Energy, Gas, Oil And Economy: What India Should Focus On In The Next Decade

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During the cold war era, it was easy to understand the relationships among the nations because the political and economic interest went hand in hand. But after the end of the cold war, the relationship among the nations has become much more complicated with a high level of uncertainty. For example, the relation between China and Japan has certain common economic interests while there is a vast difference in their political aspirations.

At the same time, India has two neighbours: one is Pakistan, known for its religious fundamentalism and terrorism; while the other one is China, known for its expansionism. In this context, India needs to take care of its national interests, which are mainly security concern, economic growth, energy security, etc. This article starts with an introduction about national interest, then it discusses the challenges to achieving it and provides some recommendations to realize those aspirations.

Introduction

Niccolo Machiavelli was the first to introduce the concept of “national interest.

Niccolo Machiavelli was the first to introduce the concept of “national interest.” The importance given by the state to the concept of national interest was equal to the importance given to the term religion in the early 19th century. But in contemporary international relations, the idea of “national interest” has immense importance because it plays a crucial role not only in defining the survival and security of the state but also in determining the foreign policy of a nation.  So far, many scholars have tried defining the concept of national interest.

Donald E. Nuechterlein is one among them. He wrote this in his journal “National Interests and Foreign Policy: A Conceptual Framework for Analysis and Decision-Making” in 1976, “National interest is the interest of a nation as a whole held to be an independent entity separate from the interests of subordinate groups or areas and also of other nations.” The component of national interest varies from country to country, depending on their priorities. For example, the primary goal of North Korea is strengthening military power, while the primary purpose of Bhutan is to secure an environment.
In the case of countries like India, it is a challenging and complicated job to define national interest because of their population, diversity, vibrant democracy and several other institutional factors and ground realities. Since the independence of India, the increasing population has led to an increase in its rate of consumption of resources, which has further led to increased energy dependence. So, in the upcoming future, meeting the energy demands to maintain the rate of growth of the economy has become a primary priority for sustaining India’s national interests.
At the same time, there is also an increase in population which is looking for work, and finding jobs for them without exploiting the environment has also become a priority for India. India has a very difficult and hostile neighbourhood, so without advancing the military, naval and air force, it is extremely difficult to survive. So, modernizing its military has also become a national interest for India.
Apart from the above concerns, issues like climate change, negotiations with international institutions for a fair and level-playing trade practice, strengthening bilateral ties with neighbouring countries, and increasing trade with them have also become areas of concern. Securing the Indian Ocean is also an essential dimension in the domain of India’s national interest.

Tackling The Energy Crisis

In the present day context, India comes under the top-five largest consumers of energy. The rate of growth of India’s economy is 7-8% per annum, and its growth rate of energy demand is also the highest. If this rate continues to remain the same, then India will come under the top-three consumers of energy by 2030. Energy is a necessary entity for running India’s engine of economic growth. India’s primary sources of energy are coal (caters to 51% of India’s energy demands), oil (meets 36% of energy needs), natural gas (10%), hydropower (2%), and nuclear energy (1%).

The Relevance Of Nuclear Energy

Theoretically, for India, nuclear energy is highly preferable for efficient energy production as well as for long-term energy security. To become an energy-independent nation, India will have to succeed in the three-stage development process of nuclear energy.  Although we have seven nuclear plants that are working right now, in 2010, the government had proposed the establishment of 19 new power plants.

The real issue is that there is uncertainty about the availability of fuel. Though India has relatively large reserves of Thorium Oxide, its Uranium reserves are comparatively modest. As of May 2014, India had 2,11,473  tonne in situ U3O8 (1,79,329 tonne Uranium) reserves. It regularly assesses the “techno­-economic viability” of extraction and development of Uranium resources. Not all Uranium deposits explored are mined and processed.

Theoretically, for India, nuclear energy is highly preferable for efficient energy production as well as for long-term energy security.

On various occasions, mining and exploration of Uranium reserves have been discontinued because of the low economic feasibility. Many a time, the Department of Atomic Energy of India has admitted that there is a Uranium crisis that has affected the functioning of the power plants although the recent India-Australia civil nuclear cooperation agreement indicates that Australia will be a long-term supplier of Uranium to India. 

This is because of two reasons. First, India and Australia have a common threat, i.e., the rise of China as a powerful nation. And the second reason is that Australia does not have any operational nuclear power plant, so it produces Uranium only for export. So, Australia may be the most important Uranium supplier for India. If these mutual trusts exist between these two countries, then it will enable comprehensive nuclear science and technology cooperation between India and Australia.

At the same time, India should reach out to other nuclear suppliers such as Canada, Kazakhstan, etc. because of its immense strategic importance. It will not only increase the bargaining power of India in the Uranium market but will also ensure the continuous supply of Uranium for its nuclear power plant. Since India has experienced the devastation caused due to an unfortunate gas leak from Union Carbide in Bhopal in 1984, it should not compromise on this angle, i.e., it needs to reassure its people that nuclear power plants are secure and safe sources of energy production.

And, simultaneously, it also has to ensure that its nuclear power plants are free from all kinds of possible aerial attacks, or else India will have to pay a substantial cost both in terms of monetary and human lives.

