BACKGROUND: Despite many security and political difficulties, India continues to be engaged in discussions on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) as well as Iran-Pakistan-India (IPI) gas pipeline projects. The Indian state owned Oil and Natural Gas Corporation (ONGC) has now started floating the idea of bringing Russian hydrocarbons to India via Kazakhstan, Uzbekistan, Afghanistan and Pakistan. The idea is already under serious discussion at official and unofficial meetings. It seems that the ONGC Videsh Ltd. (OVL), the international arm of the ONGC, is awaiting political clearance to announce concrete technical details. The idea was first floated during the Kazakh foreign minister’s visit to India in March 2013 and later on the sidelines of the “Heart of Asia” ministerial meeting in Almaty. The issue was also discussed during the Indian External Affairs Minister’s visit to Moscow in late April.
It was initially suggested that the pipeline would start in the southern Kazakh city of Shymkent, an oil refining hub, and then run south through Uzbekistan and reach Afghanistan. From Afghanistan it may follow the TAPI route. Since extensive energy linkages already exist between Central Asia and Russia, the proposed route was further extended north to open Russian hydrocarbon exports to South Asia. From the Gazprom Central Asia-Centre pipeline, built during the 1960s, linkages have previously existed to Mazar-e-Sharif in Afghanistan and these could be revived again. The distance to the Indian border from Mazar-e-Sharif is about 1200 kilometers. The ultimate idea is to establish an energy corridor of gas and oil pipelines linking South Asia into Eurasia. If needed, parallel road corridors could also be constructed.
At this stage of economic modernization, India is adapting to economic globalization and to the emerging Asian and global balance of power. India is vulnerable due to insufficient energy resources. Accelerated growth has also forced India to synchronize its energy security strategy with its foreign and security policy. India’s actions and commitments on the energy front will in the coming years shape its relations with countries like the U.S., Russia, China, Iran and Kazakhstan.
IMPLICATIONS: In the past, India’s external energy policy largely meant securing reliable supplies from the Gulf. More recently, it has included multiple strategies of diversification, acquiring assets abroad and pipeline politics. Various official policy documents broadly outline that India’s energy security can be increased by (a) diversifying both its energy mix and sources of energy imports; (b) pursuing overseas acquisitions of energy assets; and (c) initiating policy reforms to attract foreign investment as well as improving domestic production, distribution and consumption. In addition, energy diplomacy has also become one of the main agendas of India’s foreign and security policy. India is seriously pursuing the nuclear energy option as well as import sources beyond the Middle East. Bilateral nuclear agreements with the U.S., France, Russia and Canada, as well as consistent engagement with the countries of Eurasia, Africa and Latin America can be understood in this perspective.
For more than a decade, India has also been exploring the possibility of importing gas through pipelines from Turkmenistan, Iran, Myanmar and Bangladesh, albeit with little success. Although India is geographically relatively close to four major gas producing nations, Russia, Iran, Turkmenistan and Qatar, the country is not receiving any gas from these exporters via pipelines. India has negotiated a long term agreement with Qatar to supply LNG but this seems to be a relatively expensive proposition. There are also discussions on a deepwater transnational gas pipeline from Oman for transporting natural gas sourced from Turkmenistan, Iran and Qatar to India.
Overall, it is quite clear that apart from the economics of the project, almost every pipeline plan to India must be weighed against security issues (Afghanistan/Pakistan), political issues (India-Pakistan relations, the U.S.-Iran standoff) and solid geo-political and economic competition (China). Hence, if India is serious about obtaining energy through pipelines, it needs to put solid political weight behind these proposals and must also work out a grand strategy to deal with these related issues simultaneously. The present energy outlook makes clear that Indian policy makers do not have the option of waiting. Thus, along with TAPI and IPI India will also be pushing for Russia-India hydrocarbon pipelines.
Compared to TAPI and IPI, the Russia-India hydrocarbon pipeline project has better chances of success. Apart from traditionally close relations built on mutual trust and the India-Russia strategic partnership since 2000, the OVL already has a 20 percent stake in Sakhalin 1. In 2009, OVL also acquired Imperial Energy which has seven discovered blocks in Tomsk, Siberia. In addition, OVL has agreed to buy U.S. energy major ConocoPhillips’ 8.4 percent stake in Kazakhstan’s Kashagan oilfield for about US$ 5 billion. There are some reports that under Chinese pressure, Kazakhstan is now considering exercising its pre-emption rights to buy ConocoPhillips’s stake so that it can later sell it to a Chinese firm.
Still, OVL is confident about its hitherto biggest acquisition abroad. The Indian government would also not like to see a repeat of 2005 when China outbid India to acquire PetroKazakhstan, Kazakhstan’s third-largest oil producer with Chinese CNPC raising its bid to US$ 4.18 billion. Similarly, OVL now also has extensive international experience with 27 oil and gas projects in 14 countries including Russia, Venezuela, Kazakhstan, Sudan, South Sudan, Syria, Vietnam, Brazil and Colombia. Similarly, it has developed partnerships with leading companies such as ExxonMobil, Shell, Total, Repsol, Statoil, Petrobras, Rosneft, Petro Vietnam, CNPC, Sinopec, PDVSA, TPOC, Petronas and Ecopetrol. Recently, the company has concluded a US$ 1 billion deal to buy U.S. energy major Hess Corp’s 2.76 percent stake in the Azerbaijan International Operating Company. Therefore, closer ties between India and Russia and OVL’s experience in the region add to the credibility of the project.
Secondly, Russia should be supporting this project as it is seriously looking for new gas markets. There is little scope for expansion in the traditional European market. Europe is facing economic stagnation and European policy makers are seriously trying to diversify sources of gas beyond Russia. Europe’s own development of shale gas production may take time but it will soon start importing shale gas from the United States. Despite close relations with China, Russia has also not been able to make a major headway into the Chinese market. Instead, China has successfully concluded direct deals with Central Asians. In contrast, India can provide a secure and enormous long term market for Russian gas exports.
Thirdly, the project is favorable when considering regional geopolitics. Unlike IPI, it does not contain an Iranian angle. It could also potentially become a big transit project for Afghanistan and hence be compatible with the U.S. promoted Silk Road Strategy. It also fits well within the multi-vector policies of Kazakhstan and Uzbekistan. With both Russian and U.S. support and possible hydrocarbon imports for its energy starved economy, Pakistan could also become an important partner to the project.
CONCLUSIONS: Overall, the India-Russia hydrocarbon corridor could become a game changer in regional geopolitics and economics. It would re-energize the India-Russia strategic partnership, create solid linkages between South Asia and the emerging Eurasian Economic Union, stabilize Afghanistan economically, and could create incentives for peace between India and Pakistan. Pakistan’s new democratically elected government would also like to engage in more energy projects to end the country’s serious energy shortages. A major concern is the security situation in Afghanistan. However, emerging details of a security agreement between the U.S. and Afghanistan may provide some solutions to the post-2014 uncertainty. The India-Russia hydrocarbon pipeline project may also further strengthen the viability of TAPI.
AUTHOR’S BIO: Professor Gulshan Sachdeva teaches at the School of International Studies, Jawaharlal Nehru University, New Delhi. He also headed ADB and The Asia Foundation projects on regional cooperation at the Afghanistan Ministry of Foreign Affairs in Kabul (2006-10). He has been a visiting Professor at the University of Antwerp, University of Trento and Corvinus University of Budapest.