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down to earth, online
Oct 31 02
From the barrel of oil
Geopolitics is not only about war and peace. It is about controlling
the world resources, particularly 'black gold'. Several international
conflicts in recent times have been sparked by the need to control
oil fields. The world's dependence on oil is complete. Yet insecurity
about energy supply is greater than ever before. With war clouds
hovering over Iraq and the conference on climate change coming up in
Delhi, Down To Earth digs into the role of oil in global politics
Reuters
The US President George W Bush is raring to launch an attack on Iraq. Whether
it has weapons of mass destruction or not, Iraq certainly has the world's
second largest reserves of petroleum after Saudi Arabia. Thanks to UN
sanctions, it produces a mere fraction of its potential. The US, on the other
hand, is the world's largest consumer and importer of oil. It is certain
whatever else, the desire to control Iraq's oil lubricates the US war
machinery. As the daily Washington Post reports, US oil companies are ready -
drills and all - to enter the Iraqi oilfields after Saddam Hussein's removal.
Oil companies from the other four permanent member countries in the UN Security
Council (the UK, France, Russia and China) also have interests in Iraqi oil
fields.
The US oil tactics are clear. Countries that participate in the US
effort against Hussein will get a fair share in the post-Hussein
Iraqi oil party. "It's pretty straightforward. France and Russia have
oil companies and interests in Iraq," said R James Woolsey, former
director of the Central Intelligence Agency, who is all for attacking
Iraq. "They should be told that if they are of assistance in moving
Iraq towards a decent government, we'll do the best we can to ensure
that the new government and American companies work closely with
them."
Elements favoured to constitute a 'decent government' in Iraq - if
Hussein is ousted in a US-led attack, that is - include the Iraqi
National Congress (INC), a forum of opposition groups backed by the
US. The Western media quoted an INC leader, Ahmed Chalabi, as saying
that he favoured the creation of a US-led consortium to develop Iraqi
oilfields: "American companies will have a big shot at Iraqi oil."
Several countries, including India, Italy, Vietnam and Algeria,
already have agreements with Iraq to extract oil. But these are in
the cold bag due to the UN sanctions on Iraq. In a post-Hussein Iraq,
these agreements are likely to be scrapped in favour of US companies.
All this speculation has led to a rapid rise in oil prices -hovering
close to US $30 to the barrel, US $5 of which is being labelled 'war
premium'. There are fears that it might climb beyond US $50 and set
in a recession as had happened after the 1991 Gulf War. Just before a
meeting of ministers of Organisation of Petroleum Exporting Countries
(OPEC, a cartel that keeps oil prices unnaturally high by controlling
production through quotas) in Osaka, Japan, in the third week of
September 2002, the most influential member of OPEC, Saudi Arabia, a
US ally, had said that it would increase supplies of oil to
compensate any shortfall resulting from US military action against
Iraq. But, at the Osaka meet, OPEC ministers decided to keep oil
production levels unchanged till the end of the year as they were
afraid of releasing extra oil into a weakening global economy. Major
oil producers are unhappy with the prospect of the opening up of
Iraq's oilfields. They fear the glut of oil might drive down the
prices. The Iraq imbroglio is also about the US need to control the
Saudi oil regime with competing reserves, according to The Economist.
But why is oil so important to international politics?
Oil that glitters
Petroleum fuels the engines of the global economy. So there is never
enough of it. Oil politics dictates international relations
The post-war boom had brought gas-guzzling vehicles, expanding
highways and mushrooming suburbs in the industrialised countries,
especially the US. This boom was fuelled by oil - the industrialised
economies depended almost entirely on intensive use of fossil fuels.
The world learned about its dependence on oil in 1973.
* Nuclear change for climate
The Yom Kippur War broke out in October 1973 between Arab countries
and Israel. The Arab nations embargoed oil export to Western nations
that supported Israel and cut down production. OPEC, formed in 1960,
was a big enough supplier to control prices by this time.
The result was chaos in all the industrialised countries.
The cost of a barrel of crude oil rose from US $3 in 1972 to US $12
by 1974. This 'oil shock' forced the West to chalk out an aggressive
plan to free itself of the clutches of OPEC. Securing supplies of
oil, increasing domestic production and importing from varied sources
were the essential elements of this strategy. A new term gained
currency: energy security. About 30 years down the line, the
industrialised countries are yet to break out of the clutches of OPEC
- their economies have kept growing on the strength of imported oil
(see table: The top players).