Hydropower

Given its technological advancements, hydropower is highly significant for a country like India. The efficiency of hydropower in terms of conversion from primary energy to potential energy is much higher as compared to fossil fuel and nuclear energy. Although since the independence of India, India has taken numerous steps to harness hydropower, the share of hydropower energy consumption in our country is not at its highest. So, in order to achieve a significant share, India should collaborate with its neighbouring nations: Nepal, Bhutan, Myanmar, Tajikistan, and Kyrgyzstan.

This initiative will serve the interests of both the parties: India and the neighbours it wishes to collaborate with. India-Bhutan relation with reference to hydropower is an excellent example for other countries. At the same time, India should address environmental, land acquisition, rehabilitation, and resettlement concerns back home to harness hydropower to its fullest. So, the idea of solving all the above issues is not only about doing justice to people or various parties involved in the production of energy but to strategically leverage its soft power with its neighbours by making hydro energy-related treaties.

Oil

The successive governments of India have started several projects to urbanize India, which will increase demand for the transport sector and also for oil. In today’s world, India’s dependence on oil is 70% and is likely to increase to 90% by 2030. This will increase India’s dependence on Gulf countries in the upcoming future since India imports its two-thirds of the total imported oil from these countries. In the current situation, nobody can predict the stability of Gulf countries.

In today’s world, India’s dependence on oil is 70% and is likely to increase to 90% by 2030./ Image Courtesy: Financial Express

So, even a slight instability can disrupt continuous oil supply. Secondly, in the future, there is a looming uncertainty about oil prices also, so India should plan to have a strategic oil reserve. India should also purchase a heavy amount of oil at the current international prices, which have become cheaper to avoid short-term oil disruptions.

If we look at the current scenario in the Gulf countries, then it tells us that there is a possibility of war between Shia and Sunni population. For example, in Yemen, a civil war is going on between Shia and Sunni population.

India should develop long-term strategic relationships with oil-producing Gulf countries like Saudi Arabia, Yemen, Kuwait, and UAE. These long-term strategic relationships should include the continuous supply of oil in the free trade agreement (FTA), and in return, India may help these countries in capacity building.

Since China has started working on the Gwadar port in Pakistan, there will be an increase in competition among Gulf countries in the race to maintain political influence using oil.

So, to overcome these problems, India should start engaging with countries like Colombia, Brazil, Cuba, Russia, Sudan, Vietnam, Syria, Egypt, Libya, and Nigeria. This will not only ensure continuous oil supply but also will increase the bargaining capacity of India in the international oil market.

Gas Pipeline Projects

The idea of natural gas comes to the picture when we start talking about ‘clean’ fuel and the global reserves, which are relatively unexploited. According to Rajiv Sikri, natural gas has a reserves-to-production ratio of 63 against oil’s 40.5, which means that gas will last for 63 years as per the production method currently known. This indicates that at the given technological advancements in energy production, natural gas will be available for the next 63 years. So the above two reasons attract any country in general and India, in particular, to invest in setting up joint ventures in Persian Gulf countries.

The recent talk with Myanmar for gas pipeline via Bangladesh or northeast failed because of uncertainty about Bangladesh’s support and also due to lack of proper infrastructure in the northeast region. So keeping in mind the above two reasons, India should make a proper plan before going for any kind of negotiation. Since India has got permission for offshore exploration blocks in Myanmar, it should collaborate with Russia or Japan and persuade them to invest in these pipelines for this plan, too. This will provide the necessary resources and infrastructure required for this project.

Iran-Pakistan-India (IPI) gas pipelines seem to be a cost-effective way to outsource gas from the Middle East countries. But India has a huge trust deficit with Pakistan which has made things difficult for the Indian government to start working on it. It seems that the current Pakistani government has shown interest in having a good relationship with India. So, India should not refrain from holding bilateral talks with Pakistan.

Since Pakistan’s government has assured protection by the Pakistani army for the Gwadar seaport, hence at the same time, India should start pushing Pakistani government security for the IPI gas pipeline. Earlier IPI pipeline project had support from Russia’s Gazprom because it leaves the European market free for Russia’s natural gas; however, due to the Russia-Ukraine conflict, the subsequent economic sanctions from west Russia have no incentive to invest in IPI gas pipeline projects.

So, on the one hand, India should start pursuing Pakistan for the security of the IPI project; on the other, it must begin to find a possible investor for IPI other than Russia. Although Turkmenistan-Afghanistan-Pakistan-India (TAPI) is another alternative for gas pipeline for India, there’s a problem with the TAPI gas pipeline project. It has been rightly pointed out by Rajiv Sikri in his book Challenge and Strategy: Rethinking India’s foreign policy which got published in 2009.

According to him, firstly, there is no proper evidence that suggests whether Turkmenistan has surplus gas to export, even if it is there then also it will be beneficial for a concise period. Secondly, it has promised to supply gas pipelines to many nations apart from TAPI countries. So, India should not prioritize such an expensive project in its foreign policy for at least a decade from now. India still has another alternative, i.e. from Russia and central Asia via China. This alternative can play a significant role in meeting India’s energy needs. Countries involved in this natural gas pipeline project are mainly Kazakhstan, Russia, India, China, and Kyrgyzstan (KRICK).  KRICK should be India’s priority, as it will not only enable gas pipelines but oil pipelines too.

