India’s energy diplomacy blossoms, finally

Wednesday, 7 September 2022 — Indian Punchline

M. K. BHADRAKUMAR

Indian Oil Corporation’s Numaligarh Refinery, Assam (File photo)

To be sure, energy security has surged as the key to a country’s strategic autonomy and independence, as world events testify, currently within the matrix of “food-fertiliser-fuel” sufficiency where the global supply chains are disrupted. Europe’s missteps on this front, upon the advice of the US to atrophy and sever the continent’s seven decades-long economic links with Russia, is proving to be a Himalayan blunder that threatens the western economies with recession and brewing political turmoil.

In this matrix, Russia holds trump cards on all three commodities — food-fertilisers, fuel — being a top global supplier, and the Biden Administration is at its wit’s end to isolate such a world power geopolitically.

In South Asia too, the oil crisis was the proverbial last straw that led to the explosive political mayhem in Sri Lanka recently, which external powers fuelled with alacrity to try to trigger a regime change (luckily fizzling out.)

Fortunately, so far, India has handled an extremely tricky situation with great wisdom and far-sightedness — and aplomb at the diplomatic level — to buffer the national economy from “oil shocks.” In an interview this week with CNBC TV (video of 15-minute interview is available below), Petroleum Minister HS Puri discussed the issues and brought out  the maturity, sweep and richness of the government’s thinking on the subject of India’s energy security.

The salience is, firstly, that India will not get entangled in the nascent G7 move to impose a price cap on Russian oil but will only take a decision on it in terms of “national interest” once the details become available (which essentially means that India will be guided by the all-important yardstick of reliability of supplies at competitive prices).

Second, Puri stressed that India will take its call carefully on the G7 move, assessing who its participants will be, what will be its implications, etc.  Simply put, India does not propose to travel in the G7/EU bandwagon. Third, India depends heavily on oil imports from the Gulf region and its dependence on Russian oil is insignificant — even minuscule in comparison with Europe’s — and therefore all this brouhaha by the western media and governments is irrelevant except as pressure points.

Fourth, Puri assertively stressed: “Yes, we will buy from Russia, we’ll buy from wherever.” He noted that India has no conflict of interests with Russia as such and the government’s sole concern will be its obligation to safeguard energy security.

Fifth, Puri distanced India from the West’s “ideological, punitive action” against Russia and scoffed at the western countries’ double standards insofar as “they are still buying (Russian oil) and will be buying for a while, and, therefore, that moral conflict question” (democracy versus autocracy, blah, blah) should be appropriately addressed to them. Putin underscored that the government will be “realistic” and its primary duty is to the Indian consumers.

Finally, most important, Puri sounded an abundant word of caution that playing around with the highly volatile global oil market is a turf that angels fear to tread and only fools with barge in. He counselled that the G7 has to be “careful” about what it is “unleashing,” because we live in a real world where economic laws of supply and demand in the market are in play.

Puri sounded highly sceptical whether many countries will buy into an oil regime structured by the US — that is, even assuming that EU countries themselves will reach a consensus on it. (By the way, G7, of which Japan is a member, has already given a waiver to Tokyo exempting the Russian supplies from Sakhalin-2, which accounts for 9 percent of Japan’s LNG imports!)

Puri’s remarks are strikingly similar to what the Chinese Foreign Ministry spokeswoman Mao Ning stated on September 5: “Oil is a global commodity. Ensuring global energy supply security is vitally important. We hope relevant countries will make constructive efforts to help ease the situation through dialogue and consultation, instead of doing the opposite.”

Now, if India and China do not align with G7 — and Japan is exempt — what is left of the Biden Administration’s dream to isolate Russia and dry up its income from oil exports with this hare-brained scheme by the US Treasury to impose a price cap on Russian oil? (See my blog OPEC+agrees on oil output cut.)

To be sure, the government is not going to be browbeaten by the Biden Administration. It is not even sure that the G7 proposal on price cap will fly. And, therefore, India’s compass to navigate the choppy waters of the global oil market is well set.

Interestingly, the 4-day visit of Bangladesh Prime Minister Sheikh Hasina to Delhi has opened a new dimension to this great game playing out in front of us —  India is positioning itself to play a pivotal role to strengthen Bangladesh’s energy security by routing the shipment of Russian oil through its refinery in Assam.

Quintessentially, this implies that not only is India intending to keep its option to buy Russian oil open, but Delhi will also help the neighbouring countries to facilitate their access to Russian supplies at competitive prices in their desperate struggle to work out energy security with such scarce resources.

India’s crucial advantage here is that it has the technology to refine Russian crude — Urals oil which is a blend of heavy sour of Urals and the Volga region with the light oil of Western Siberia — which the smaller neighbours in South Asia lack due to the heavy capital investments involved. Thus, reports say that one possibility is that Russia’s oil giant Rosneft may sell Russian oil to Bangladesh and route the supply through  the Numaligarh refinery run by the Indian Oil Corporation in Assam which is equipped to handle Urals crude.

Moreover, anticipating the future dependence on Russian oil supplies, Bangladesh is interested in tapping into a 131-km long cross-border oil pipeline that is under construction (and will be ready by the end of the year), which “will make (Russian) fuel supplies seamless” for 16 districts in Bangladesh in the Rangpur-Rajshahi regions.

This is a fantastic development in India’s neighbourhood diplomacy on the whole, which becomes a model of cooperation between India and its smaller neighbours who can negotiate with Rosneft access to Russian oil at competitive prices whose shipment can be routed through Indian refineries.

Can’t this model be replicated in Sri Lanka, Nepal as well with pipeline grids connected to India or transportation by other means? Such cooperation would cement the foundation for iron clad strategic ties between and amongst the South Asian countries, with India acting as an energy hub for Russian oil supplies to the region.

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