There is talk of a new Cold War for energy sources. This is mainly for two reasons: China’s success in booking new petroleum reserves abroad in competition with western multinationals and the resurgence of Russia’s dominant hold on its reserves of natural gas and petroleum. The US and Europe perceive the revival of this post-Soviet entity as a threat, though different from the previous threat posed by its huge nuclear arsenal.
The US assiduously cultivated the new republics in central Asia and the Caucasus, which went adrift when the Soviet Union disintegrated in 1991. Azerbaijan with its Caspian oil was a temptation not to be ignored. Georgia was in serious economic straits. Turkey was an ally. The US and the EU masterminded the Baku-Tbilisi-Ceyhan oil pipeline and completed it against all odds by 2005. This enables Caspian oil to move directly to the Turkish port (Ceyhan) and thence by sea to western ports.
Moscow, which had previously monopolised Caspian oil and gas piped through its territory, had to watch this bold bypassing in despair and frustration. Worse for Moscow, the West has also built a gas pipeline parallel to the Baku-Tbilisi-Ceyhan line. But by May 2007, Russia had gained enough diplomatic and economic muscle to sign agreements with two important central Asian republics — Kazakhstan and Turkmenistan — for a gas pipeline through Russian territory to supply Europe. This counter-move has raised a clamour in the West about Europe’s increasing energy dependence on Russia.
The world oil demand is now 86 million barrels per day (MMBD). By 2030 it is estimated by some experts to exceed 115 MMBD. The demand for natural gas may also rise by a similar proportion. Price does not seem to deter demand. But prices will climb with every fresh disruption. Several countries with abundant oil and gas are politically unstable. They have enjoyed the bonanza as states, but paradoxically it has also led to disaffection among their poorer citizens who feel left out. If the US or Israel provoke a regime change in Iran, the oil spigots from the Gulf will run dry, with consequences more disastrous than the OPEC-induced crisis of 1973, especially for India.
Energy security is the current cry among the deficit countries. Oil exporters like Venezuela are looking for political advantage as well as more profits. Russia, for instance, choked off the gas pipeline through Ukraine to Germany to signal displeasure at the former’s “Orange Revolution” in 2006. Russia under Putin has been using this weapon against Georgia when it was thwarted in its projected gas pipeline to Turkey. But Russia succeeded in buying gas from Turkmenistan at the lower price of $100 per thousand cubic meters and selling it at $250 to Europe, taking advantage of land-locked Turkmenistan finding no alternative route to transport its gas.
There is a frantic effort on in the US to re-design its energy strategy by resorting to liquefied coal technology, biofuels at the expense of foodgrains like corn and soya, windmills, solar heating, etc. But there is little effort to curb the wastage due to the use of petroleum products in the transport sector. For India these unproven means of reducing crude oil usage are of less relevance, except perhaps for solar power. In the medium period, before decline in oil/gas production becomes a global nightmare, we have to join the fray and scramble for assured sources of oil/gas.
In this contestation, India must keep to its Cold War policy of avoiding one-sided alignment. We need to be on friendly terms with all the major supplying countries. Our foreign policy has to be so fashioned as to keep our relations sweet with Saudi Arabia, Iran, Iraq and the Gulf sheikdoms, with Russia definitely, with the central Asian republics, with African suppliers, with Indonesia and Venezuela. This has been the hallmark of Chinese energy diplomacy. Though India does not have the capacity of China to offer them incentives, and though China is more sought after as a power, India has to cultivate the supplier countries and simultaneously lower its dependence on oil-based economic growth.