Since this project will benefit China, the chances of opposition are very less. If China opposes this, then also India should negotiate with China by saying that we will allow Bangladesh-China-India-Myanmar (BCIM) if China allows KRICK. Also, most importantly, since KRICK will pass through Jammu and Kashmir, it will help in integrating this alienated region to the larger subcontinent. India should also leverage its growing presence in South China and a warm reception from countries like Vietnam to use it as soft power tactics and demand border settlements if the Chinese want India to withdraw from the South China Sea.

On The Economy Front

In the realm of international politics, the strength of a country is measured on the basis GDP figure and military strength, and not based on the rate of exploitation.

In the given mode of energy production, generating employment without exploitation is almost impossible. But such economic growth faces resistance from civil society, and this resistance is very high in democratic countries as compared to countries that have an authoritative state.

At the same time, in the realm of international politics, the strength of a country is measured on the basis GDP figure and military strength, and not on the basis of the rate of exploitation. The primary goal of any country should be the welfare of its people. In countries like India, which has the highest number of people who come under working age, the sole focus should be on economic growth in its foreign policy to be able to accommodate these people in the workforce. We hardly have any good universities comparable with universities in Russia, Japan, and Singapore.
If India focuses on providing international standard education to all students, then it will benefit both ways, i.e., generating employment for Indian youth and also generating soft power among and besides the Asian countries. For example, many Indians are working in the Middle-Eastern countries, so if India starts a vocational certificate course that is recognized by all Asian countries, then it will generate employment for Indians and will also enable in creating qualified professionals. Here pursuing Asian countries to recognize Indian courses can be part of India’s foreign policy. India should pursue developed countries so that Indian universities can also tie-up with foreign universities to strengthen research, consultancy, and guest lectures by foreign experts. 

On the whole, it should aim at becoming a hub for capacity building in Asia.  India, in its foreign policy, should emphasize providing free student visas to foreign students. If there will be an increase in foreign national students, then it will enable cultural exchange with those countries, and will subsequently generate the influence of India’s soft power. So, by developing universities, training centres India can achieve economic growth without environmental exploitation. These universities will also help India in setting its agenda at various world forums like the World Trade Organization (WTO) which has been dominated by developed countries.

India’s Security And The Indian Ocean

Historically, the role of the Indian Ocean is very significant in empire building. The Indian Ocean can be an opportunity if India is successfully able to use this for force projection in various directions. At the same time, it can also be a serious threat to India’s security. A huge percentage of the world’s oil trade goes through the Indian Ocean. In the upcoming future, it is going to be a new source for energy exploration. Since the beginning of human civilization, it has been a major trade route. In recent times it has become an essential place for naval power projection for Eurasian countries.

The region attached to the Indian Ocean is a significant hub for both the growing population and a vibrant economy. The strategic geographical location of the Indian Ocean makes it significant in the realm of international politics. For the first time in 2007, the then external affairs minister of India, Pranab Mukherjee, had said that “gross negligence of maritime security eventually led to the colonization of the sub-continent. India cannot afford the same mistake again. India should try to control over at least its immediate maritime neighbourhood, namely the Arabian Sea, the Bay of Bengal and the north Indian Ocean,” which holds true even in the current scenario. 

Although India has emerged as the second-highest naval force after the United States, it still needs to increase its strategic influence across the sea, keeping in mind that it has a very hostile neighbourhood. So in this context, the Indian navy can play a strategic role in shaping India’s foreign policy. India’s location enables it to cover major Seas Lines of Communication (SLOC) in the Indian Ocean. At the same time, there is a growing American and NATO presence in the Indian Ocean. The actual threat for India is from growing Chinese presence, especially strings of pearls which aim at encircling India. So, to counter strings of pearls, India should join hands with Japan, America, and Australia.

It should aim at taking advantage of these countries’ Chinese Containment Policies. Importance of Vietnam’s military capacity building and transfer of Brahmos missile technology should also be a significant part of India’s foreign policy, because if we are successfully able to divert China’s attention towards Vietnam and South China sea, then the possible security threat for India will decrease. Since India is nuclear power, it enables nuclear deterrence from its neighbours like China and Pakistan. At the same time, India needs to have an advanced naval and air base at Andaman Nicobar Island for better coordinated and integrated marine interests.

Conclusion

India has never been involved in terrorism or expansionism. This should reflect on its future foreign policy too. In order to meet the increasing energy demands, India should go for multilateral and bilateral ties which should ensure profit for both sides. Economic growth without exploitation is in India’s national interest, so this should reflect in India’s foreign policy. The major problem India has is its neighbour, and also its strategic location. So for those neighbours who want to improve relationships with India like Southeast Asian countries, building relationships with those countries should be India’s primary focus.

India should become a leading developing country by leveraging fair-trade practices, adding to solving climate change issues and the like at international platforms, and must continue to dominate the world by using its soft power.

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