Take the example of the US, the world's largest consumer of energy
and the biggest importer of oil. When the US began trying to
diversify its oil sourcing and increase domestic production in 1973,
it imported about 35 per cent of the petroleum it consumed. Today, it
imports more than 50 per cent. As energy demand surged by 17 per cent
during the 1990s, domestic oil production rose 2 per cent only.
And oil accounts for 40 per cent of the total energy use in the US at present.
Canada, Mexico and Venezuela each supply the US about as much
petroleum as Saudi Arabia, the world's biggest oil producer. Yet
Saudi Arabia remains its biggest supplier of crude oil. In 1977, OPEC
(Organisation of Petroleum Exporting Countries) accounted for one
third of the total US oil consumption. In the mid-1980s, the figure
fell to below 13 per cent. And then it started climbing again. At
present, OPEC accounts for half the US oil imports - roughly
one-fourth of total consumption - and about half of that comes from
the Persian Gulf (see graph: Energy depots). The US doesn't see
itself breaking free of dependence on oil imports anytime soon. In
fact, some experts say that the percentage of US oil imports (as well
as those of other oil importing countries) from the OPEC cartel, and
specifically from the Persian Gulf, is only going to increase (see
graph: Oil stuck).
9/11
The terrorist attacks on the US on September 11, 2001, have revealed
the cost the country has to pay for its oil dependence on the Gulf.
Its oil ties with Saudi Arabia became a bit of an embarrassment when
it was found that 15 of the 19 hijackers in the attacks were Saudi
citizens. About 600 families who had their relatives killed in the
September 11 attack have filed a US $100 trillion lawsuit against,
among others, Saudi officials for helping the terrorist network
behind the attack. The US government's continued support for the
autocratic Saud family of Saudi Arabia causes considerable
discomfiture to a country that plays the global cop and claims to
defend democracy across the world.
Proposing the largest energy budget in US history, Spencer Abraham,
US energy secretary, told a committee of the House of Representatives
on March 6, 2002: "Over the last 12 months we have seen energy supply
shortages; natural gas and gasoline price spikes in the Midwest and
California; and terrorist attacks within our borders... [The budget
request] of $21.9 billion addresses the new security challenges we
face as a nation after the events of September 11, as well as
increased concern regarding our dependence on foreign oil, and the
security of our critical energy infrastructure."
Oil that glitters
This dependence is not unique to the US. Take the example of Japan,
the second largest consumer of oil in the world - it consumed more
oil in 2001 than Russia and Germany put together. Oil meets 52 per
cent of Japan's total energy needs and the country has virtually no
oil reserves of its own. About 75-80 per cent of this oil comes from
OPEC, particularly from countries in the Persian Gulf - United Arab
Emirates, Saudi Arabia, Kuwait, Qatar and Iran. "Japan has worked -
with relatively little success - to diversify its oil import sources
away from the Middle East," notes the US department of energy. Japan
has used its commitments to cut down carbon emissions under the 1997
Kyoto Protocol to rapidly increase its nuclear power production -
nuclear provides about two-thirds of its electricity. The nuclear
industry is witnessing something of a revival across the world (see
box: Nuclear change for climate).
Another method the Japanese have tried is to build inroads for its
oil companies overseas. In 1967, the government established the
state-run Japan National Oil Company (JNOC) to promote overseas oil
exploration to secure oil supplies. It amassed several bad loans in
trying to invest extensively and guarantee loans of Japanese
exploration firms. But in February 2000, the company lost drilling
rights in Saudi Arabia, losing a supply of 280,000 billion barrels
per day. This was after Japan refused to invest in development
projects in the kingdom. Another concession to a Japanese exploration
company expires in January 2003, and its renewal has been dogged by
controversy. Japan's Arabian Oil Company has been trying to make up
for the loss in Saudi Arabia by courting Iran. But Iran is a
political anathema to the US, Japan's close ally. In its effort to
diversify, Japan has created an exploration stake in the Caspian Sea
region, just as the US interest in the Caspian has increased greatly
in recent times.
Coming back to the US, it has developed a recent interest in several
regions - from Russia to the Caspian region to a love affair with
Central African nations. Africa supplies 15 per cent of the total US
oil imports. This is bound to increase as a result of rapid growth of
production from new fields and the construction of a pipeline from
the landlocked Chad to ports in the Atlantic Ocean. There are two
clear advantages in courting Africa. First, most African reserves are
close to the coastline or offshore, making exports to the US easier.
Second, several African oil producing countries aren't members of
OPEC. Gabon walked out of OPEC in 1995. Nigeria is a member, but has
been unhappy about the production quotas. There are reports that it
has been producing over and above its quota through recently
developed oilfields. "It is a measure of President Bush's interest in
the geopolitics of oil that he found time at the United Nations last
month to meet several leaders from west Africa," the Financial Times
of London observes.
Attending the oil interests are stories of how systems are
manipulated to benefit industrialised countries and their rich oil
companies. Some US non-governmental organisations have alleged that
federal government officials are compromising on environmental
reviews of international infrastructure development funded by
US-backed public development banks. One example is the US $3.7
billion oil pipeline to be built by a consortium of oil companies led
by Exxon-Mobil from Chad to ports in Cameroon. Officials of the US
Agency for International Development said that both the countries had
failed to perform an adequate assessment of the environmental impact
of the pipeline. Yet the US representative at the World Bank backed a
loan of US $ 140 million for the pipeline.
A recent study by the Institute for Policy Studies in Washington, DC,
shows that many energy corporations facing US government
investigations - for accounting irregularities, energy market
manipulation, fraud, bribery, human rights abuses or other
malpractices - have coaxed out billions of dollars as finance from
the World Bank over the past decade. These include Halliburton, the
second largest beneficiary of World Bank energy financing. Dick
Cheney, US vice president, was the CEO of the company before his
election. Other names include the bankrupt energy giant Enron and
Harken, which had George W Bush on its board before he became
governor of Texas. Big oil and morality do not go together.
The top players
Producers, exporters and importers of oil
Producers Mt* % of world
total
Saudi Arabia
USA
Russia
Iran
Venezuela
Mexico
China
Norway
Iraq
UK 427
354
322
186
172
171
163
158
127
127 12.0
10.0
9.1
5.2
4.8
4.8
4.6
4.4
3.6
3.6
Rest of the World 1,348 37.9
World 3,555 100.0
Exporters
Mt
Saudi Arabia
Norway
Russia
Iran
Venezuela
Iraq
UK
Nigeria
UAE
Mexico 319
136
135
107
107
101
92
89
86
82
Rest of the World
620
World 1,874
Importers
Mt
USA
Japan
Korea
Germany
Italy
France
The Netherlands
Spain
India
UK 494
214
121
104
88
82
59
59
45
45
Rest of the World
615
World 1,926
*million tonnes; Source: 2001, Key World Energy Statistics from the
International Energy Agency
Energised by oil
Energy policy has always been of vital importance in the US. That's
why oil and gas executives have taken over the reigns of the
government today
"Not since the rise of the railroads more than a century ago has a
single industry [energy] placed so many foot soldiers at the top of a
new administration."
- Newsweek, May 14, 2001
George W Bush took over as president of the US on January 20, 2001. Within two
weeks, he established the National Energy Policy Development Group under Vice
President Dick Cheney. Hence the informal name Cheney energy task force. Both
Bush and Cheney have worked for oil companies in the past and their eagerness
in getting cracking on an energy policy was hardly surprising. About 80 per
cent of the oil and gas industry's political contributions in the US was to the
Republican party.
Cheney submitted the task force's report to the president in the form
of the National Energy Policy on May 16, 2001. Among the highlights
of the report was the opening of drilling for oil in the Alaska
National Wildlife Reserve (ANWR) and a push for expansion of nuclear
power.
Bush's plan to permit oil and gas drilling within the ANWR has drawn
a lot of flak from environmentalist groups.
* No synergy
* Enron and all that
* Cream Team
At the heart of the matter lies the '1002 Area' - this coastal plain
is the last 5 per cent of the entire north slope of Alaska that is
not already available to oil and gas exploration. The Sierra Club, an
environmental group, stresses that the area is the last great
wilderness in North America and is home to grizzlies, rare musk oxen,
polar bears, 130 species of birds and dozens of other wildlife
species.
It is the birthing and nursery grounds for a herd of 130,000
Porcupine Caribou, one of the hemisphere's largest caribou herds.
