India's Energy Security Interests in Central Asia

Energy prices play an important role in political and economic life and matters to state policymakers because energy prices can threaten economic, environmental and national security.  The threat to economic security is represented by the possibility of declining economic growth, increasing inflation, rising unemployment, and losing billions of dollars in investment. Hindrance in energy supply can also lead to rise to various geopolitical risks that include delivery of the service, changes in executive and legislative power, labor union activities, internal politics and regulatory stances, as well international relations of a country.

India is a sixth largest energy consumer and it is estimated that each year the energy consumption of India is likely to increase by 5%. The main reason government imposes control on petroleum products such as diesel, kerosene and liquefied petroleum gas (LPG) is to help millions who live on less than $1 a day other than remaining in power and to check the inflation. The Indian government spent almost $9 billion last year on fuel subsidies, added to the country's budget deficit. State-run gasoline retailers have been losing billions of dollars as well because they are forced to sell to consumers at prices set by New Delhi. Last year when three largest state-owned oil companies warned in 2008 that they would soon run out of money to import oil, the government finally raised price caps. Since June 4, 2008 petrol is up by 11%, diesel by 10% and LPG by 17%. The price of kerosene, the most widely used cooking fuel, was left unchanged but the rise in prices of petrol, diesel and cooking gas has led to inflation going up to a 13-year high of 11.05 per cent. However, there has been fluctuation in the petrol prices since then due to the election in 2009 and fall in the international oil price.

India is seeking oil assets in countries such as Kazakhstan, Sudan, Vietnam, Iran and Ecuador through Oil and Natural Gas Corporation Videsh Ltd. (OVL). Presently, OVL has stakes in 24 oil and gas projects spread across 14 countries including Vietnam, Myanmar, and Sudan. It is believed that Central Asian Republics (CARs) also have huge reserves of oil and natural gas, which can provide an alternative for the fast depleting resources in the rest of the world and can reduce India’s dependence on the West Asian oil supplies. However, many experts believe that Kazakhstan, Turkmenistan and Uzbekistan are not likely to ease up their energy-export advantage due to their geo-political disadvantage.

New Delhi has been active in joint oil exploration and having its stakes in energy producing region. The recent visit by the President of India to Russia and Tajikistan (2nd to the 8th September, 2009) was not only meant to enhance goodwill, trust and mutual confidence but also to explore the opportunities related to economic cooperation and energy security. The President was accompanied by the Minister of Petroleum and Natural Gas Murli Deora and other high-level delegation. The visit came a month after the “Dushanbe Four” Summit held in Tajikistan where the leaders of Afghanistan, Pakistan, Tajikistan and Russia. There were some positive economic (related particularly to electricity transfer from Tajikistan to Pakistan) and defence developments for Islamabad to establish its toehold in CARs directly and through developing its relations with Russia thus, reflecting the competing interests of India and Pakistan over energy resources in the region.

Earlier on 25-26 November, 2008, Indian petroleum ministry’s decision to invite Central Asian countries including Azerbaijan and Russia, the biggest crude producer outside the Opec cartel, to attend India-CIS Round Table conference in New Delhi, which was held after the Commonwealth of Independent States (CIS) St. Petersburg Summit of June 2008. The New Delhi conference was organised to explore the possibilities of importing petroleum from the oil rich Caucasian and Central Asian countries to India. It is expected that India can have an advantage as the CIS summit of St. Petersburg brought Russia back to the centre stage despite of strong US lobby against the Moscow. In order to have its firm hold over the resources in CARs, New Delhi needs to re-explore and exploit its historical ties with Moscow.

In April 2008, India and Kazakhstan, the biggest of the Commonwealth of Independent States (CIS) countries after Russia and is among the top ten countries in terms of hydrocarbon energy reserves as also mineral resources including uranium, agreed to enhance bilateral trade and economic cooperation particularly in the hydrocarbon sector. OVL already has a 15 percent holding in Kazakhstan’s Alibekmola oil fields and a 10 percent holding in the country’s Kurmangazi fields. India is also pitching for its stake in Russian Sakhalin-3 project, on the lines of India’s interest in Sakhalin-1. This was highlighted during the Petroleum Minister Murli Deora visit to Russia in the first week of November 2008.

The governments of Turkmenistan and Kazakhstan has last year reaffirmed their desire to expand their deliveries of oil and gas northward through Russian controlled pipelines connecting Central Asia with European markets. At the same time both countries remain interested in delivering large quantities of oil and gas through Iran to South Asia. They are also looking forward to diversifying their export routes westward to supplement their hydrocarbon exports through Russia, Iran, and China.

Azerbaijan and Turkmenistan are important from the perspective of world energy markets for the reasons that these two countries possess extensive oil and gas reserves within their territories and their geographic location allows them to function as potential gateways for energy exports from Central Asia through the South Caucasus to Europe and the Mediterranean region. At the same time, Iran has been improving its Caspian port infrastructure to encourage Central Asian governments to send more oil and gas southward to its Persian Gulf ports. For example, Iranians are constructing a massive trade and port facility at Bandar-e Anzali and Bandar-e ‘Abbâs.

Work and efforts to develop a technically and commercially viable project on Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline are currently on. TAPI is backed by US but has dim chances due to the instability in Afghanistan. However, Washington opposes India, Pakistan and Iran’s 2,700-kilometer IPI "peace" pipeline that is likely to transfer Iranian natural gas from its South Pars field to India via Pakistan. However, India hasn’t agreed to join the project. At the same time New Delhi would like Washington’s involvement in the project for the smooth supply of gas to India by exerting pressure on Pakistan if need be. Iran is now working towards extending the project to China instead of India due to delays in finalising modalities and the fluctuating relations and mutual suspicion between India and Pakistan.

Existing international trends are making Central Asian leaders turn willingly to Moscow. India’s initiative in Central Asia and its efforts to involve Russia would not only benefit Moscow in Central Asia but can also pave the way for Russia’s economic expansion into Indian markets. Such developments are also likely to bring Central Asia and South Asia region economically and culturally closer. In addition, if India wants to be a global player, it needs to develop multiple strategies for security and economic cooperation. At the same time, India must remain economically, technically and culturally engaged in the region through inter-governmental agreements to achieve its long term objectives. It is also important to build people-to-people contact by organising cultural and educational exchange fares and programs.

(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies).