Globalization has led to enhanced cooperation in the economic fields between states. Under the era of globalization, following a policy of complete isolation and independence is undesirable.
Taking cue from this, India abandoned its Non- Aligned hangover and state-led economy that led to a grave fiscal situation which threatened to ‘bankrupt the federal exchequer’ towards the end of 1980s.
India then adopted ‘a new economic policy’ in 1991 which in effect abandoned socialism and accepted the goal of a ‘capitalist economic system’ characterised by privatisation, liberalisation and de-licensing. That ushered in a new phase of economic diplomacy in India which not only tried to maximize receiving economic aid from the donor countries but also wished to attract foreign direct investment from the developed countries of the West and Asia.
To secure oil and natural gas for the growing energy need of India was also an important aspect of that diplomacy. The outcome of that economic diplomacy has been India’s joining in some multi-lateral economic fora such as the World Trade Organization in 1995, Organization for Economic Co-operation and Development (OECD) in 1996 etc.
In this article
- India’s Oil Diplomacy
- Why Does India Wish to Strengthen the Oil Diplomacy?
- India and Central Asia-An Enduring Partnership in Energy Security
- Latin America: An Alternative Destination of Oil for India
- China’s Aggressive Oil Diplomacy: India Should have to Go Forward
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India’s Oil Diplomacy
India’s economic diplomacy partly has been transformed into oil diplomacy. India’s oil diplomacy can be divided into three phases (1) from independence to 1960s, (2) from 1960s to end of the Cold War & (3) since 1991 to present time. In the third phase, especially in 2000s India sought for alternative overseas sources of oil and gas. In the 21st century, oil issue has been key issue in India’s foreign policy. Regarding overseas oil, India started high-level diplomacy.
India’s Energy security question rose as a big question since 1991. Since 1990s, the suppliers of India’s oil supply have been changed. To augment commercial purchases on the world market, India’s, government and oil firm’s sought to secure oilfields in abroad. These assets added 3 to 5 million tons annually to India’s oil supply in the mid-and late 1990s.
Presently India is facing energy insecurity. India’s main sources of energy are coal, oil and gas which is 50% of the reservation of India’s own petroleum is very little. We have a confirmed discovery of gas in [Krishna Godavari] KG basin D-6 by Reliance Industries but that is from over seven years back. Since then, not even the private sector has discovered any new find. If our own exploration is going to stagger in both oil and gas and if we do not put in enormous resources that are required in research and development to deal with the peculiar geographical problems found only in India, then the future seems insecure.
Why Does India Wish to Strengthen the Oil Diplomacy?
India is the seventh largest country in the world in terms of geographic landmass, and the second largest in terms of population with 1.2 billion people. When gross domestic product is considered, the country falls into the ten largest economies. Further, the country has been experiencing economic growth of around 7% per annul since 2000, despite the 2008 economic crisis.
The country enjoys an abundance of traditional and non-traditional energy sources, but these sources are insufficient to meet India’s growing needs. It therefore resorts to importing most of its energy from abroad, especially from Middle East crude oil and natural gas exporters.
Thus, in an effort to secure both best prices and energy security, the country has concluded a number of short- and long-term contracts at government level and, to a lesser extent, through private companies . By 2025, India will be the second largest pressure, after China, on global energy resources. The country is trying to respond to this through two ways: by expanding the base of domestic renewable energy and increasing its nuclear power capacity which is scheduled to rise to 9% of total energy capacity in the next 25 years from its current 4.2% level. India has five nuclear reactors, and is working to build 18 more by 2025. If this is achieved, the country will have the highest amount of energy nuclear reactors in the world. The seriousness of India’s energy requirements can be gleaned from the fact that over 56% of rural households receive no electricity.
India has been importing a huge quantity of crude oil from different regions in the world. According to 2012 report India imported the following percentages of crude oil from several sources: Saudi Arabia (19%), Africa (18%), West Hemisphere (18%), Iraq (13%), Kuwait (10%), UAE (9%), Iran (6%), Other Middle East (6%) and others(4%).
India and Central Asia-An Enduring Partnership in Energy Security
The Central Asian countries may be a significant destination for India. India already made a close ties with Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, Kyrgyzstan for getting gas and oil. This region is rich in hydrocarbon. Kazakhstan is one of the oil producing country. It is expecting by 2019 Kazakhstan will be one of the largest (among best 5) oil producing country.