Moreover, the Union of Concerned Scientists of USA says drilling in
the refuge would provide a very short-term solution for a long-term
problem.
The National Energy Policy is a clear effort in the plan to increase
energy supply by all means possible. Democrat Senator Harry Reid said
the GOP (the Republican Party's nickname) now stood for 'gas, oil and
plutonium'. The energy bill was submitted to Congress. The
Republican-dominated House of Representatives passed the 'dirty'
energy bill on August 2, 2001 - it was something of a rubber stamp.
Then the energy bill went to the Democrat-led Senate. On April 25,
2002, the Senate passed an energy bill that was very different from
what the House had passed - it does not permit drilling in Alaska
(see box: No synergy).
The real controversy, however, has to do with the working of energy
task force - there are numerous allegations that it was under undue
influence of energy companies, and very unwilling to share the
details of its working. Investigations and legal action have been
initiated to bring this to light.
The probe begins
The General Accounting Office (GAO), the investigative arm of the US
Congress, had begun a probe into the functioning of the Cheney task
force in April 2001 following complaints from two members of the
House of Representatives. Cheney refused to disclose the details of
the meetings his task force had with corporate representatives. There
were raised eyebrows about Cheney trying to cover his links with the
energy giants like Enron (see box: Enron and all that). On February
22, 2002, GAO filed a case in the US District Court in Washington,
DC, to obtain certain records in connection with the task force.
Meanwhile, the Sierra Club also approached the courts in February
2002 to force disclosure of the task force's meetings with industry
representatives. "When the Bush Administration wrote its energy
policy, big oil and energy companies were given the red-carpet
treatment, but the public was shut out of the process," said Carl
Pope, Executive Director of the Sierra Club. "Americans deserve to
know what happened behind those closed doors, and the law requires
it." The suit was clubbed with another case filed by Judicial Watch,
a public interest group that investigates and prosecutes government
corruption.
"We are concerned that energy policy is being made in secret by
individuals and interests with a financial and political stake in
particular policies. If the vice president wants to involve the oil
industry or environmentalists in his energy task force's
deliberations, so be it, but the law requires that the American
people be kept informed about these deliberations," stated Larry
Klayman, chairperson of the group. The first hearing was held on May
23, 2002. The judge delivered a severe blow to the administration -
he rejected Cheney's request to dismiss the lawsuit. He ordered
Judicial Watch and co-pleaders to propose a 'discovery plan' for the
task force.
The Natural Resources Defense Council, a prominent public interest
group in the US, said the Bush-Cheney energy plan is the "culmination
of a process that hinged on cosy business connections, secret deals
and industry campaign contributions". The council stresses that there
are too many points of convergence: "Both Bush and Cheney worked in
the energy industry. They appointed pro-industry people to their
transition teams and to key administration posts overseeing federal
energy and environmental policies. They received generous campaign
contributions from energy companies, which enjoyed easy access to the
Cheney energy task force. The result? An energy plan that promotes
industry-favoured measures" (see box: Cream team). "At best, the
energy industry has undue influence on major governmental decisions
that will affect all Americans. At worst, the energy industry, which
is enjoying record profits, has hijacked our government and now has
the power to seriously weaken environmental safeguards, threaten
public health, and gouge consumers." Cheney admitted meeting Enron
CEO Kenneth Lay on at least six occasions at the time when the White
House was drafting its national energy policy. He refused to give
further details. US oil interests have always governed its energy
policies. It is just that Bush is a little more shameless and brazen
about it as compared to previous regimes.
The Caspian affair
The landlocked Caspian Sea is a cauldron of geopolitics. Its
essential ingredients: oil and natural gas
The Caspian region has possibly the third largest oil and natural gas
reserves in the world (after the Persian Gulf and western Siberia),
estimated to be up to 15 per cent of the total reserves of the world.
Hardly any of this potential has been tapped as yet, and it is
expected that there are much bigger reserves that haven't been
assessed as yet.
* Behind the veil
* The Afghanistan files
The Caspian region's introduction to the geopolitics of oil began
with the collapse of the Soviet Union in 1991. Several smaller
nation-states emerged in Central Asia (Turkmenistan, Uzbekistan,
Kazakhstan, Tajikistan and Kirgizstan) and the Caucasus (Georgia,
Armenia and Azerbaijan). A handful of former communist party
strongmen rule the Caspian countries and runs them like fiefs.
