delivering 90 MCM per day. 760 Kms will pass through sensitive areas.

(c) MBI. The Myanmar - Bangladesh – India pipeline, with a total length of 897 kms, the cost is $ 1 Billion. It has a capacity of 33.5 MCM per day. 289 Kms passes through sensitive areas.

Another option for laying pipe lines is by outflanking antagonist states. The Myanmar pipeline is proposed to bye pass Bangladesh and the Zaranj – Delaram route via Iran is under construction to provide an alternative approach to Southern Afghanistan , given Pakistani sensitivities to Indian forays into its back yard. All these issues highlight the need for security.

 India is also emerging as a refining hub with lucrative margins of $ 2 per barrel the highest in the World. Pipe line manufacture is also an important area in which India is leading. The coast of Gujarat is emerging as a key area. Its proximity to Pakistan and the internal turbulence in the state is a cause of concern. Thus the security of the port areas and the sea lanes also needs some consideration. Vulnerability of India ’s off shore installations which are said to be worth Rs 175,000 Crore is also important as 68 percent of India ’s oil production comes from offshore resources.

In terms of security from the vagaries of World oil price and cartels as OPEC, the efforts initiated by the former petroleum minister, Mr. Mani Shankar Aiyar to form an Asian or a Sino Indian cartel free of the New York Mercantile or the London Brent Crude Index needs to be pursued with vigor. India and Mumbai appears to be the ideal location for such an Asian oil trading hub, given the strength of the financial capital in equity and commodity trading and the dynamic investing and trading community of the country.