India plays catch-up with China, Russia By M K Bhadrakumar
India will be watching the expanding horizons of Russia-China energy
cooperation with mixed emotions. The first session of the Russia-China-India
Business Council within the trilateral format is due to be held at the end of
March in Delhi.
While making the offer to host the meeting of the newly constituted business
council at a meeting of the foreign ministers
of the three countries in Vladivostock last year, India has signaled that
energy cooperation is at the top of its concerns, while working with Russia and
China in a new spirit of regional cooperation.
During the visit of Russian President Vladimir Putin to Beijing last week,
Russia and China signed a memorandum on Russian gas supplies to China amounting
to 60 to 80 billion cubic meters annually from eastern and western Siberia
through pipelines that will become operational by 2011. This Sino-Russian
energy cooperation holds deep implications for India.
First of all, Moscow is finally moving ahead with energy cooperation in Asian
markets with a long-term perspective.
Secondly, India may have to factor that global competition for Russia's natural
gas will intensify in the coming period. Whereas previously Europe and the
United States were competing for Russia's natural gas supplies, now China and
the Asia-Pacific region will join the competition.
Thirdly, Russia is keeping its word that its energy diplomacy will be within
the framework of a long-term strategy. The pipelines to China are expected to
cost US$10 billion. But Russia has insisted that it would build them on its
own. India will take note that hard-boiled economic realism increasingly guides
Russian energy diplomacy.
Fourthly, Russia's agreements with China have reaffirmed that Moscow prefers
comprehensive energy cooperation with foreign partners rather than mere
supplier-buyer relationships.
The Russian side negotiated China's readiness to extend cooperation in the
energy sector to downstream activities, like oil-and-gas processing,
oil-and-gas chemistry, and machine building - areas in which Russian companies
possess expertise. India, too, would like to attract Russian investments.
Fifthly, Russia unmistakably stressed its expectation to expand involvement in
the hugely expanding market in China for nuclear energy. As Putin explained at
his press conference in Beijing, "Cooperation in the energy sector ... is not
limited to deliveries of raw energy ... [it] includes deliveries of Russian
energy equipment. This refers to nuclear energy and the fact that Russia will
continue to participate in establishing new nuclear energy capacities for
China."
Two Russian nuclear power plants are currently being constructed in China in a
US$3.2 billion project. The first is expected to go on line later this year.
Russia may figure as a major competitor to the US in nuclear commerce involving
China. India would monitor how the Russian-Chinese-US equations develop in the
field of nuclear energy.
Sixthly, Russian state-owned oil company Rosneft has announced plans to enter
China's network of retail trading in petrol and petroleum products. Rosneft
signed agreements for setting up two joint ventures by the end of 2006.
(Chinese and Indian companies are in the running for purchase of Rosneft's
shares when the Russian major goes public by July.)
"Our dream is to enter China's retail market for oil products," said Rosneft's
chairman Segei Bogdanchikov, who accompanied Putin. But India's market
restrictions in the retail sector with regard to foreign oil companies still
remain rigorous.
Russian leadership has been emphasizing lately that Moscow would broaden the
scope of energy security to include matching steps by the importing countries
for ensuring Russia's own "security of demand". Moscow expects its
interlocutors to reciprocally provide access to their retail markets for
Russian oil companies.
Russian-Chinese cooperation holds two broad implications for India in terms of
the politics of energy security. Firstly, it underscored the reality that while
nuclear energy could be an option for meeting energy needs in the medium and
long term, oil and gas will remain the main sources of energy, at least for the
next quarter century - especially gas.
India cannot overlook that Russia and Iran are the only viable sources of gas
supplies for the Indian market. Also, Russia virtually controls the entire gas
flows of the post-Soviet space, including Central Asia. From the perspective of
energy diplomacy, therefore, India's friendly relations with Russia and Iran
assume a greater criticality than ever.
India has a lot of ground to cover in restoring the verve in its relations with
Iran after the recent chill over the Iran nuclear issue. Indian diplomatic
initiatives in the direction of fence-mending are already visible. The
Russian-Indian relationship has remained close and friendly, but it must
acquire greater substance. Smaller countries like Norway and Turkey enjoy trade
volumes with Russia over 10 times that of India's - literally coming from way
behind and overtaking India during the 1990s.
Secondly, China has shown that laying pipelines for maintaining assured supply
lines still remains the first preference, even if alternate means of supply
exist - liquefied natural gas transported overland or by sea. This brings us
back to the centrality of the Iran gas pipeline project for India, no matter
what Washington may tell Delhi.
Furthermore, in the light of the upcoming gas pipelines from western Siberia
(and from eastern Siberia eventually) into China, Delhi could be expected to
look seriously at the viability of extending these Russian pipelines to India.
The need of adopting a schematic approach to developing gas pipeline routs from
Eurasia to India via China began permeating Indian thinking in recent years.
Inchoate thoughts could now begin to crystallize.