Some of the biggest oil companies of the world court these oligarchs;
and the corporations' mutual interests are conflicting, competitive
and overlapping in turns, leading to bitter rivalry alternated with
mutualism. In July 2000, there were reports that the US justice
department was investigating whether James Giffen, a New York banker
and official adviser to Kazakh president Nursultan Nazarbayev,
illegally funnelled US $35 million from three oil companies to Swiss
accounts of high-ranking Kazakhstan officials, including Nazarbayev.
"I cannot think of a time when we have had a region emerge as
suddenly to become as strategically significant as the Caspian," US
Vice President Dick Cheney, then the CEO of the oil company
Halliburton Corp, told a meeting of oil executives in 1998. In the
same year, Bill Richardson, the then US energy secretary, laid out
the US interest in the Caspian region: "This is about America's
energy security. It's also about preventing strategic inroads by
those who don't share our values. We're trying to move these newly
independent countries toward the West. We would like to see them
reliant on Western commercial and political interests rather than
going another way. We've made a substantial political investment in
the Caspian, and it's very important to us that both the pipeline map
and the politics come out right."
It is this politics of drawing maps that kept the Caspian region from
becoming a major oil and gas exporting area. In Russia, the region
has a former superpower to its north. To the east lies China, an
emerging superpower. To the east and south lie such politically
volatile, strife-torn areas as Chechnya, the Kurd-dominated parts of
Turkey, Iran and Afghanistan. Add to this the fact that the most
powerful country in the world is directly involved through its
business interests or through the presence of troops in the fallout
of the war on terrorism. Religious and ethnic unrest has complicated
matters further; the region is the mingling point of Christian Europe
and Islamic Asia, of the several ethnic peoples of Central Asia.
During the US military campaign in Afghanistan in response to the
September 2001 terror attacks, several analysts had pointed out that
an important reason behind the US action was securing its oil/gas
interests (see box: The Afghanistan files). "Afghanistan's
significance from an energy standpoint stems from its geographical
position as a potential transit route for oil and natural gas exports
from Central Asia to the Arabian Sea," says the US department of
energy's country analysis brief on Afghanistan.
Pakistan-based journalist and author Ahmed Rashid, who has covered
Central Asia for more than 20 years, compared the oil geopolitics to
the 'Great Game' (a term coined by Rudyard Kipling) between Russia
and Britain for the control of Central Asia in the 19th century. In a
1997 article, Rashid called it the 'New Great Game', a term that has
gained currency. While the 19th century game was between two players
and the prize was India and the warm-water ports of the Arabian Sea,
the new game has many teams, with players constantly changing sides,
aligning, de-aligning, and then realigning.
Is it a sea? Is it a lake?
When it comes to regional matters, perhaps the biggest mess has to do
with the ownership of the Caspian Sea, the bed of which is rich with
oil and gas. Before 1991, the Soviet-Iranian treaties of 1921 and
1940 regulated the ownership of the sea. But neither side established
seabed boundaries or negotiated exploration. No new legal framework
or treaty was worked out after the break-up of the Soviet Union,
meaning the earlier treaties still govern development rights to the
seabed.
The Caspian affair
The five nations along the shores of the Caspian - Russia,
Azerbaijan, Iran, Turkmenistan and Kazakhstan - are locked in a
bitter dispute over this. It came to a head on July 23, 2001. An
Iranian gunboat chased two Azerbaijani oil exploration ships from a
disputed oil field in the southern Caspian. This was the most serious
flare-up in an uneasy peace. BP oil of the UK suspended all
exploration and development activity under its contract with
Azerbaijan in the Alov oil field to which Iran has a claim. Russia
and the US condemned Iran. Turkey responded in late August 2001 with
a show of force by sending fighter jets to Azerbaijan, its ethnic
ally. Since then, exploration and development in the southern Caspian
has come to a standstill.
It is a different story in the northern Caspian. In August 2002, when
Russia held the largest military exercises since the collapse of the
Soviet Union in the Caspian Sea, it invited representatives from the
four other littoral states as observers. Russia and Kazakhstan have
signed a bilateral deal on sharing of disputed oil fields. In the
second week of July, the Kazakh energy minister Vladimir Shkolnik was
reported to have said that tenders would be invited before the end of
the year for some 120 offshore sites. Russia has an understanding
with Azerbaijan as well. Iran says such agreements are illegal before
a five-way settlement is reached. But all this bickering seems inane
in light of the fact that the very status of the Caspian 'Sea' is
disputed.
