BIMSTEC—Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, is an organisation consisting of Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand. It is no secret that China has tried to woo the BIMSTEC as part of its energy diplomacy. It is true, China has the capacity, technical expertise and resources, but unfortunately, China is increasingly being shunned by both western powers and its neighbours. While China shares borders with 14 countries, it has territorial disputes with more than 18 nations. The Belt and Road Initiative (BRI), once touted as a symbol of Xi Jinping’s muscular strategy, is in shambles today. As per OECD data, China’s BRI has run into losses of over $101.8 billion and has only accelerated the yawning trust deficit China and its neighbours share.
India, under the astute and dynamic leadership of Prime Minister Narendra Modi, on the other hand, has outsmarted Beijing’s energy outreach, with some deft moves. India has a regional power system integration with Bangladesh, Bhutan and Nepal through high-voltage synchronous (alternating current) and asynchronous (high voltage direct current) connections. India’s power projects with its neighbouring countries at various stages of implementation, showcase how the Modi government has gone for the jugular, in building India’s energy security. These projects are mentioned below:
(a) 400 Kilovolt (kV) operation of Muzaffarpur (India)—Dhalkebar (Nepal) 400kV dc line (operated at 220kV)
(b) Baharampur (India)—Bheramara (Bangladesh) 2nd 400kV dc line
(c) Alipurduar (India)—Jigmeling (Bhutan) 400kV dc (Quad) line
(d) Gorakhpur (India)—New Butwal (Nepal) 400kV dc (Quad) line
(e) Sitamarhi (India)—Dhalkebar (Nepal)—Arun-3 HEP (Nepal) 400kV dc (Quad) line
Further afield, India has energy deals with Vietnam and seeks additional ones with Indonesia and Australia. These are useful partners, because of their rising mistrust of China. The route to self-reliance is based on energy security and Modi knows that better than most. That being the case, the 750-megawatt Rewa Solar Power Plant in Madhya Pradesh, which was dedicated to the nation by Prime Minister Modi on July 10, 2020, consists of three solar power generating units that are located on a 500-hectare plot of land inside a 1590 hectare solar park, making it amongst the largest single-site solar plants & projects in India and worldwide, too.
The 2245 MW Bhadla photovoltaic solar park at Jodhpur in Rajasthan and, the 2050 MW solar park at Pavagada in Karnataka, are solar parks and not solar plants. It is a pity that India’s clueless Opposition, misled by an equally rudderless Congress, which cannot even differentiate between a solar plant and a solar park, had the audacity to create confusion in the minds of people about the Rewa solar plant’s status, in the pecking order. Apart from a $440 million funding from the World Bank’s sister arm, the International Finance Corporation ( IFC) and its sheer size and scale, the Rewa solar plant, is the first one to be coming up via the reverse bidding, auction route, corroborating India’s self-reliance model, in the area of energy security.
It is a pity that India’s clueless Opposition, misled by an equally rudderless Congress, which cannot even differentiate between a solar plant and a solar park, had the audacity to create confusion in the minds of people about the Rewa solar plant’s status, in the pecking order. Apart from a $440 million funding from the World Bank’s sister arm, the International Finance Corporation (IFC) and its sheer size and scale, the Rewa solar plant, is the first one to be coming up via the reverse bidding, auction route, corroborating India’s self-reliance model, in the area of energy security
India and China have witnessed similar trends in energy demand, consumption and imports, in the past few years. For instance, in 2018, China was the world’s largest consumer of energy and accounted for 24% of global energy consumption and 34 % of global energy demand growth. India, for its part, has the third-largest energy demand in the world. The International Energy Agency (IEA) projects that by 2040, the average Chinese household will consume twice as much energy as it does today and India alone will grow to account for 30% of the entire global increase in energy demand. Both India and China are energy importers and also import from the same regions, primarily the Middle East and North Africa (MENA), followed by East Asia and the Pacific, as mentioned by Priyanshi Chauhan, who has written extensively on this subject. In effect, India and China are vying for resources in the same regions, generating competition for scarce energy resources.
