COMMENTARY little can be done about rural indebtedness Now, on the other hand, corporate entities 3 There are nonetheless some dissenting voices which are heartening. For instance, see Kanitkar (2010). (except shedding tears) because its eco- and groups have a wide range of economic 4 Apart from receiving the Padma Bhushan in 2010, nomic/political causes cannot be identi- interests and most of them are also Aamir Khan has also shared a platform on educa- tion with visiting US Secretary of State Hillary Clin- fied. The “public” acclaim for the film will increasingly involved in the media. This ton, something which could not have happened perhaps reinforce the government’s5 faith means that capital presents a united front without the government’s tacit approval. The reason was apparently his film Taare Zameen Par (2007) in gestures – the same kind of gestures that against social and economic criticism, as it about educating a mentally disadvantaged child. Peepli Live blandly criticises it for making. were. If this is granted, there is perhaps a 5 Ronamai (2010) also notes that LK Advani was also all praise for Aamir Khan. The acceptance of the To conclude, it will be useful to specu- greater degree of censorship today – at the film by politicians of different ideological hues (the late briefly about why, despite its concern, level of ideation – although the censoring Congress as well as the BJP) confirms that Peepli Live is politically and economically non-committal. Peepli Live is more timid in its social criti- authority is not the State but the economy. cism than films like Mother India, Ganga References Jumna and Upkaar. The reason, I propose, Notes Kanitkar, Tejal (2010): “Images and Politics in Peepli is that the corporatisation of the economy 1 The term “Bollywood” came into use as late as in Live”, Pragoti: Progress and Struggle, 27 August, has lent versatility to capital that it did not the new millennium, and was resisted by doyens available at http://www.pragoti.org/node/4114 of the film industry in India because they took the MacFarquhar, Neil (2010): “Banks Making Big Profits possess in the 1950s and 1960s. To elabo- term to be pejorative, i.e. that mainstream Hindi from Tiny Loans”, New York Times, 13 April, available rate, it might have been possible for film cinema simply aped Hollywood. The indications at http://www/nytimes.com/2010/04/14/world/ now are that the term “Bollywood” first became 14microfinance.html?r=1&ref=todayspaper production to be more independent earlier acceptable currency around 2002-03 not within Ronamai, Raymond (2010): “Indian Prime Minister because it was not reliant on other India but in the United Kingdom and the United Watches Peepli Live”, 30 August, available at States of America, in places like Bradford, Leices- http://entertainment.oneindia.in/bollywood/ sections of the economy – moneylenders, ter and Birmingham, where Hindi films are mar- news/2010/manmohan-peepli-live-300810.html landowners and traders, for instance, who keted as a brand with “Bollywood” becoming a Vasudevan, Ravi (undated): “The Meanings of ‘Bolly- kind of handy label. See Vasudevan (undated). wood’”, Journal of the Moving Image, available at are attacked in the above three films. 2 For instance, see MacFarquhar (2010). http://www.jmionline.org/jmi7_8.htm
and is courting supply agreements with Chindia’s Energy Curse Russia. It also spread its horizons to Latin America, tapping deep into Venezuelan and Brazilian reserves. Christian Brütsch, Matthew Hulbert Distracted by its nuclear ambitions and environmental chatter, India ended up in After mulling over whether he Chindia cracks have been show- China’s energy wake. According to some China and India should divide ing for some time now. The widely calculations, energy firms in India lost hydrocarbon reserves among Thailed 2006 memorandum of un- business worth more than $12.5 billion to derstandings on upstream exploration, oil their Chinese competitors in 2009 alone. themselves, the Government of refining and pipelines was a bold political There simply is too much China in Chindia, India has told its energy majors gesture invoking “South-South” coopera- and it is too close for comfort. A brief to sign up more contracts no tion to quell a long-standing regional glimpse on a map leaves no doubt that matter what. But Delhi is in a rivalry. But it was not designed as a frame- India ought to hold the geographical aces work to manage the political frictions that in the Bay of Bengal. But the generals in bind. To compete with China’s usually come with competitive upstream Naypyidaw thought it more expedient to oil giants, India’s energy firms resource acquisition. Without significant sign pipeline contracts that will fuel the will have to bulk up. If they do, follow-ups, it failed to gain operational development of China’s western regions. they