India & China: Different Game Plans for Securing Energy: Civil Services Mentor Magazine June 2013

India and China: Different Game Plans for Securing Energy

The much hyped energy rivalry between India and China has
seemingly played a part in the new great game in Central Asia. Popular media
laments India’s sluggishness in following China’s footsteps. However, upon
closer examination, the two countries aren’t quite playing the same game; their
motivations and limitations with regard to Central Asia are different, a fact
that is often ignored in surface comparisons.

China began to take serious notice of Central Asia in the
late 1990’s, following a series of critical events. Losing energy self
sufficiency and becoming a net oil importer in1993, the Taiwan Strait crisis and
South China Sea disputes with the Philippines in 1995-6, all heightened Chinese
insecurity about relying on US-controlled oil sources and supply routes.
Additionally, domestic security was threatened as Uyghur separatist movements
were rising in Central Asia and spilling over into China. Not only could the
large untapped energy reserves in Central Asia be transported directly over land
borders through pipelines, China could take advantage of American and Russian
inattentiveness to influence Central Asia. India does not share China’s
insecurity of energy sources or supply routes being under US influence. Thus,
the drive to own energy resources is not as acute. As long as oil reaches the
market, it will be available to India. If India is keen  on owning assets,
it is to limit Chinese control over energy or for lower prices. Unlike China,
India also didn’t have major security concerns from Central Asia, making it
unnecessary to entrench itself into the region long-term for stability. However,
this security calculus has changed recently, with terrorist bases spreading to
Tajikistan after the Afghanistan war.

India also faces some major limitations compared to the
Chinese advantage in Central Asia. The most serious limitation is connectivity.
While China shares close to 3000 km in land boundaries with Kazakhstan,
Kyrgyztan, India has absolutely none. Land connectivity can only be created by
traversing through Pakistan and Afghanistan, both unstable and dangerous. Thus,
direct bilateral pipelines and extensive land based trade, which are the
hallmark of Chinese involvement, are not really an option for India. Central
Asia remains landlocked and thus, sea links are also limited – through Russia,
Iran, or China. While the Iranian option was most favorable to India, heavy
Western sanctions have made businesses weary of trading through this route.China
entered Central Asia’s energy markets in 1997, when China National Petroleum
Corporation (CNPC) acquired a 60.3% stake in Kazakhstan’s Aktobe Munai Gas,
gaining access to three oilfields and an exploration block. By contrast, India’s
first acquisition was only in 2011 and much smaller – a 25% stake in a single
oil bloc, the Satpayev. Interestingly, CNPC was bidding against established oil
majors; the company not only cleanly outbid every rival, it also paid the cash
strapped Kazakh government a generous bonus upfront and conducted feasibility
studies on a pipeline to Xinjiang, offering the Kazakhs a non-Russian export
line. This combination of China’s deep pockets, technological expertise in
exploration and infrastructure and commitment to the region has eased the path
to a rapid and impressive range of acquisitions and partnerships. China followed
a two pronged strategy to building energy security in Central Asia. First, China
acquired energy assets – both oil blocs as well as oil companies. Second, China
used its technological prowess to get entrenched in the energy infrastructure
and industry in the region, thus, creating interdependence between China and
Central Asia, whether by building pipelines or setting up petrochemical plants.


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