Is it a body of water under the Law of the Sea Convention, which does
not cover inland lakes? If so, the full maritime boundaries of the
five countries would be based upon an equidistant division of the sea
and undersea resources into national sectors. Under this, states
would have exclusive rights only to resources lying within 45
nautical miles of their shore. If it were agreed, on the other hand,
that the Caspian is not a 'sea', then international maritime laws
would not apply. Then its resources have to be developed jointly (see
map: Dividing the Caspian). Iran is agreeable to dividing the Caspian
into national sectors, but on the condition that each country gets 20
per cent of the seabed and surface of the sea. However, if the Law of
the Sea were to be applied, Iran would get only about 12-13 per cent.
Kazakhstan and Azerbaijan want this as they have big offshore oil/gas
fields not far from their shores. They oppose Iran's proposal of
dividing the Caspian into five equal sectors. They are in a hurry to
strike a deal to be able to exploit their fields. Iran has little oil
or gas off its Caspian shore, and is playing a waiting game to
maximise its share. Russia and Turkmenistan keep shifting sides
depending on which plan - or which variation of the two plans - is
more profitable to them. But let us assume that the legal dispute
over the Caspian is sorted out. How will the oil and gas be marketed?
Pipeline politics
Anybody who invests billions in extraction of petroleum and natural
gas would want the shortest, cheapest route to the most lucrative
market. Unlike most major oil exporters of the world, most Caspian
nations are land-locked.
Pipelines are preferable to overland and marine tankers, especially
for gas, provided the volumes of supply and demand justify the
investment. The Caspian region doesn't have the economy or the market
for its oil and gas production capacity. It doesn't have the
investment and technology required to explore and transport oil/gas
over long distances. To make the oil/gas reach a market, the
pipelines or tankers need to cross international boundaries. This is
where pipeline politics extends from economics to geopolitics (see
map: Pipeline dreams).
The existing pipelines go north to Russia, already the owner of the
largest gas reserves of the world as well as unpaid bills for gas
imported from Caspian nations in the past. The rapidly growing
economy and burgeoning population of China in the east is separated
from the Caspian region by a vast desert pockmarked with ethnic
unrest. A pipeline going west to European markets via the Black Sea
or the Mediterranean is likely to be too costly and areas such as
Chechnya and the Kurdish dominated parts of Turkey don't inspire too
much confidence. Yet work has already begun on a 1,755-km pipeline
from Azerbaijani capital Baku to the Turkish port of Ceyhan in the
Mediterranean, via Georgia. This is the only pipeline that fits well
with US foreign policy. Georgia has used US fears of Iran to settle
for the western route because it gains transit fees from the pipeline
passing through is territory.
After years of hesitation and mistrust, there were signs that the US
and Russia might work together on the Baku-Ceyhan pipeline. Russia
announced on June 11, 2002, that it would build a pipeline connection
to the Baku-Ceyhan oil route. This would give Russia access to a
warm-water port in the Mediterranean for exports. In May, Russian and
Georgian officials had announced a joint venture to build a line
connecting the Black Sea port of Novorossiisk to the Baku-Ceyhan
pipeline.
The eastern pipeline route to China was a matter of speculation till
news arrived that China had begun work on the 'east-west' gas
pipeline. This large project, often compared to the Great Wall and
the Three Gorges dam in terms of size, would stretch across a 4,250
km from the recently discovered gas fields in the western deserts of
Xinjiang (close to China's border with Pakistan) to Shanghai in the
east. This is relevant to the Caspian nations as they could build a
connection to this pipeline and export gas to as far as Japan.
But the most economical access to the sea (and the international
market) for Caspian oil and gas is through Iran, a political anathema
for the West. Such a route would greatly increase Iran's wealth and
influence in the region, something the US finds unacceptable (see
box: Behind the veil). The second most viable route is through
Afghanistan to Pakistan and possibly to India. On May 30, 2002,
Turkmen, Afghani and Pakistani leaders signed a long-negotiated
agreement in Islamabad over the pipeline via Afghanistan. But
according to sources in Pakistan, oil companies haven't shown any
interest in the deal due to the situation in Afghanistan. With
Indo-Pakistani relations at a low ebb, there is no possibility of a
pipeline coming to India through Pakistan. This deters oil companies
as the Pakistani market isn't big enough. The real attraction for the
companies is the energy starved Indian market.