And this is where India scores handsomely over China, with the world increasingly becoming wary, suspicious and now, post the COVID pandemic, very angry too. Every major nation globally realises that the Corona virus has been China’s doing, thanks to its grossly irresponsible behaviour and what seemed like a cakewalk in terms of energy diplomacy for China, only two years back, has now given way to a new geopolitical recalibration, with China being the outcast, thanks to its deplorably expansionist mindset.
The Belt and Road Initiative (BRI) was meant to strategically strengthen China’s energy security, via control over transportation routes. But in its 7th year running, the BRI is an unmitigated disaster, reflecting very poorly on Beijing’s energy diplomacy. China sought to secure its maritime energy trading route by maintaining a significant presence in the sea and controlling Sea Lines of Communication (SLOCs) through port development activity in Gwadar in Pakistan, Hambantota in Sri Lanka, and Kyaukpyu in Myanmar. However, China’s neighbours have not been willing to be arm-twisted into accepting its authoritarian hegemony.
BRI is not a brand investors trust, says Tanner Greer, who understands oil diplomacy and foreign policy, better than most others. In the Maldives, the pro-Beijing Progressive Party of Maldives was unseated in 2018 by the Maldivian Democratic Party, which ran on an explicitly anti-BRI platform. The Maldives’ new president, Ibrahim Mohamed Solih, called the BRI “a big cheat” and a “debt trap” that must be abandoned or renegotiated. Mahathir Mohamad, the ex-prime minister of Malaysia, described BRI projects as a form of “new colonialism” that must be rejected. Beijing’s quest to create a stable pro-China tilt in Sri Lanka has only spawned political instability, with President Maithripala Sirisena sliding up to and away from Sri Lankan politicians connected to China as the situation demands. In Bangladesh authorities in 2018, blacklisted China Harbour Engineering Company, one of the region’s most active BRI construction firms, on accusations of corruption.
On July 10, PM Modi inaugurated Asia’s largest Rewa Ultra
Mega Solar Power Project in Rewa District of Madhya Pradesh
The Belt and Road Initiative was meant to strategically strengthen China’s energy security, via control over transportation routes. But in its 7th year running, the BRI is an unmitigated disaster, reflecting very poorly on Beijing’s energy diplomacy
Burma was so alarmed by regional election trends that it put a hold on its BRI-funded port project in Kyaukpyu until the Chinese agreed to cut its scale by 80%. Nepal and Pakistan have also demanded that China cancel or completely re-tool ongoing projects in their countries. In western Pakistan, opposition to the initiative has turned violent in the last two years. In 2018, Baluchi separatists attacked the Chinese consulate in Karachi, treating Chinese infrastructure investment in their region as a threat to their dreams of independence. Chinese analysts who hoped that the BRI investment would help stabilise China’s borderlands and ease the threat it faces from ethnic separatists inside China now must come to terms with an initiative that is embroiling China in conflict with separatists outside of China.
BRI threatens to drive some countries towards default, as the Chinese central government is not willing to be the lender of last resort to needy, cash-starved nations. Like Pakistan, most countries driven to bankruptcy will have only one option left—go crawling to the International Monetary Fund, in hopes of a solution. Far from being a strategic masterstroke, the BRI is a sign of strategic dysfunction. There is no evidence that it has reshaped Asia’s geopolitical realities or empowered China’s energy security, in any manner. For the last three years, even China’s state-run banks have been trying to extricate themselves from spending more on the BRI initiative. The Belt and Road Initiative is evidence that the CCP’s once responsive policymaking system is breaking down. The rest of the world must recognise that BRI persists only because it is the favoured brainchild of a totalitarian Xi Jinping, living in an echo chamber, unaware of the humiliation BRI has heaped on the CCP’s dreams of enriching China’s energy security. The sovereign debt of 27 BRI countries is regarded as “junk” by the three main rating agencies, while another 14 have no rating at all. It is thanks to Prime Minister Narendra Modi’s foresight and unflinching commitment to India’s sovereign interests that India refused to join or endorse the BRI, both at the SCO summit in Qingdao in 2018 and the SCO summit at Bishkek, in 2019. The BRI has benefitted none—investors lost money, Chinese banks ran into massive defaults and leaders of BRI’s participating nations lost elections as people in these countries voted against this lopsided alignment with the untrustworthy Chinese establishment. The loss for Beijing was infinite—it lost both money and face. All hopes of using the BRI to strengthen China’s energy security have come crashing and Xi Jinping’s dreams of engineering geopolitical re-alignments have been dashed too.
