INDIA The Emerging Energy Player PPAANNTT__FFMM__88117777558811556622..iinndddd ii 1100//1188//0077 1111::1100::0077 AAMM This page is intentionally left blank. PPAANNTT__FFMM__88117777558811556622..iinndddd iiii 1100//1188//0077 1111::1100::0088 AAMM INDIA The Emerging Energy Player Girijesh Pant An Imprint of Pearson Education PPAANNTT__FFMM__88117777558811556622..iinndddd iiiiii 1100//1188//0077 1111::1100::0088 AAMM Copyright © 2008 Dorling Kindersley (India) Pvt. Ltd. Licensees of Pearson Education in South Asia No part of this eBook may be used or reproduced in any manner whatsoever without the publisher’s prior written consent. This eBook may or may not include all assets that were part of the print version. The publisher reserves the right to remove any material present in this eBook at any time. ISBN 9788131781560 eISBN 9789332509399 Head Office: A-8(A), Sector 62, Knowledge Boulevard, 7th Floor, NOIDA 201 309, India Registered Office: 11 Local Shopping Centre, Panchsheel Park, New Delhi 110 017, India PPAANNTT__FFMM__88117777558811556622..iinndddd iivv 1100//1188//0077 1111::1100::0088 AAMM C ONTENTS P REFACE VII I ENERGY SECURITY: T C G C 1 HE HANGING LOBAL ONTEXT II INDIA’S SEARCH FOR ENERGY: I E C 39 SSUES AND MERGING ONCERNS III INDIA–GULF ENERGY RELATIONS: R I 84 EDEFINING NTERDEPENDENCE IV INDIA–IRAN: T S E P 123 HE TRATEGIC NERGY ARTNERSHIP V INDIA–RUSSIA ENERGY RELATIONS: T E D 168 HE MERGING YNAMICS VI INDIA–AFRICA: P E P 195 LEA FOR NERGY ARTNERSHIP VII ASIAN COMPETITION FOR ENERGY: I I 234 MPLICATIONS FOR NDIA VIII THE INDIAN ENERGY DIPLOMACY: B S P 262 EYOND THE ECURITY ARADIGM I 295 NDEX PPAANNTT__FFMM__88117777558811556622..iinndddd vv 1100//1188//0077 1111::1100::0088 AAMM This page is intentionally left blank. PPAANNTT__FFMM__88117777558811556622..iinndddd vvii 1100//1188//0077 1111::1100::0088 AAMM P REFACE It would be fitting to spell out the intent of this volume at the outset. It is an account of the Indian endeavour to define its energy engagement with the leading players in the globalizing energy market. The narrative of Indian initiatives is accompanied with commentary, not as much on the evaluation as on the content of the emerging profile. The objective is to comprehend and define India’s global energy interest beyond the ‘scramble for energy’ framework and reflect upon the energy discourse from a mutually beneficial perspective in the expanding energy space. The energy frontiers are expanding and unfolding new possibilities of encounters. The world energy market is undergoing structural changes. There are more consumers and many suppliers. Consequently, it is witnessing a realignment of power relations. Energy has been vital in maintaining the global strategic balance. Today it is defining relations among nations. The qualitative shift triggered by the rise of Asian economies has its bearing on the global strategic balance. Apparently, the Asian arrival is seen with apprehensions. The oil flow from the Persian Gulf to Asia or the Russian supplies to Asia with the construction of new pipelines are seen as a diversion from the Western market. No wonder the West is concerned about the ramifications of the Asian demand on their energy security. Thus, the discourse on energy security demonstrates a tension between the anxieties of new stakeholders and the fear of old stakeholders. The divergence in perspective is detrimental to global energy security. It is gradually recognized that the divide is flawed because the geopolitical fault lines are losing relevance with the sharpening of geo-economic contours of the energy space. PPAANNTT__FFMM__88117777558811556622..iinndddd vviiii 1100//1188//0077 1111::1100::0099 AAMM VIII PREFACE The new technology and new concerns (environment and local community) are impinging upon the context decisively. The small and stranded energy resources are no more inaccessible and unviable. Yields from the wells have increased significantly. The logistics of transport have overcome many terrain-linked problems, though in the process they have added on to vulnerabilities as well. Significantly, the thrust of these vulnerabilities pushes towards collective responsibility whether it is the pooling of strategic reserves to meet natural or political calamities or the security of sea-lanes. Moreover, it is widely recognized that even if the hydrocarbon is non-renewable, the price is soaring, more for political reasons than economic scarcity. Clearly, the emerging imperatives are directing energy security towards a paradigm of collective mode. Energy security became a part of the Indian policy construct at the beginning of this century. In fact, its energy security policy is still in the making. Yet the initiatives taken by the country do reflect the underlying concerns and, to some extent, the thinking on this issue. Indeed with more than 70 per cent import dependence, India has to factor energy security in its domestic and foreign policy. India is emerging as a leading energy market; hence, all leading suppliers are attracted to it. Yet, as history demonstrates, energy deals are seldom signed according to commercial concerns alone. The loss–gain matrix is much more complicated and therefore requires a diplomatic mode of transaction. Indian energy diplomacy is gradually gaining grounds. It initially followed the prevailing modes, even aped the main competitors, but soon discovered their limitations. So it decided to change its style of diplomacy, though the content remained the same. How India is positioned in the global energy market, what its stakes are and how it could negotiate with them, the nature and profile of its engagement with different energy suppliers, and its understanding of the perceived competition are the concerns of the book. The attempt is to profile the Indian energy relations in the global context and fathom the issues which India is facing in defending its energy interest in the changing world market. The study focuses on the external dimensions without PPAANNTT__FFMM__88117777558811556622..iinndddd vviiiiii 1100//1188//0077 1111::1100::0099 AAMM PREFACE IX disregarding the need to augment domestic exploration and production. On the contrary, it argues for a re-conceptualization of energy security in a wider frame of reference where domestic and external dimensions are duly recognized. It questions the Western perspective of defining energy security in limited terms such as ‘access at affordable price.’ Certainly, given the wide range of issues, it cannot be claimed that all of them are covered, yet in a modest way this book provides the leading trends of India’s foreign energy relations. This book has drawn heavily from the series of lectures that I have delivered on different facets of India’s energy security policy over the last three years. During the course of time, I realized that the material on this subject is highly scattered and stranded. Since energy security, both in general and in the Indian context, is no more an academic passion but a concern of high politics, it deserves a serious scrutiny. Its importance can be gauged by the fact that it appears in almost all important bilateral deals. It is time that an audit is done of the initiatives taken, or not taken, in this direction. Obviously, before the audit an inventory of the efforts made so far should be prepared. This book attempts to make such an inventory. It has eight chapters elaborating and profiling the range of issues impinging on the Indian energy scene. It needs to be clarified at the outset that for the purposes of this book, energy refers to only hydrocarbon and the issues covered are related to external dimensions of the subject. It begins by outlining the energy security issues in the global context. The thrust of the argument is that the emerging energy security concerns are pressing for a rewriting of the script in view of the fast-changing global context. The India- centric issues are elaborated upon in the second chapter. The theme of the chapter is that in view of the increasing energy consumption and the changes in the energy mix triggered by market-based growth, India has little option but to augment the supply of hydrocarbons both from domestic and external sources. The growing imports have made it imperative to comprehend the issues, their multiple dimensions and the need to evolve a strategy. The next four chapters provide the emerging trends of the Indian energy engagement with PPAANNTT__FFMM__88117777558811556622..iinndddd iixx 1100//1188//0077 1111::1100::0099 AAMM