India Joins
The Scramble For Oil
By Parwini Zora
and Daniel Woreck
12 April 2005
World
Socialist Web
None of
us in Asia should fall victim to the strategies of outsiders. The only
way to counter the geopolitics of others is to have our own geopolitics
Manishankar
Aiyer, petroleum and natural gas minister of India
India
has recently joined the global scramble for oil and natural gas alongside
other Asian states, including China, South Korea and Japan. Through
diplomatic manoeuvres aimed at securing transnational pipeline routes
and overseas crude oil and natural gas production deals, India is seeking
to lay claim to a larger share of the worlds energy resources.
It is also carrying out a major restructuring of the national energy
industry. (See: Indian
government to merge state-run oil firms).
Though Indias
thirst for oil is rooted in economic imperatives, the emergence of India
as a major player in foreign energy ventures will have a profound impact
on world geopolitics. It takes place under conditions in which oil is
already the object of the most intense competition between the US, the
European Union, China, Japan and Russia.
The countrys
international oil policy is becoming a growing point of friction with
the United States. In particular, the US is determined to scuttle Indian
negotiations with Iran over a pipeline to India via Pakistan. The development
of closer ties between India, China and Russia, as well as Indias
courting of oil-rich Venezuela, are also potential threats to American
interests.
Energy needs and
control over energy supplies are central to the strategic calculations
of all the major powers. They are no less important for the Indian bourgeoisie,
which, having abandoned its post-independence national development strategy
in 1991, is seeking to transform India into a platform for global manufacturing,
office processing and research production, and use its increasing weight
in the world capitalist economy and its nuclear, space and military
capacities to lay claim to great power status.
In terms of global
oil consumption, India is still a relatively small player. Although
India is home to more than 15 percent of the worlds population,
it accounts for only 3 percent of world oil consumption. China, by contrast,
consumes 7.6 percent of the worlds oil. Indias energy needs
are rising sharply, however. Last year alone, Indias crude oil
consumption increased by 10 percent. Moreover, India is highly dependent
on oil imports. Some seventy percent of Indias oil is imported
and oil imports account for one third of the total value of all Indias
imports. By 2020 India is expected to have to import 80 percent of its
energy needs.
India has the worlds
fastest-growing car market, which is driving oil consumption and imports.
Economic growth, rising oil prices and recent disruptions in oil supplies
due to the US military interventions in Iraq and Afghanistan are propelling
the Indian government to join the hunt for cheap and secure sources
of oil and natural gas.
Much of the urgency
behind Indias current drive to secure and diversify its sources
of oil and natural gas is due to fear of falling behind other countries,
especially China. The chairman of the partly privatised Oil and Natural
Gas Corp. (ONGC), Subir Reha, said in a recent interview with Bloomberg.com
that India was concerned that it had lost oil bids in Sudan and Indonesia
to China. During the three to four years China had a lead
on India in aggressively seeking foreign energy resources, the Chinese
got lots of oil and gas projects when crude oil prices had
fallen to single digits, complained Reha. When we came to
the international market, crude reached record levels and no one was
selling properties.
But the US drive
to control world oil supplies is an even bigger concern. New Delhi well
recognises that the US, by projecting its military power into the Middle
East and Central Asia through the invasions of Afghanistan and Iraq,
is seeking to gain a stranglehold over the worlds oil supplies,
and that this constitutes a potentially grave threat to the interests
of the Indian bourgeoisie.
Since the end of
the Cold War and the abandonment of national economic regulation, the
Indian government has developed a new relationship with Washington,
an Indian-US strategic partnership. The United States is currently Indias
largest trading partner and, due to bilateral defence agreements made
in the aftermath of the September 11th attacks, the Indian and US militaries
have mounted joint exercises in the Indian Ocean and South China Sea.
In spite of these
ties, Indias urgent need to secure energy resources is contributing
to the development of major fault lines in Indo-US relations and lending
further urgency to the moves New Delhi took in the wake of the US invasions
of Afghanistan and Iraq to improve relations with other Asian states,
including China, Russia and Iran, in the hopes of constraining US power.
The economic and
geo-strategic conflicts between India and China run deep. However, in
keeping with the steps initiated by the previous Bharatiya Janata Party-led
government, the present Congress-led United Progressive Alliance government
is seeking to mend fences with China. India is wary of Washingtons
aims to make India a frontline state in any future confrontation between
the US and China. It is also increasingly eager to avoid direct confrontation
with China over energy resources. The two countries have pursued joint
ventures for oil extraction, including in Russia, Iran and Sudan, and
China has proposed even closer cooperation.
Reflecting these
recent shifts, Indian Prime Minister Manmohan Singh recently declared,
Diplomacy has changed and today it is about economics, trade and
petroleum. These words were echoed by Chinas deputy foreign
minister, Zhou Wenzhong, who said, Business is business. We try
to separate politics from business.
There has been some
talk of an unofficial Indo-Chinese-Russian alliance aimed at curbing
US penetration in Asia. On April 11, Indian and China announced the
formation of a strategic partnership, with Singh declaring,
India and China can together reshape the world order. The
deal includes pledges to boost bilateral trade, improve diplomatic relations
and work together to address global challenges and threats.
Energy security pact with Russia
Last year, during
Russian president Putins visit to India, the two countries signed
a memorandum of understanding for joint exploration and distribution
of natural gas in the Caspian Basin, as well as for building underground
gas storage facilities in India and technology transfers to India from
Russia.
While visiting Moscow
last October, Indias Petroleum and Natural Gas Minister Manishankar
Aiyar stated, In the 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. What I am talking about
is the strategic alliance with Russia in energy security, which is becoming
for India at least as important as national security.
