Two global events have strongly impinged on independent India’s foreign policy: first, the rise of Organisation of Petroleum Exporting Countries’ cartel power in 1973 and second, the downfall of the Soviet Union in 1991. The former established the vital role of oil in economic development, while the latter jolted us into a search for new bearings in an insecure world.
The West overcame the oil shocks of the 1970’s by using its technological prowess, but India had no such recourse because of meagre investment, poor planning, and an urgent need to replace non commercial energy sources by commercial sources. Petroleum increasingly commanded a seller’s market. Yet India has failed to adopt a viable national strategy to cushion the looming energy crisis.
The scope of this discussion is limited to the oil sector. Natural gas is more diffused in availability, posing different challenges. A map of the existing and planned oil and gas pipelines will resemble the medical diagram of blood vessels and capillaries.
The big shots
The large importers of crude oil are the US, China, the EU, Japan and India. Between 1980 and 2000, the balance of oil power shifted from the cartel to market-determination and recently to buyer-supplier contracts. OPEC supplies more than 50 per cent of worldwide oil trade.
Once again it is Advantage Seller. Improvements in oil exploration and production have so far helped to meet the rising world demand. It is estimated to increase from the current level of 85 million barrels per day (mbd) to 115 mbd by 2030, while supply cannot catch up. This forebodes fiercer competition among nations for scarce crude. India may be edged out by nations with a bigger clout and a thicker wallet.
The major powers are poised for the struggle. Some of the prospective oil-rich areas, apart from the Arab peninsula, are Iraq, Iran, Russia, Central Asia, Sudan, West Africa and Venezuela. The big buyers are crowding in. Niger, Angola, Chad and Nigeria are cursed by the blessing of oil, which grossly enriches a few, but leaves the populace in penury.
The US, the largest importer of oil (25 per cent of world oil exports), is diversifying energy sources and means. But it is unable to overcome its oil addiction in road transport. Fuel standards will be tightened, but the US gives higher priority to thwarting the rise of Russia as a resurgent avtar of the Soviet Union. The result is a pipeline Cold War. Azerbaijan, Kazakhstan and Turkmenistan have become the cockpit of the Eurasian scramble for oil and gas. Kazakhstan holds three Aces, with its oil, gas and uranium. While extant oil pipelines favour Russia, China stepped into construct its own pipeline from Kazakhstan to Xinjiang, with a plan to extend it eastward.
The US backs Georgia, which opposes Russia. This enables the West to operate the new Baku-Tbilisi-Ceyhan (BTC) pipeline. It is a strategic counterthrust to the Russian monopoly over oil and gas from the Central Asian republics in the former Soviet Union. The EU diverges from the US on fuel sourcing. It has become more dependent on Russia for oil and gas. Even Poland, which is anti-Russian, and Ukraine, have to abide by the logic of trimming foreign policy to petro-dependency.
The Arctic has become the latest theatre of oil nationalism in ugly competition. Russia, Canada, Denmark and the US are staking claims for territorial rights there with the prospect of drilling for abundant oil.
Indian interests
India, like the other big oil importers, has to ensure its supplies for the short and medium term, while vigorously developing alternative energies, from nuclear to biofuels to solar. Admittedly, we are disadvantaged in the scramble for bilateral contracts with exporters or in striking rich oil wells in land and sea.
India must cultivate the new Russia. We need Iran too, and Myanmar, if they can eventually sell us fuels. A foreign policy of cleaving closer to the US at the expense of these partners is misconceived. India should also work for a multi-national reserve of oil, to be tapped by member countries in a crisis.