Coming to India, the Indian National Congress and its failed scion Rahul Gandhi, need to be reminded of how the Congress-led UPA’s jaded energy diplomacy and utter incompetence, compromised Indian energy interests. This was evident in the calling off, of the Shwe gas pipeline project between Myanmar, Bangladesh, and India in 2005, for no good reason. India’s loss under Congress turned into China’s gain. Later in 2009, a gas pipeline project was initiated between China and Myanmar, providing the Chinese, access to Myanmar’s Shwe field.
In sharp contrast, Narendra Modi has not only called China’s bluff on various matters but more importantly, he has built powerful bridges, with the middle eastern countries and the Trump administration in particular, in taking oil diplomacy to another level altogether. Don’t forget, North Americal is one of the most prominent standalone players today, pumping over 12 million barrels of crude daily and India’s excellent relations with the USA, if anything, have only helped.
India has a stated objective of achieving 40% of installed capacity from non-fossil fuels, by 2030. Coal power generation accounts for 38-40% of the additional power generation worldwide, and about 27% of the global energy mix. Therefore, clearly, despite the focus in non-fossil fuels, coal as a source of power is unlikely to become redundant any time soon and relying only on CIL which accounts for 83% of India’s coal production, 76% of thermal power capacity and over 50% of India’s total energy supply, make little sense
Giving a big fillip to India’s energy security, Modi on June 18, 2020, launched the auction process for 41 coal blocks for commercial mining, a move that opened India’s coal sector for private players. “Allowing private sector in commercial coal mining is unlocking resources of a nation with the world’s fourth-largest reserves,” the PM, pointed out. The new change in rules will now, pave the way for private companies to win coal blocks via the two-tier auction process of technical and financial bidding, with no end-user restrictions.
Coal reforms under PM Modi’s leadership have been a continuous process. In March 2015, the Narendra Modi led government enacted the Coal Mines (Special Provisions) Act, containing provisions enabling the government to allocate coal mines through auctions. Over 70 coal mines were auctioned/allocated. On February 20 2018, the Cabinet Committee on Economic Affairs (CCEA) permitted private firms to enter the commercial coal mining industry in India, with mines to be auctioned to the firm offering the highest per tonne price. In August 2019, the Modi Government approved 100% FDI via the automatic route for coal mining, to boost revenues of states and create employment, besides developing the far-flung areas.
Moving away from coal, India has emerged as a global leader in renewable energy, where investments top those into fossil fuel. After adopting its National Electricity Plan (NEP) in 2018, India remains on track to overachieve its “2˚C compatible” rated Paris Agreement climate action targets. At the Secretary General’s summit in New York, India announced its intention to reach a target of 450 GW of renewables by 2030.
The Paris agreement 1.5 Celsius limit means that there needs to be a phase-out of coal in the power sector by 2040, at the latest globally. The National Electricity Plan (NEP) in 2018 included more than 90 GW of planned coal-fired capacity, which will increase emissions unnecessarily, and risk becoming stranded assets. Abandoning these plans is more than feasible when we consider recent developments such as a 50% decrease in the cost of solar power in just the last two years and several utilities shelving plans to build coal plants.