Turkmenistan may be the largest oil producing country by 2019. Uzbekistan has 655 trillion cubic feet, in Kazakhstan 85 trillion cubic feet and Turkmenistan 100 trillion cubic feet. Actually, this region has reservation of 2.7% of world’s total oil stock and 7% of total gas reservation.
Against this backdrop, India aimed to have close linkage with this region. There are mainly three problems to import oil and gas from the Central Asian countries:
- Geographical constrains. It is very difficult to carry oil and gas through pipeline via Afghanistan for its location.
- There is a proposed pipeline project from or Turkmenistan. In 2005, ADB submitted a feasibility study to the petroleum ministers of Turkmenistan, Afghanistan, Pakistan and India. In May, 2007, India joined a four-party agreement with the ADB on this proposed pipeline. But due to Afghanistan’s political and security problem, it has not been materialized even today.
- The Central Asian states are partly controlled by China. China is trying to stop India’s initiatives regarding the pipeline project. India’s energy pipeline diplomacy is back into play with the National Democratic Alliance government working on simultaneous plans for constructing transnational crude oil and gas pipelines’ to India from Turkmenistan, Russia: and Kazakhstan.
Latin America: An Alternative Destination of Oil for India
South America rose 10 per cent each as Indian refiners bought heavier but cheaper grade oil. Indian refineries have consistently reduced imports from traditional markets like Saudi Arabia and stepped up purchases from newer geographies like Mexico and Venezuela as imports have become viable due to availability of cheaper variants and softening of shipping cost. India imported 189.44 MT of crude oil in 2014-15, almost unchanged from the previous fiscal, to meet over 80 per cent of oil needs. Venezuela was a very close third with 24.40 MT of oil supplies, 13 per cent higher than 2013-14. Mexico supplied 5.06 MT of crude oil in 2014-15, marginally higher than 4.94 MT a year ago.
China’s Aggressive Oil Diplomacy: India Should have to Go Forward
Demand for Oil has been increased in China in order to cater to the needs of its l.3 billion people. The oil suppliers from Africa and the Middle East since the 2000s, countries such as Iraq, Angola, Sudan or Congo are among those which have supplied oil to the Chinese market. The flow of oil from Angola, Sudan or Equatorial Guinea to China demonstrates the fact that China cooperates with these states despite “violation of human rights and serious abuses committed by their governments.” The oil represents almost one fifth of the China’s energy demand, meaning that yet in 2009 China needed almost 120 million tons of oil equivalent to cover its domestic oil needs. There are number of states in the Middle East as well as in Africa in which the latter applies. China does not only neglect internal situation, but it has even pursued steps that have worsened domestic situation in particular states in Africa and the Middle East. These actions may be considered as a component of the Chinese foreign oil policy.
China has been strategically forwarded towards Middle-East and African countries through using aggressive and dangerous policies. For collection of oil and gas from Middle-East and Africa it adopted some steps which are beyond the imagination of Indian foreign policy makers.
The hostile relations between the USA and China went in favour of China. China took this opportunity and made closeness with Iran by supplying arms. Sudan is another notable example of the Chinese engagement in selling of weapons to foreign armed groups and movements. Secondly, being a supper power China has successfully projected itself in Middle-East and Africa and in terms of oil diplomacy as well as market economy. In addition, to the already examined means of achieving oil supplies, China has also used its political power to make its ‘oil alliances’ with certain countries in the Middle East and Africa.
Thirdly, China is imposing its pressure on African nations for violation of human rights and flourishing of terrorism. Fearing for China most of the oil rich African nations have bound to give access in oil fields.
Fourth, China has started oil extraction from different parts of Africa. More than one million
Chinese labours, engineers, officials are employed in African states. It is a sharp labour policy of China. In few cases, African nationals get jobs in Chinese occupied oil field. It is economically beneficial for China.
Fifthly, China has been predominant power in Africa.
In this backdrop, what strategies would be taken by India? India can take the following policies for entering in Africa and Middle-East.
Firstly, India’s energy requirements are enormous. It can extend its market to these regions and can surely enhance its IT, Biotechnology, Agro-products based market. In return, it would be active and alert in getting of targeted quantity of petroleum products in this regions. India has already owned some oil and gas fields. These will have to increase. Secondly, India should increase its importance as an international power. Through power politics, at the same time through using of technology and manufactured product it will have to gradually forward in capturing of entire Middle-East and African market.