India already holds
a 20 percent stake in Russias energy-rich Sakhalin-1block. ONGC
Videsh Ltd. (OVL), the overseas arm of Indias Oil and Natural
Gas Corp. Ltd. (ONGC), has made an investment of $1.7 billion, which
is expected to go up to $3.5 billion later this year.
Reportedly, India
is to consider investing a further $1.5 billion in the Sakhalin-3 gas
field and another $1.5 billion in the joint Russian-Kazakh Kurmangazy
oilfield, both in the Caspian Sea. The Russian invitation to India to
join the Sakhalin-3 project is especially noteworthy, since it occurred
shortly after Moscow removed a major US oil company from the same project.
As one of the planned
Indo-Sino joint ventures, Indian and Chinese oil firms lined up together
as Asian customers for the possible purchase of the some of the assets
of the Russian Yukos Oil Co., confiscated by the Putin regime in Russia.
These moves are
clearly aimed at establishing some sort of counterweight to American
dominance over energy production. On February 14, inaugurating the third
Asian gas buyers summit in New Delhi, the Indian petroleum minister
Manishankar Aiyer proclaimed that Asian natural gas players should come
together to from an Asian gas grid. The aim of such a grid would be
to enable the countries in the region to take full advantage of oil
profits and thereby end the wretched western dominance that
has prevented energy security and economic growth in Asia.
Diplomacy over oil bids with Iran and Pakistan
The suggestion by
Iran to the previous BJP-led Indian government about the construction
of a pipeline to supply oil and gas from Iran to India is once again
on the table. Iran is scurrying to secure diplomatic ties with Asian
powers via energy deals in order to counteract US threats of economic
sanctions and military invasion. A $40 billion deal was drafted on the
7th of January with the National Iranian Oil. Co. (NIOC). The deal would
allow India to import natural gas over a period of 25 years, starting
in 2009. NIOC would also develop two Iranian oil fields and a gas field.
The Indian government
had reconfirmed that it will not stop its dealings with Iran because
of US objections, including those voiced by US Secretary of State Condoleezza
Rice during her recent trip to India. Talking to reporters on the sidelines
of the Confederation of the Indian Industries, Aiyar said, We
have noted what US concerns are, and I think US is well aware of what
our energy requirements are.... We need 100 million standard cubic meters
per day of natural gas by 2025. Can America supply us that? I am only
looking at securing energy security for the country. (See:
US Secretary of State presses India and Pakistan to abandon Iranian
gas pipeline).
Iran is the second
largest crude oil producer among the Organisation of the Petroleum Exporting
Countries (OPEC). It owns 10 percent of the worlds proven oil
reserves and also has the worlds second largest natural gas reserves.
India perceives Iran as a viable corridor to access the natural resources
and economic opportunities of Central Asia and the Middle East. During
the third gas buyers summit in February, officials of the National
Iranian Gas Exports Company (NIGE Co.) began their preliminary discussions
on the delivery of Iran gas via a pipeline at the India-Pakistan border,
expected to be signed in Teheran by June.
The development
of an Indo-Pakistani-Iranian pipeline is seen by New Delhi as a means
of both helping to meet its energy needs and fostering a closer economic
relationship with Pakistan. The Indian political elite calculates that
this will cut across Pakistans ability to pursue a policy of geopolitical
confrontation with India and enable Indian business to dominate the
Pakistani market.
However, to bypass
a direct agreement with Pakistan, India has proposed two separate agreementsone
between India and Iran on purchasing the gas and another between Iran
and Pakistan for the pipeline. During the summit the initial construction
plan was revised to include plans to extend the pipeline to Southern
China.
India looks East...and West
Dropping the earlier
policy of isolationism practiced by New Delhi in relation to the military
junta in Rangoon, Burma, the Indian government hosted a week-long visit
from the Burmese military general Than Shwe last October. The visit
aimed to accelerate closer diplomatic ties with Myanmar and also neighbouring
Bangladesh, in part to pave the way for a pipeline to bring Burmas
natural gas to India via Bangladesh.
The Burmese pipeline
agreement has been hailed in India as a major step toward regional cooperation.
It is particularly seen as a landmark in India-Bangladesh relations.
According to the Indian petroleum minister, it is the first time in
over 30 years that Bangladesh has agreed to its territory being used
for transport of any commodity to the Indian market.
Indias recent
initiative for a leading position in closer regional collaboration among
the Association of South-East Asian Nations (ASEAN) and the Bay of Bengal
Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC)
states is part of New Delhis attempt to penetrate regions to its
east traditionally dominated by China and Japan.
To the west, India
has secured energy deals in Africa, including in Libya, Sudan and in
the Ivory Coast. Even further off, India is looking to establish long-standing
relationships with a number of South American states. Among these countries,
Venezuela has become prominent. Venezuela is our arrowhead in
Latin America, assured the Indian petroleum minister, saying that
India would use Venezuela to enter other South American countries
energy markets.
Closer relations
between India and Venezuela run directly counter to US attempts to isolate
the regime of Hugo Chavez. During his four-day visit to India this month,
Venezuelas President Hugo Chavez and Prime Minister Manmohan Singh
signed six energy and cooperation agreements. The ONGC Ltd and GAIL
Ltd., is to take a 49 percent stake in the Venezuelan oil field of San
Cristobal and PDVSA. Venezuelas state-run oil company is to invest
in Indias Mangalore Refinery in the state of Karnataka.
Venezuela, the worlds
fifth-largest oil exporter, is currently seeking to diversify its markets
as a means to reduce its dependence on the United States, which currently
buys over 60 percent of Venezuelan oil. Venezuela has recently deepened
cooperation and signed a number of agreements in the petroleum sector
with Russia, China, Brazil and Argentina.