India’s Paris Agreement target is within the range of what is considered to be a “2°C compatible” fair share of the global effort. This means that India’s unconditional Paris Agreement climate commitment in 2030, even while it allows the country’s total emissions to increase, is consistent with holding warming to 2°C. India could become a global climate leader with a “1.5˚C compatible” rating if it abandons plans to build new coal-fired power plants.
Discussion on India’s energy security, however, is incomplete without speaking of hydropower. India has an estimated hydropower potential of 1,45,320 MW, excluding small hydro projects (SHPs). At the end of February 2020, installed capacity was about 45,700 MW. Several hydroelectric projects (HEPs) in India were languishing for decades under an inept, Congress-led UPA regime, due to contractual conflicts, environmental litigations, local disturbances, financial stress and unwilling purchasers
Right now, the nation has over 200 GW of coal-fired capacity in operation; if all the planned capacity is built, this could increase to over 300 GW over the next few years. This is an important consideration, as India’s CO2 emissions rose by 4.8% in 2018, largely driven by emissions from coal power plants. Estimates show India could achieve the more ambitious part of its Nationally Determined Contribution (NDC) goals—a 40% non-fossil-based power capacity by 2030, more than a decade earlier than targeted. This has been made possible due to the unmitigated and singular focus of Prime Minister Narendra Modi, in embracing clean energy. While interventions in the electricity sector have largely been driven by strong policy commitments, action in the transport sector will be governed in the long run by the targeted penetration of electric vehicles. Despite this, recent policy announcements by the Modi Government indicate that it is prioritising, manufacturing and infrastructure development in a manner that facilitates a transition to a lower-carbon transport system.
Given the burgeoning energy demand, the Modi Government’s huge strides in developing renewable energy sources have been highly commendable. The installed capacity of renewable energy generation in the country has grown 72% from 80 gigawatt (GW) to 138.9 GW during the past six years. Foreign direct investments of $6.1 billion flew into the Indian clean energy sector—including solar, wind, biomass, large hydro and nuclear—in the five years 2014-19. Globally, India stands third in terms of renewable power, fourth in terms of wind power and fifth in terms of solar power installed capacity. For the period 2014-2019, clean energy investments in India were about $75 billion.
Of the renewable energy sources, excluding large hydro above 25 MW, installed capacity of solar energy capacity registered the highest growth. It grew from 2.6 GW in March 2014 to 34.4 GW in February 2020. An additional 62.4 GW clean energy capacity is currently under various stages of implementation and 34.07 GW is under various stages of bidding. Most of the clean energy projects, except nuclear power and some large hydro, are set-up in the country by the private sector, which bodes well for overall energy security. The country’s solar installed capacity reached 37.63 GW as of March 31 2020. India has the lowest capital cost per MW globally of installing solar power plants.
The Indian Government had an initial target of 20 GW solar capacity for 2022, which was achieved four years ahead of schedule. In 2015, the target was raised to 100 GW of solar capacity (including 40 GW from rooftop solar) by 2022, targeting an investment of US$100 billion. India has established nearly 42 solar parks to make land available to the promoters of solar plants. In the decade ending March 31, 2020, India expanded its installed solar power capacity by 233 times from 161 MW to 37,627 MW. And a large part of that phenomenal growth came in the last six years, under the visionary leadership of Prime Minister Narendra Modi.
Roof-top solar power accounts for 2.1 GW, of which 70% is industrial or commercial. In addition to its large-scale grid-connected solar photovoltaic (PV) initiative, India is developing off-grid solar power for local energy needs. Solar products have increasingly helped to meet rural needs; by the end of 2015, just under one million solar lanterns were sold in the country, reducing the need for kerosene. That year, 118,700 solar home lighting systems were installed and 46,655 solar street lighting installations were provided under a national program; well over 1.4 million solar cookers were distributed in India.
