Opinion - Leader Page Articles   

Energy security and life beyond Chevron

The maelstrom in the Pakistani political scene has largely overshadowed the November 11 announcement in Tehran that an agreement has been finalised regarding the Iran-Pakistan gas pipeline project. But that does not make the project any less important. Its significance for the geopolitics of the region was never in doubt.

The tidings from Tehran signify that without the hullabaloo of an “independent foreign policy,” et al, the Pakistani government probably pursued one with regard to the pipeline project. The Pervez Musharraf regime does not claim to be a promoter of multipolarity in the international system, and very obviously, it lacks credentials to advocate a democratised world order.

Therefore, what is extraordinary is that for a second time, Pakistan has modestly indicated that its enlightened national interests demanded cooperation with Iran. The first time was two years ago when it abstained from voting in the International Atomic Energy Agency (IAEA) over the Iran nuclear issue. Some grit, no doubt — even if the jury is still out.

A salient point to be noted is the statement in Tehran by Mokhtar Ahmed, Adviser to the Pakistan Prime Minister, that the gas pipeline could be extended to China. The idea holds far-reaching possibilities. Western capitals have long worried about an “energy club” taking shape within the framework of the Shanghai Cooperation Organisation, a plan ascribed to Russian President Vladimir Putin. Indeed, Russia is keen on promoting Iranian energy exports to the Asian region and to have an understanding with Iran so that the two countries do not compete in the Western market.

Russia has, in recent years, significantly consolidated its influence over Central Asian countries. Iran, on its part, has been a votary of the idea of a “gas OPEC.” Least of all, Russia has consistently evinced interest in participating in the Iran gas pipeline project.

The Iranian Oil Minister’s Special Envoy for the project, Hojjatollah Ghanimifard, endorsed what Mr. Ahmed said about the possibility of China becoming party to the project. These statements were made on the eve of Chinese Foreign Minister Yang Jiechi’s visit to Tehran on November 13-14. Addressing a press conference in Tehran, Mr. Yang said, “We are ready for an all-out expansion of ties with Iran because the country’s position and role is of high significance, and China’s approach to relations with Iran is long-term and strategic.”

The pipeline project would be a major step in realising the two countries’ ambitious target to boost their bilateral trade ten-fold in the coming decade. With a $10-billion annual trade, China is already Iran’s number one trading partner.

From Iran’s viewpoint, the consolidation of relations with China is taking place alongside the deepening strategic understanding with Russia flowing from Mr. Putin’s historic visit to Tehran on October 16. While calling on Iranian President Mahmoud Ahmedinejad on November 13, Mr. Yang said China and Iran played an “effective role” in regional and international equations and that enhanced relations would serve regional and international stability and peace.

What emerges is that Russia and China are robustly pursuing long-term cooperation with Iran. Clearly, they have factored in the point that it is only a matter of time before Western capitals (including Washington) could have a turnaround in their attitude toward Tehran, considering Iran’s status as the “last frontier” on the globe’s energy map. They aspire to avail of Iran’s preferences for the Asian energy market.

Unsurprisingly, Mr. Ghanimifard discounted India from joining the gas pipeline project. He underscored that Tehran is open to the idea of an Asian energy grid through transfer mechanisms, or swap arrangements, or both. Recent statements by Iranian officials are indicative of their awareness of New Delhi’s lukewarm stance toward the Iran pipeline project.

All the same, the project is not a complete write-off for India. New Delhi can derive satisfaction that the brilliant idea mooted by Mani Shankar Aiyar three years ago (when he was the Petroleum Minister), is finally coming to fruition. Even though a priori history, the UPA government did take the initiative towards bringing together the energy-producing and energy-consuming countries in the Asian region.

But a bombshell dropped by Mr. Ahmed deprives us of any immediate sense of gratification over promoting Asian unity. He said Islamabad proposed to focus on the Iranian pipeline for the present and would defer the project envisaging gas import from Turkmenistan. In effect, he meant Islamabad would relegate to the back burner the Trans-Afghan Pipeline (TAP) project, which envisages transportation of Turkmen gas via Afghanistan to South Asia.