According to Indian experts, there are possibly two variants of a pipeline
project realistically attainable for bringing Russian oil and gas to India -
both in a rough north-south direction along the existing railway lines and
roads in Kazakhstan and the Xinjiang region of China.
These variants are: a) West Siberia, Tyumen, Omsk, Semey, Druzhba, Urumchi,
Korla, Kuqa, Aksu, Kashgar, Yarkand, Shahudullah, India. (An alternative could
be that the route branches off from Korla to the southern branch of the Silk
Road along the southern rim of the Taklamakan desert, on to Khotan and
Shahidullah.); b) West Siberia, Tyumen, Petropavlosk, Astana, Karaganda,
Bishkek, Issyk Kul, Naryn, Kashgar.
There could also be a spur from North Siberia to Tomsk, Novosibirsk, Barnaul,
Rubtsovk, Semey that would thereafter follow as one of the routes above.
Alternatively, there could be such a pipeline: Irkutsk (Russia), Ulan Ude, Ulan
Bator (Mongolia), Yumen (China), Dunhuang, which would thereafter follow the
southern branch of the traditional Silk Road to Khotan, Shahidullah, India.
Similarly, there could be a pipeline enabling India to access the vast Kovykta
deposits in Russia's eastern Siberia. Such a pipeline could be from Irkutsk
(Russia) via Ulan Ude, Ulan Bator, Yumen (China), Dunhuang, and, thereafter
follow the southern branch of the traditional Silk Road to Khotan, Shahidullah
and India.
For any of the above pipeline grids, the hubs would be Urumchi and Kashgar in
Xinjiang. The pipelines from Siberia (and any potential ones from Central Asia)
could converge on these two hubs, from where the pipelines could move to the
south to the main markets of north India.
The most difficult and challenging section is across the Karakorum-Himalayan
ranges. But there are possible routes:
a) Via the Karakorum pass and Khardung-la to Leh
b) Via the existing Aksai Chin road alignment connecting Xinjiang to Rutong in
western Tibet. From Rutong, it is a relatively short distance along the plateau
skirting the Pangong Lake to Chushul and the Manali-Leh highway
c) Via Aksai Chin and the Xinjiang-Tibet road up to Tashigang, and then down
the Indus valley from Demchok to Upshi along the alignment of an existing
motorable road, and thence along the Leh-Manali highway
d) Ingress routes from western Tibet into India along the Sutlej River (Rutog,
Gartok, Shipki Pass, Hindustan, Tibet Road via Kinnaur to Simla); via the Niti
Pass and Gahwal; or, via the Manasarover route (Rutong, Gartok, Manasarover,
Taklakot, Lipulekh Pass, Pithoragarh.
Oil pipelines could also be laid along the same alignments as the gas
pipelines. Besides, a pipeline through China could integrate India's energy
cooperation with Central Asian countries.
Thus, pipelines could be laid from Turkmenistan and Uzbekistan along a main
branch of the Silk Road, namely, Bukhara, Samarkand, Khojand, Andizhan,
Ferghana, Osh, Erkeshtam, Kashgar. (Incidentally, a railway line exists from
Bukhara to Osh, which China is linking up with Kashgar.) Alternatively, India
could conceive a "Central Asian spur" along Bukhara, Samarkand, Tashkent,
Chimkent, Bishkek, Almaty, Yining, Korla, Kuqa, Aksu, Kashgar.
China holds the key to the success of such pipeline alignments. Indeed, it
would be easy to embellish the idea of trilateral cooperation with China and
Russia with geopolitics in a multipolar global setting. But that's unnecessary.
Putin's visit to China signaled that at the end of the day, economic realism
remains the underpinning of energy cooperation. Putin pointed out that of the
29 agreements signed by the 800-member delegation that accompanied him, only
one was a political statement.
China could earn considerable income by way of transit fees from pipelines
transiting Xinjiang and Western Tibet. Pipeline activities could stimulate the
economic development of these regions of China, apart from fostering regional
or sub-regional cooperation between these regions and neighboring India.
Conceivably, China would be interested in swap deals with India, namely, buying
India's oil and gas in Sakhalin in exchange for the oil and gas produced in its
assets in Xinjiang and Kazakhstan.
Of course, the Tarim basin gas deposits in Xinjiang are the most accessible gas
deposits for India (other than Iran), with the shortest pipeline routes to
India. China would even find it more advantageous to supply the gas from Tarim
basin to India rather than to transport it to east China.
India could reciprocally offer China an energy corridor to the Gulf region that
would enable China to reduce its excessive dependence on the long and perilous
supply lines from the Indian Ocean via the Malacca Strait and the South China
Sea. China would have every reason to welcome an overland route via India.
M K Bhadrakumar served as a career diplomat in the Indian Foreign Service
for over 29 years, with postings including India's ambassador to Uzbekistan
(1995-1998) and to Turkey (1998-2001).