Also, the International Solar Alliance (ISA), proposed by India in 2015 as a founder member, headquartered in India, has clearly, put forward the concept of “One Sun One World one Grid” to harness abundant solar power on a global scale. To cut a long story short, 56% of India’s commercial energy is met by coal whereas, well over 60% of entire power generated in India is coal based. Modi Government has set a target of installing 175 GW of renewable energy capacity by 2022, which includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydropower. The government is promoting the development of solar energy in the country by providing various fiscal & promotional incentives like 10-year tax exemptions. If we look at the last decade, the growth rate of coal was roughly 6.5%, which is further expected to slow down to about 4% till 2030.
Galwan misadventure has only further isolated Xi Jinping, denting his fast waning popularity at home and eroding his already much-compromised credibility, abroad, post the COVID pandemic. It is not India but China that needs to worry about Saudi production cuts as part of future OPEC agreements as well as recent attacks on Saudi oil infrastructure. Venezuela cannot supply oil due to its ongoing turmoil, while Iran is under sanctions. The USA is in no mood to oblige China, and the fractious trade wars of 2019 have only got uglier with President Trump banning Huawei and rightfully so
In other words, effectively speaking, India has a stated objective of achieving 40% of installed capacity from non-fossil fuels, by 2030. Coal power generation accounts for 38-40% of the additional power generation worldwide, and about 27% of the global energy mix. Therefore, clearly, despite the focus in non-fossil fuels, coal as a source of power is unlikely to become redundant any time soon and relying only on CIL which accounts for 83% of India’s coal production, 76% of thermal power capacity and over 50% of India’s total energy supply, make little sense.
Cognisant of the situation, in an unprecedented move, the Modi Government recently approved the promulgation of Mineral Laws (Amendment) Ordinance 2020 that will amend the Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act of 2015. The reformist ordinance marks a dramatic shift from the outdated and lethargic attitude of past Congress-led UPA dispensations, as it opens up the coal sector to private players so that they can mine coal for commercial purposes and not merely for captive use.
India produced about 607 million metric tonnes of coal in 2018-19 and imported another 235 million tonnes (mt). It is estimated that of the 235 mt, 135 mt valued at Rs 171,000 crore could have been easily met from domestic reserves, had the coal sector been opened up to the private sector.
The Modi Government needs to be therefore applauded for taking the tough but practical step of democratising the coal sector and ending the monopoly of CIL, which is over 70% government-owned. Allowing 100% FDI in coal mining will also help India to harness its coal reserves which were earlier available only for captive use of steel and power, more efficiently. Privatisation should help attract global players like BHP, Glencore, Rio Tinto and Anglo American. India is also taking steps to free up more coal deposits and broaden its auction pool, to strengthen its energy security further.
Discussion on India’s energy security, however, is incomplete without speaking of hydropower. India has an estimated hydropower potential of 1,45,320 MW, excluding small hydro projects (SHPs). At the end of February 2020, installed capacity was about 45,700 MW. Several hydroelectric projects (HEPs) in India were languishing for decades under an inept, Congress-led UPA regime, due to contractual conflicts, environmental litigations, local disturbances, financial stress and unwilling purchasers. Only about 10,000 MW of hydropower was added over the last ten years. In yet another bold move, the Modi Government accorded renewable energy (RE) status to large HEPs in March 2019, enabling new HEPs to receive concessions and green financing available to RE projects. Courtesy the Draft Electricity (Amendment) Bill 2020, hydropower purchase obligation (HPO) should become a reality soon. However, a better option is re-engineering of the power market to treat hydropower as a peaking and grid-balancing power, and also to distribute its higher tariff over the entire energy consumption on a prorated basis.
Hydropower potential is located mainly in northern and north-eastern regions. Arunachal Pradesh has the largest unexploited hydropower potential of 47 GW, followed by Uttarakhand with 12 GW. As water and water power are state subjects, the construction of HEPs is often delayed due to conflicts among riparian states—the Subansiri HEP is a prime example of this. The unexploited potential is mainly along with three river systems—the Indus, Ganges and Brahmaputra. Like electricity, hydropower should also be brought onto the concurrent list to enable uniform policy and facilitate faster development.
