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U.S.-India relations and the liquid natural gas conundrum
By Siddharth Srivastava
Global Beat Syndicate
NEW DELHI—The hottest issue in Indo-U.S. relations these days—and one in which both sides have an equal stake—is “energy security” in the face of dramatically rising prices and diminishing oil resources. While the gas-prices crisis in America is evident in the wake of Katrina’s devastation, the current skyrocketing U.S. gas prices are only a precursor of things to come.
In global terms, a long-term energy crisis is brewing, with India, China and the United States seen as the future powerhouses, guzzling more oil than they can possibly produce or import. Already, oil prices have skyrocketed to over $70-a-barrel, and gas and diesel prices are spiraling into another round of hikes in India and rest of Asia. These sharp price rises are only expected to reduce demand for the short term.
It is estimated that by 2025, today's global demand of 84 billion barrels of oil per day will have grown to as much as 130 billion barrels a day. The United States is the world's largest energy consumer, but no amount of Alaskan oil exploration or production will rise to meet U.S. requirements. China and India, too, will have to import considerable quantities of crude oil to make up for gasoline guzzling automobiles. Already, India imports 70 percent of its crude oil.
It is in this context that natural gas has emerged as a more environmentally sound, cheaper and more easily available oil substitute. Compared to the current oil cost of about $70 per barrel, an equivalent amount of gas cost only $20 to $30 in recent months. Energy experts predict that gas, once considered a wasteful by-product of oil exploration, will become the number one fossil fuel in the future.
But the problem is that the United States, India and China—and especially the first two, plus Japan and European Union countries—are all about equally distant from major gas reserves in Iran, Qatar, Yemen, Russia, Central Asia, Nigeria, Angola and Venezuela. Added to the problem is that these gas-rich countries face unstable political situations. The gas from their fields will have to be carried through politically unstable and often dangerous areas.
Enter China and India, both of which want to quickly establish close ties with these gas rich countries to address their future requirements, counterbalancing U.S. and separate Asian demands to meet their own rising requirements. After protracted negotiations, India has signed a $22 billion deal to buy liquefied natural gas from Iran over a period of 25 years starting in 2009, and a separate LNG deal with Qatar to address its more immediate energy shortages.
India’s deal with Iran has put a strain on Indo-U.S. relations, and scores of Indian officials have been involved in a major diplomatic offensive to persuade the Bush administration to de-link Washington’s concerns about Teheran’s nuclear program from the issue of energy security. In response, President Bush now says he will encourage China and India find more efficient ways to use oil.
The real story as well as conflict of interest, however, lies elsewhere. At present, the Bush administration is balking at the idea of giving its approval to the 1,600 mile gas pipeline from Iran through Pakistan to India, even though all three countries had agreed to go ahead with the massive project. While the United States is objecting because of Iran’s supposed nuclear program, it has also put strong pressure on Pakistan, threatening Islamabad with sanctions if it gives the project a go-ahead. Clearly, this kills two birds with one stone: it addresses Iran’s nuclear program threat, and curtail’s India’s competition for scarce oil supplies.
In response the recent White House actions, Iran’s oil minister Bijan Zanganeh said, “It is unreasonable to prevent India and Pakistan from accessing Iranian gas. Energy markets should be depoliticized. We sell crude oil and LNG. Why can’t we be allowed to sell piped gas?”
Writing in the Times of India, foreign editor Chidanand Rajghatta noted that if the geopolitics of South Asia-U.S relations was about wheat in the 1960s and ‘70s, and about the “intellectual brain drain” in the 1990s, it is now going to be about controlling the transportation and consumption of energy—specifically, natural gas.
Because of oil shortages and growing demand, there are serious signs of renewed interest in nuclear power for peaceful purposes. As things now stand, experts say it will be easier to overcome legal barriers to develop civilian nuclear power than to overcome issues surrounding natural gas, given Washington’s direct interest in the matter. But for now, the real political struggle is over gas.