Pakistan, of course, is being realistic. The Afghan situation does not lend itself to stability in the near future. Secondly, there are concerns whether Turkmenistan has any surplus gas left for export to South Asia after meeting its obligations to Russia, China, and Europe — in that order. Western energy experts already estimate that if the Turkmen-China gas deal is implemented, Europe may be the net loser.

That is to say, the hard reality is that there is no TAP on the anvil in the near future as an alternative to the Iran pipeline project. Our Petroleum Ministry must ponder, “what next.” With question marks hanging over the gas pipeline project from Myanmar, we find ourselves somewhat awkwardly back at ground zero. That brings the discourse to our famous Russia option. There was a good case for the Petroleum Minister to accompany the Prime Minister during his recent visit to Moscow. (But he didn’t.) The success of Indo-Russian summitry lies in the great continuity of the exchanges at the highest political level between the two countries.

Since, surprisingly, no joint statement was issued after what Mr. Putin intriguingly called his “constructive and very frank conversation” with Dr. Manmohan Singh in Moscow on November 11, it is difficult to know how intensively they interacted on energy cooperation. Mr. Putin made en passé reference to something that we already knew — that “conditions are in place for building on this experience [of cooperation over Russia’s Sakhalin-1 oil project] and extending it to new projects in Russia, India and third countries.” Dr. Singh merely added, “We continued our dialogue in the energy sector.”

But that is a disappointing lowering of expectations of Indo-Russian energy cooperation, which was seen as the leitmotif of Mr. Putin’s state visit to Delhi in January. The joint statement issued after Mr. Putin’s February visit had brought to the agenda of discussions some creative ideas in the direction of Russia and India addressing the concept of energy security as an “acceptable balance between security of demand and security of supply.”

Shorn of the mystique of government idiom, the two leaders plainly signalled a readiness to consider India’s upstream participation in Russia’s fabulous oil and gas fields as quid pro quo for Russian companies’ downstream participation in the Indian market. Russian commentators viewed it as a conceptual breakthrough holding out the promise of taking Indo-Russian bilateral economic cooperation out of its deep slumber. Mr. Putin and Dr. Singh took a major decision by way of constituting two joint Working Groups — one each for upstream and downstream activities, “demonstrating the viability of future India-Russian cooperation in the entire hydrocarbon value chain.”

The idea itself is eminently doable. (Russia has developed similar patterns with European partners and China.) Curiously, Reliance Industries and the influential U.S. oil major Chevron just showed that with requisite political support from the two capitals, innovative involvement of American partners in the lucrative Indian petrochemical sector is possible.

Chevron is set to ramp up its 5 per cent equity in Reliance’s massive 29-million tonne Jamnagar refinery to 29 per cent, requiring a relatively small investment of less than $2 billion, besides taking equity in the Krishna-Godavari gas fields. The Jamnagar refinery will be getting crude from Chevron for processing, while Chevron is assured of picking up a certain percentage of the highly lucrative value added products. There is big profit involved. Admittedly, Chevron, which is influential with the current U.S. administration, has swiftly cashed in on the prevailing climate of U.S.-India relations to enter the lucrative field of downstream activity in India in the “hydrocarbon chain.”

Yet Chevron does not propose to bring crude from American oil fields, nor is it offering its Indian partner a piece of the action by way of providing Reliance with upstream access to its oil fields. Russia, in comparison, offered the Oil and Natural Gas Corporation access to its fields, and Russia has huge funds to invest.

The Petroleum Ministry should learn from Reliance. It should ascertain from Reliance the ABC of getting the ONGC and Russia’s Rosneft oil company to consummate their longstanding friendship.

The country’s worrisome energy security demands that there is life beyond the Chevron saga. Given the traditional climate of mutual trust and goodwill in India’s relations with Russia, and assuming there is political will, the UPA government (or a successor government) could always revive energy cooperation as a priority item in the next round of summitry with Russia.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Congress dreams
Travails of the U.S. credit market
Energy security and life beyond Chevron
Pakistan’s future is without Musharraf
Spain’s divorce rate soars after rules relaxed
The nuclear deal
Pertinent questions
Pakistan politics
Capital punishment
‘For Southeast Asia, to have India as a partner is a tremendous plus’

Copyright © 2007, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu