SPEAKING
FREELY India trails China in energy
race By Chietigj Bajpaee
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
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Economists, business tycoons, politicians and
strategists like to make frequent comparisons of the
Panda (China) and the Peacock (India). In some cases,
they see complementarity: India's software advantage and
China's hardware prowess; India's service sector
specialization with China's manufacturing sector
flourish. Both countries are looked upon as having
parallel but shared pasts - both have rich histories,
cultures and traditions; both suffered at the hands of
Western colonialism; both are competing for leadership
of Asia, the developing world and status on the world
stage.
More often than not, it has been this
last commonality that has received the most attention -
India and China as competitors. And for the past 20
years, China has been the hare while India the tortoise
in terms of economic development, military capability
and geopolitical status. Now, as oil prices skyrocket
and Asian energy demand soars, China has once again
taken the lead over India with a more pro-active energy
policy.
China, which has been a net oil importer
since 1993, is the world's number two oil consumer after
the US, accounting for 7% of world demand and has
experienced a 40% increase in oil imports over the
previous year. India, as the world's number six energy
consumer, has experienced an 11% increase in imports.
India however, may be in a more desperate situation
given that its oil imports account for 2/3rd of its
consumption compared to China's 1/3rd. Still, China has
taken the lead in the search for alternative energy
resources and security.
In China, the Tarim
Basin to Shanghai (west to east) gas pipeline has just
become operational. China has also begun joint
pre-exploration studies with the Philippines in the
South China Sea - though parts of the territory (the
Paracel and Spratly islands) are disputed - as well as
engage in gas exploration in the East China Sea, parts
of which are disputed by Japan (Diaoyu Islands). India,
on the other hand, is years away from fully exploiting
its oil discoveries in the northern state of Rajasthan
or the gas finds off the coast of Andhra Pradesh in its
south, let alone exploring the potential resources off
the Andaman Nicobar islands.
In terms of
securing energy imports, China has attempted to improve
relations with its major oil suppliers such as Saudi
Arabia and Iran, selling them military technology,
investing in their industries and energy infrastructure,
granting aid for oil and looking the other way on their
human rights records. China is also making an active
attempt to diversify beyond the Middle East by lobbying
for the oil pipeline between Angarsk (Russia) and Daqing
(China) over the one to Nakhodka, which favors Japan.
With Japan pledging to invest heavily in the
project, Yukos (which had favored the Daqing route) deep
in financial trouble, and the Nakhodka route potentially
serving a bigger market of northeast Asia and the US,
the Japanese-backed proposal looked like a sure winner.
But with Chinese leaders making a number of trips to
Moscow, including a recent visit by Premier Wen Jiabao,
coupled with rising tensions over Japanese Prime
Minister Koizumi's recent sail around the disputed
Northern Territories/Southern Kuriles, the pipeline
route appears to be swinging back in China's favor.
Even if China does not get the pipeline to
Daqing, Beijing has been assured by Moscow that it will
expand energy exports by rail to China. On its western
borders, China has been an active player in the "New
Great Game", having signed an agreement with Kazakhstan
in 1997 to access its energy resources. With increasing
oil prices and instability in the Middle East, China is
pushing ahead with a pipeline to Kazakhstan and other
energy-rich Central Asian states. China's leading
chemical trader, Sinochem Corporation, has recently
acquired Korean oil refiner Inchon Oil in China's first
takeover of a foreign oil company.
India is at a
geographic disadvantage vis-a-vis China given that it
does not share a land border with any Central Asian
states or Russia. China shares borders with three
Central Asian states - Kazakhstan, Kyrgyzstan and
Tajikistan - as well as Russia. Nevertheless, India had
a head start in cultivating relations with both Central
Asia and Russia given its strong relations with the
erstwhile Soviet Union during the Cold War. India could
also leverage its "soft" power influence in Central Asia
through its historical links that go beyond the
Indo-Soviet Treaty of Friendship to the Mughal period
and Silk Route, as well as the popularity of India's
mass culture (Bollywood films and music). These links
made Central Asian states less suspicious of doing
business with India compared to the expansionist
imperial powers such as China, Russia and the US or
states exporting Islamic fundamentalist instability such
as Iran, Pakistan and Saudi Arabia.
But India
has failed to fully utilize these links. While India's
ONGC (Oil and Natural Gas Company) and its subsidiary
OVL (ONGC Videsh Limited) have attempted to diversify
their energy imports, accessing energy resources in the
Sudan and Libya as well as establishing partnerships
with Iran and Russia, it goes nowhere near the
investments made by China's Sinopec (China Petroleum
& Chemical Corporation), China National Petroleum
Corporation (CNPC), its subsidiary PetroChina, and China
National Offshore Oil Corporation (CNOOC). This very
month, India lost a deal for oil fields in Angola to
China, which is offering aid-for-oil to energy-rich West
Africa.
In terms of energy conservation, China
has delayed several construction projects and cut loans
and investments in energy-hungry industries such as
steel and cement. Major industrial centers are rationing
power and even Shanghai's famous Bund is conserving
power with the lights of several famous attractions
being shut off in the evenings. China is also actively
pursing alternative energy resources such as natural gas
and nuclear and hydroelectric power, as evident in the
number of dam and nuclear power projects on the table
such as the mammoth Three Gorges Dam.
While
China still faces severe problems such as an increasing
car ownership, it has taken a more structured, long-term
approach to addressing its energy concerns than India.
While India has also looked into generating
hydroelectric power through dams and re-routing several
river systems, changes in state and central governments
coupled with disputes with upstream and downstream
states such as Nepal, Bangladesh and Pakistan over the
re-routing projects has slowed down the plans. The trend
in India towards gas-guzzling Sports Utility Vehicles
(SUVs) has also placed a strain on its energy needs.
China has also been far more successful at attracting
foreign direct investment into upgrading and increasing
its energy infrastructure and supporting its move toward
alternative and cleaner energies.
With respect
to energy security, China is winning again. Like Japan
and the US, it is pushing to acquire a national fleet of
VLCCs (Very large Crude Carriers) that could be employed
in case of supply disruptions brought on by an accident
or a terrorist attack along the narrow Straits of
Malacca or a US-led blockade in the event of a conflict
over Taiwan. With respect to the Straits of Malacca,
which experiences 40% of the world's piracy and through
which 80% of China's oil imports flow, China is looking
into bypassing the straits with discussions for a
pipeline to Myanmar as well as possibly Bangladesh,
Pakistan or Thailand.
In Central Asia, China led
the creation of the Shanghai Cooperation Organization,
which began as the Shanghai Five in 1996. This body has
moved from resolving border disputes to fighting the
three evils of extremism, terrorism and fundamentalism
and promoting greater economic integration. In doing so,
China has not only promoted stability on its energy-rich
borders in Central Asia, but also within its borders in
energy-rich Xinjiang province.
While China has
either resolved or shelved its border disputes, India
has active conflicts on almost all of its borders with
neighboring states. The inability to resolve the Kashmir
dispute with Pakistan has undermined the viability of an
Iran or Turkmen natural gas pipeline via Pakistan to
India. As such, India has had to look into the expensive
option of a deep-sea pipeline that bypasses Pakistan
altogether. The resurgence of violence in India's
northeast, sporadic attacks on pipelines, and India's
poor relations with gas-rich Bangladesh and
China-friendly Myanmar have prevented it from fully
exploiting its proximity to a region rich in energy
resources.
While India and China compete for
energy, this does not preclude the possibility of the
competition leading to cooperation given that both
states face similar dilemmas. Both states have attempted
to limit the inflationary impact of rising fuel prices,
with India cutting customs and excise duties on energy
imports and offering fuel subsidies and China regulating
refined oil prices, neither of which are sustainable in
the long run.
Both states' energy industries are
still highly regulated as are the industries
complementing them such as transport infrastructure,
power grids and refineries creating bottlenecks and
fueling power cuts and shortages. Both India and China
are still heavily reliant on environmentally unfriendly
coal burning for their energy needs, which has
contributed to haze and pollution across their major
cities, undermining their reputations as emerging global
business and financial centers. Utilizing their vast
intellectual and human capital, both could work toward
finding more environment-friendly and efficient energy
resources such as coal liquefaction and fuel cell
technologies.
Both states also suffer the
effects of an "Asian premium" on imported oil, whereby
Asian states pay more for imported energy than their
European and North American counterparts. Given that
both need to ensure access to cheap energy resources in
order to sustain their growth, India and China (along
with Japan, South Korea and other energy-hungry states
in Asia) could try their hand at collective bargaining
with OPEC and Russia.
China and India also lack
a "Strategic Petroleum Reserve" that could be accessed
in cases of short- to medium-term supply disruptions.
Along with South Korea and Japan, which have adopted a
minimalist approach toward strategic reserves, China and
India could work toward creating an Asian Strategic
Petroleum Reserve. Finally, in terms of addressing
energy security, both states along with other major
Asian military powers could adopt a more integrated
approach in addressing shared threats to energy
supplies. This could be done bilaterally or
multilaterally through such organizations as the
Shanghai Cooperation Organization (SCO) for Central Asia
and the ASEAN Regional Forum (ARF) with respect to the
Straits of Malacca, and South and East China Sea.
If China and India are to remain the drivers of
Asian and global growth, they must be ensured access to
cheap, reliable, and clean sources of energy. While
China clearly leads over India in the energy "game", in
the long run, regional and global stability and growth
can only be assured through cooperation rather than
competition or conflict.
Chietigj
Bajpaee is an Asia analyst. He has been a researcher
for the International Institute for Strategic Studies.
He has a graduate degree in international relations from
the London School of Economics.
(Copyright
Chietigj Bajpaee)
Speaking Freely is an
Asia Times Online feature that allows guest writers to
have their say. Please click hereif you
are interested in contributing.