Marrying energy security with environmental friendliness is never easy due to the natural conflict involved. However, under Modi, India has managed this conflict seamlessly. For instance, as of March 31, 2020, the country’s total installed power capacity stood at a little over 372 GW. Of this, the installed power capacity from renewable sources (including large hydro) accounted for over 134.7 GW or 36.21% of the overall power capacity. This is a huge development, in reducing carbon footprint, without sacrificing growth. Don’t forget that when Modi initially took charge in May 2014, renewable sources barely accounted for 5% of the installed capacity, thanks to the previous, utterly incompetent and lethargic Congress-led, UPA regime. Again, within renewables, solar installations account for about 27.2% of the overall renewable capacity, today, in India.
Energy security and energy diplomacy are mirror images of each other, and it is here that Prime Minister Narendra Modi, the quintessential statesman at all times and strongman when needed, has outscored and outwitted China’s Xi Jinping, handsomely. India’s membership to the Shanghai Cooperation Organisation (SCO), in June 2017, has enhanced India’s energy security by diversifying its energy needs, from West Asia and, ensuring greater energy cooperation between energy producers and consumers, by linking Central Asia and South Asia. Central Asian states, namely Kazakhstan, Kyrgyzstan, Turkmenistan, Tajikistan, and Uzbekistan, are rich in energy resources. According to the BP Statistical Review of World Energy 2016, Turkmenistan, which leads the Central Asian Region (CAR) with the highest gas reserves, is placed fourth in the world. Uzbekistan and Kazakhstan have the second and third highest gas reserves in this region. Kazakhstan also accounts for world’s twelfth-largest global oil deposits. Tajikistan and Kyrgyzstan have abundant hydropower potential of which only less than 10% is being used, as pointed out by Manish Vaid, in a detailed essay.
Besides the SCO, which has become an effective engagement tool in oil diplomacy, under the Modi Government, Moscow has been pushing for India’s entry into the Eurasian Economic Union (EEU),as India, with its inclusive policies, unlike Xi’s high handedness, can serve as a focal point, to strengthen relationships within the oil and gas rich, Central Asia-Eurasian region.
India has been in talks with Russia to enter a Free Trade Agreement (FTA) or a Comprehensive Economic Partnership Agreement (CEPA) with the EEU since the inception of the EEU in 2015. The EEU is a Russia-led free-trade bloc boasting a population of over 180 million and a GDP of over $1.9 trillion. Its other members are Belarus, Armenia, Kyrgyzstan, and Kazakhstan, while Uzbekistan and Tajikistan are in negotiations to enter the union.
India has been supportive of projects passing through its non-disputed territories, like the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, the International North-South Transport Corridor (INSTC) and of course, the Chabahar Port project Recently, Chabahar was in the news, after a decidedly ignorant Rahul Gandhi, started making wild allegations at the Modi government, in his typically immature &puerile style. His lies were busted--“Considering the history of cooperation between the two countries and the existing potentials and capacities, Iran and India are determined to continue their cooperation in the field of rail transport, especially the Zahedan-Chabahar railway”, said the Iranian Railways head Saeed Rasouli, after a meeting with Indian Ambassador to Iran, Gaddam Dharmendra.
Kazakhstan is India’s largest trading partner in the CAR and the two countries have signed various treaties to cooperate strategically and militarily. Moscow and New Delhi have close ties in science and technology, defence, and nuclear energy.
Russia and Kazakhstan, in particular, have been of great strategic importance to India. While Moscow and New Delhi have close ties in science and technology, defence, and nuclear energy and have been looking to strengthen their economic ties, Kazakhstan is India’s largest trading partner in the CAR and the two countries have signed various treaties to cooperate strategically and militarily. New Delhi also has security interests in Tajikistan, which is soon to gain membership to the EEU. A growing Indian presence in the EEU would satiate Russia’s concerns about future expansion by the Chinese in the CAR. For India, membership into the EEU would significantly raise its geopolitical profile, blunt Chinese aggression in the region, besides of course, adding muscle to India’s energy security.