High and dry
India's energy supplies depend entirely on the vagaries of the market
India's prominence in the energy market is that it is the world's
sixth largest energy consumer - and yet woefully short of energy
sources. It has large coal reserves but the worrisome part is
petroleum, which accounts for about 30 per cent of the total energy.
India produces only 30 per cent of the 110 million tonnes of
petroleum products it consumes. Its share of 0.4 per cent of the
world's petroleum reserves is best described as 'traces'. Reserves of
natural gas, too, are nothing much to talk about.
The 1991 Gulf War showed that energy security in India is a
contradiction in terms. Here are some sobering facts.
* Net imports of crude oil and petroleum products more than doubled
between 1990 and 1999.
* About 45 per cent of the petroleum consumed in India is imported
from the politically volatile Middle East. This is only going to
increase.
* If oil prices rise by US $1, India's annual oil bill can increase
by US $600 million.
* The International Monetary Fund estimates that every rise of US $5
in the cost of crude oil lowers India's Gross Domestic Product by 0.5
per cent, raises inflation by 1.5 per cent, and leads to an outflow
of Rs 18,000 crore.
What India doesn't have is available in plenty in its neighbourhood,
be it the gas fields in Bangladesh, Myanmar, the Persian Gulf or the
Caspian Sea, or the immense hydroelectric potential of Nepal. Yet the
country doesn't seem to be getting any - a reflection on India's
diplomatic failures in its backyard.
Subcontinental drift
There are two proposals for gas pipelines to India. Unocal of USA,
which discovered significant amounts of gas in the Bibiyana field of
northwest Bangladesh in 1998, wants to build a 1,363-km pipeline to
export 500 million cubic feet (14 million cubic metres) of gas every
day for the next 20 years. But the Bangladeshi government has been
unable to decide if it wants to allow export of gas to India - the
issue is too sensitive politically. Whichever party is in opposition
starts whipping up fears of a deal that compromises Bangladesh's
interests as Unocal would get the money and India would get the gas
(see map: Only on paper) India has now started negotiating with
Myanmar for its oil and gas reserves in the hope that Bangladesh will
cave in to business demands.
The pipeline from Iran to India via Pakistan has been discussed and
debated for over 10 years. But it is getting nowhere due to
deteriorating Indo-Pak relations. Pakistan is quite keen on the
project - it would earn Pakistan over US $500 million annually as
transit fees - but India is not willing. An undersea pipeline
fetching gas from Iran or Qatar has gotten nowhere. Another project
to fetch gas from Oman has been shelved after eight years of study
and expenses of Rs 330 crore. An undersea pipeline is anywhere
between two to ten times as expensive as an overland one.
Power games: hydro and nuclear
India is also woefully short of electricity. The prospect of
importing electricity from Nepal by building dams has gotten nowhere.
There is a lot of talk of expansion of India's nuclear power. A lot
of international nuclear power companies have shown interest in
India. But any talk of foreign support or investment in nuclear power
in India disregards the fact that India is not a signatory to the
Non-Proliferation Treaty (NPT), and is not likely to be any time
soon, says G Parthasarthy, former High Commissioner to Pakistan.
India is also working on the fast breeder technology.
In 1997 it began operating the Indira Gandhi Centre for Atomic
Research in Kalpakkam. This is primarily due to its precarious
position on nuclear fuel: India has vast resources of thorium but
limited uranium. "Kalpakkam to my mind is a failure. Fast-breeder
technology is dangerous and I don't want my family to live anywhere
close to a fast breeder reactor. Thorium is an overrated fuel given
the state of technology," says Sunil Dasgupta, journalist and
researcher on energy security issues, based at the Brookings
Institution in Washington, DC.
"Fast-breeder reactors are expensive, largely due to important safety
concerns," says M V Ramana, research associate at the programme on
science and global security at Princeton University, USA. "Mere
availability of an energy resource cannot determine a country's
energy strategy. If that were to be the case, then clearly we could
derive the required power from solar photovoltaic cells, for
example." All said and done, India isn't really trying to free itself
from dependence on oil imports.
