The economic boom came and went and the bullishness was
corrected by foreign investors pulling out and the dip in
commodities. Just wait for the corrections due to the
Iraq war and energy
crisis coming in the next one year.
USA
too is in boom, the huge deficit notwithstanding. Russia does not
know what to do with its earnings and reserves and are back to
military spending to take on USA. The so called Cornelli Barnett's
theory that spending on Defence fuels the economy is on the move in
Russia.
The nation's economic indicators are strong as NRI money from
abroad in participatory notes and FDI continues to flow like water.
Returning Indians are coming back with flush pockets and the
property market is sizzling. But we predict tough days ahead for
India on the
energy front in the coming years, which will have an effect on the
economy, and the country is doing little about it.
The electricity crisis in
New Delhi is
hitting businesses, not the VIPs, and both Tatas and BSES are trying
to cope but UP, Gurgaon and many parts of India are in a terrible
shortage and transmission losses are colossal. The cost of energy is
rising world wide, and the supply is just keeping up with demand and
Russia is pumping away and depleting its reserves.
China
is building up huge strategic reserves and its demand is rising.
Indonesia is set to become a net importer as its economy has picked
up.
The Indian
Government is unable to raise prices, an education reservation
policy muddle is keeping the Government busy and the Left has won in
Bengal and unless they relent, prices of gas and fuels will rise
only marginally. Even in USA prices have risen dramatically. The
Iran factor, problems in
Bolivia, Venuzuela
or Nigeria can set off crises of their own. Gas prices are high and
linked to oil as the world goes into gas mode all over and the Kyoto
protocol will hit coal based plants.
Unfortunately, the PM and his people are banking on the
Nuclear Deal and travelling to and fro, but no one is saying where
the capital for such nuclear power plants will come from, where is
the time schedule
–– in India save Delhi's Metro no Government projects have been
built on time. Nuclear plants take at least 5 to 7 years to build
and India
will never have more than 7 to 8% of its demand met by nuclear
energy. The PWHR reactors we have work at 47% capacity due to many
reasons.
The US Nuclear deal is still to be reviewed as a military
deal by USA,
to curb India's proliferation in the main and do nuclear plant
business as a side effect. In fact France may gain and on 29th May
the NSG meets in Rio so all our brains will be there as locally LTTE
go into fighting mode, Nepal yearns for democracy and Bangladesh
slips towards China. The region is in neglect by big brother
India.
In this context the following summary on
China is timely.
China and the Middle East –– Building Market Share
It is no secret that
China's demand for
energy imports, especially oil, will increase as the country
continues to modernize. Already the world's second largest oil
importer, the addition of new vehicles, additional housing, richer
citizens capable of greater consumption and environmental
degradation as a result of coal-fired generators portend that demand
for imported energy resources will only increase in the near future.
Estimates suggest that demand will balloon from current consumption
levels of over 6 million barrels of oil per day to more than 14
million by 2025. However, the question remains: how will China meet
its future energy needs? China’s oil diplomacy initiatives are based
on China’s
growing relationship with the states of the Middle East.
Finding a Niche
China’s charm
offensive in Africa, Latin America and Central Asia represents an
opportunistic strategy that aims to take advantage of a diplomatic
vacuum ( India is not following up in Middle East) with respect to
bilateral relationships. That is to say, to date, China has largely
been happy to set its sights on potential oil and gas partners that
have been maligned, or at least ignored, by the
United States.
China has been happy to exploit this void, moving aggressively into
markets not explicitly unfriendly, but increasingly estranged from
Washington. These include markets in Central Asia, and Central and
South America. For China, these states are the low-hanging fruit,
and while cultivating new bilateral relationships among them has
required some investment and effort from Beijing, they have not
challenged the dominance of the
United States
as a global energy importer.
Much more challenging has been
China’s attempts to
enter into the Middle Eastern market. Though there are ample
opportunities to develop energy relationships outside of the
Middle East,
China is drawn to the region for several reasons. First, Middle
Eastern oil is ‘sweeter’ or of a higher grade than oil found
elsewhere. This means that the oil comes out of the ground almost
‘ready-to-consume’, that is, there are lower and fewer refining
costs for the consumer. Second, oil and gas fields in Middle Eastern
deserts are largely already identified, tapped and/ or easily
brought online. For the consumer, this means not only lower capital
outlays at the front end of an energy deal, but also lower operating
costs as the oil is extracted and shipped abroad. Though new
partners in Africa, Latin America and Central Asia give Beijing some
hope that energy security might be within reach, Chinese players are
rightly concerned that real energy security cannot be guaranteed
until China can increase its market share in the Middle East.
Reflecting this reality,
China has begun to
approach the Middle Eastern region as an energy consumer. China is
acutely aware that the region’s leaders are already deeply involved
with powers in Washington, as well as aware that the oil trade in
the region is associated with colonial ambition of the sort that
China’s diplomacy offensive since 2003 has actively attempted to
dispel. Any Chinese strategy to enter into the Middle Eastern oil
trade needs to be consistent with China’s commitment to a ‘peaceful
rise’. If it does not, alarm bells may sound not only in New Delhi,
but also in parts of Southeast Asia.
Low Hanging Fruit
China’s path to
energy security then necessarily leads through the
Middle East, though the routing is unclear. Not surprisingly,
Beijing has begun
its approach using its tested method of gathering the low-hanging
fruit in states already estranged from
Washington. In the
Middle East, this means courting
Iran and Syria.
Assessing Risk
China has evidently
already made significant inroads into the Middle Eastern energy
market. With important cornerstone suppliers in Iran and Saudi
Arabia, China is maneovring to position itself as a
customer-of-choice among the smaller oil exporters of the region,
including Syria, Yemen and the states of the GCC. While there are
several advantages for the states of the region to diversify their
reliance away from
Washington,
there should be real hesitation when we consider that China is not
in a position to provide the kind of umbrella security traditionally
provided by the United States. China may be a more comfortable
partner for many Middle Eastern regimes, because of the
predictability of Chinese demand and market operation and because of
China’s willingness to respect the absolute sovereignty of its
commercial partners. However, as many states in the region,
including
Saudi Arabia,
Yemen, Oman and Kuwait owe much of their internal and external
security to a strong relationship with Washington, there is only so
much room for manoeuvre. Until the fundamental security calculus in
the Middle East changes, there will be little opportunity for states
in the region to diversify their economic interests away from
Washington in any way that threatens
US energy security.
In the meantime, China will continue to pursue soft power and
diplomacy, and small-scale energy projects in the region, that
define its energy niche in the region.
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