But India must extend its outreach beyond just the CAR to encapsulate all of Eurasia, including the Commonwealth of Independent States (CIS), which would be facilitated greatly by joining hands with the EEU through an FTA, said Hana Masood, in a very well analysed piece, sometime back.
Lack of direct and regulated access to the CAR and CIS region’s markets, which an FTA would immediately resolve, will empower India’s energy security, besides boosting Modi Government’s, “Make in India” initiative. More importantly, it will help India’s dairy and textiles’ exports and free India from non-tariff barriers imposed by Russia, on India’s healthcare & pharmaceutical products. To cut to the chase, Modi is taking his time to join the EEU, which will give India direct access to some of the richest energy markets in Central Asia and, globally. He is in no hurry and is perhaps looking to access the CAR via an FTA that protects Indian interests.
More recently, India pulled out of the Regional Comprehensive Economic Partnership (RCEP), a China-led pan-Asian FTA, due to scepticism from Indian companies over China’s role, with fears that cheap goods from China would swamp markets and thwart Indian businesses. This clearly showcases in no uncertain terms that Prime Minister Narendra Modi is very much his own man and will only do what is right for India, Leftists and paid Op-ed writers, owing allegiance to China, be damned!!
With Russia in no mood to enrol China or the SCO into the EEU, India has scored a major diplomatic victory in terms of energy diplomacy. China’s Galwan misadventure has only further isolated Xi Jinping, denting his fast waning popularity at home and eroding his already much-compromised credibility, abroad, post the COVID pandemic. It is not India but China that needs to worry about Saudi production cuts as part of future OPEC agreements as well as recent attacks on Saudi oil infrastructure. Venezuela cannot supply oil due to its ongoing turmoil, while Iran is under sanctions. The USA is in no mood to oblige China, and the fractious trade wars of 2019 have only got uglier with President Trump banning Huawei and rightfully so.
Chinese investments in Russian oil firms have also run afoul in recent years and the massive contamination of oil supplies shipped via the Druzhba pipeline to Europe has raised questions about Russia’s reliability as an energy supplier. China’s $160 plus billion in investments in foreign oil fields to garner secure crude oil supply in rogue petro-states has not panned out well either. Several oil states have defaulted on Chinese loans or failed to deliver the promised oil.
Most recently, oil payments by Venezuela to cover its $60 billion in borrowing from Beijing has fallen by the wayside as the country’s oil production has collapsed. Prolonged civil wars in Sudan and South Sudan have severely restricted the amount of oil Chinese companies could extract. Now with US sanctions, oil shipments from Iran are in question. Angola, another important Chinese supplier, could see its production plummet by a third in the next few years if it cannot shore up investment.
All this puts more importance on other West Asia supplies, which could face increased geopolitical risk if the escalating conflict between Iran and Saudi Arabia leads to additional sabotage against Persian Gulf shipping and production. Iraq, Kuwait and the United Arab Emirates are major suppliers to China but could see derailment of exports to China. Saudi Arabia, therefore, is the only reliable, long-standing oil exporter that China can boast of. Xi Jinping has overplayed his hand repeatedly, but the world has had enough. China has no one but itself to blame for putting its economy, in a sticky spot. Prime Minister Narendra Modi, in the meanwhile, is changing the rules of the game like an ace, to India’s advantage. Securing India’s energy security via energy diplomacy, by forging sustainable partnerships in the Central Asian Region, is Modi’s impeccable way of realigning geopolitical equations in the post-COVID era.
(The writer is an Economist, Chief Spokesperson for BJP Mumbai & author of the Bestseller, “Truth&Dare--The Modi Dynamic”)