Beyond oil
Energy security will not come with more drilling. The faster we
realise this, the better
"One of the ironies at the turn of the century is that, in an age
when the pace of technological change is almost overwhelming, the
world will remain dependent, out to the year 2020 at least,
essentially on the same sources of energy - oil, natural gas, coal -
that prevailed in the twentieth century."
- The Geopolitics of Energy into the 21st Century, Centre for
Strategic and International Studies, February 15, 2001
At some stage the world will have to turn away from oil. Either there would be
none of it left or it would become forbiddingly expensive. And then? Or let's
assume that there will be plenty of oil for all times to come.
There has to be a limit to the amount of carbon emissions the Earth's
atmosphere can take without reacting to abuse. What after we hit that
point?
Most governments are not bothered; that much is clear. They are
interested only in securing maximum supplies of fossil fuels, in
controlling oil reserves and garnering political support from these
sops. In September 2000, the price of a barrel of oil touched a
10-year high of US $35. Large parts of Europe were immobilised,
leading to street blockades and protesters demanding total exemption
from fuel taxes that account for more than half the price of petrol
in Europe. France was the first to succumb - it cut taxes to the tune
of US $400 million. Italy and Belgium also conceded a little. But the
British prime minister Tony Blair put his foot down, arguing that
high oil prices were good for combating global warming. Other
European governments also decided to not cut fuel taxes, citing
political and environmental reasons.
Taxpayers' money is used in many parts of the world to subsidise the
price of fossil fuels, keeping them artificially low. This ignores
the non-renewable nature of the fuels, or the cost of their adverse
effects on health and environment. More disturbing is the fact that
this makes renewable energy options uncompetitive - undermining any
possibility of a transition to cleaner energy options like solar and
wind power or fuel cells. The prices of these technologies have come
down in recent times and they need critical support at this stage.
The way to do that is to cut subsidies and levy taxes on fossil
fuels. Fuel taxes were adopted in Europe after the oil shock of 1973,
when they were seen as necessary to improve efficiency. Well, the
imperative for the same is greater today: cutting carbon emissions to
mitigate global warming and air pollution.
While the European trend on fuel and carbon taxation is by no means
perfect - European governments apart from the UK are yet find a way
to hold industry accountable through energy taxation - it is much
better than what the US has to offer: an attack on Iraq and an
unwillingness to compromise on the American way of life. Expansion of
nuclear power is definitely not worth the 'high-level' waste it would
generate. Nuclear energy is not clean till a way is found to deal
with nuclear waste. The Kyoto Protocol cannot be used to promote
nuclear energy.
In India, nuclear energy is making a comeback despite a long history
of failed promises. The country's government-run nuclear energy
sector's performance is best summarised in a statement of Homi
Bhabha, the founder of India's nuclear power programme: "No power is
costlier than no power." The effort to get foreign capital into the
nuclear energy sector is very unrealistic at the moment due to
India's stance on the NPT. Moreover, insurance cover for nuclear
plants is too expensive a proposition in the Indian energy market. As
for the government's investment in fast breeder technology, even its
proponents acknowledge that it is not likely to bear any fruits for
the next two decades. It is a long-term investment, they say. It is
surprising how the government is so keen on investing in a technology
with disputable credentials, but is unwilling to pursue renewable
technologies with the same level of commitment. To ensure security of
oil supply at reasonable prices, India is getting into such
awe-inspiring areas as Sudan and Myanmar. In determining its energy
policy, India is actually following the US example.
When politicians believe that the voting patterns are determined by
the price at which petrol - or should we say gasoline - is sold for
gas-guzzling sports-utility vehicles, one cannot talk of terms like
efficiency in energy use and demand side management. Two days before
the US secretary of state Colin Powell was to address the UN summit
on sustainable development in August in Johannesburg, negotiators
from the US and OPEC blocked proposals by the European Union and
Brazil that would have required the world to obtain a set percentage
of its energy from renewable sources by 2010.
The nexus of governments and oil cartels is too strong for those
making feeble noises about renewable energy. As exporters and
importers of oil consolidate their polluting business, the
environmental ground seems more slippery than ever before. When
negotiators to the eight Conference of Parties to the UN climate
convention arrive in Delhi in November, they better have their ears
close to the ground (or should we say the oil fields!). The world's
oil reserves are unequally distributed. But the Earth's atmosphere is
shared by all.
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