risk triggering a new round traction and fell short of dividing substan- To say that Delhi must catch up would be tive reserves under a “gentleman’s agree- an understatement. of resource contestation India ment”, let alone a common energy policy. cannot win – or can it? Discreet blocs in Sudan, Iran, Ecuador and Chasing the Dragon’s Tail Syria were the only assets that ever made Some analysts might object that we are it on the collective table. too harsh: Indian companies have been In the meantime, China has been busy trying to secure reserves, and they have expanding its presence in central Asia; had some success. Partnering with Mittal grasping new reserves in Australia and Investments, Oil and Natural Gas Corpo- south-east Asia; and cementing its position ration (ONGC) cleverly used infrastructure as the leading Asian energy player in west joint ventures to secure initial reserves Christian Brütsch ([email protected]) is at the Africa (including Nigeria, Angola and from Ashkhabad. ONGC’s overseas invest- University of Zurich and Matthew Hulbert Guinea). It is fast closing in on the largest ment arm – ONGC Videsh Ltd (OVL) – obtai ([email protected]) is at the Center for producers in west Asia by building vertical ned a 20% stake in Russia’s Sakhalin-1 gas Security Studies, ETH Zurich. linkages across the energy “value chain”, project and opened negotiations with
Economic & Political Weekly EPW september 25, 2010 vol xlv no 39 15 COMMENTARY Gazprom and Rosneft for more stakes. It Takes Two to Tango The snag for India is that China shows The purchase of London-listed Imperial So what is the problem? This surely does absolutely no sign of letting up. CNOOC is Energy for $2.1 billion added substantial not sound like Delhi has lost the energy chasing a massive 28% increase in output Russian assets to its holdings. plot? Well no, it does not, unless we put this year, which is about 290 million bar- Oil and gas imports from Africa, too, it in perspective. Once we compare it to rels of oil equivalent. PetroChina has also increased. Indian firms expanded pro- the more substantive steps China has earmarked overseas output to increase duction in Angola, Sudan and Nigeria, made, the record looks distinctly circum- from 10% to 50% by 2020. Money certainly increasing crude imports from the region spect. Last year Chinese companies spent will not be a problem should they decide by roughly 5%. Key initiatives include around $32 billion buying natural re- to aim higher still: China’s $2.4 trillion in OVL’s $750 million investment in the source assets abroad. The figure becomes foreign reserves literally beg for com Greater Nile Oil Project in South Sudan, far larger if we take into account addi- modity hedges, and the Chinese majors the extension of exploration in the North tional sweeteners provided by the China are well aware that a strengthening Ramadan offshore concession in Egypt Investment Corporation (CIC) or the Chinese yuan will enhance their purchasing power and a new Exploration and Production Development Bank to tip the balance even further. Sharing Agreement for Contract Area 43 for future contracts in Beijing’s favour; In comparison, Delhi has asked its oil in Libya. Reliance Industries (RIL), India’s ONGC’s acquisition of Imperial Energy majors to make one “major” acquisition a largest private energy firm, upped its was India’s only large foreign energy year. Admittedly, it has a smaller pool of game in Nigeria by taking a $1.7 billion deal. The contrast is stark. foreign reserves ($282 billion, as on 27 Au- stake in natural gas assets. To prepare Like India, China has stepped up activity gust 2010) to play with, but only signing further inroads, Delhi even started to em- in Latin America, Africa, central Asia and off deals worth up to $1.1 billion before ulate Beijing’s “multilateral game” by west Asia. But its prizes have been far companies have to seek Delhi’s approval is holding India-Africa energy conferences larger both in terms of upstream equity not going to cut the mustard. Indeed, just from 2007 onwards, offering kudos to stakes and securing long-term contracts as India lost out to China when trying to over 25 countries. for reserves. Over the past year, Indian buy PetroKazakhstan in 2005, it now In the Americas, Indian firms acquired national oil companies (NOCs) have been looks set to lose out in Uganda where stakes from Canada to Colombia. RIL even running to standstill plugging growing CNOOC has outstripped ONGC’s bid for a succeeded where China National Offshore supply gaps, while Chinese NOCs have raised stake in the Lake Albert region. You would Oil Corporation (CNOOC) had stumbled their reserves by a staggering 40%. Net think that all of this would prompt ONGC when it acquired a 40% stake in Atlas international production levels are set to to show its muscle: but only pledging to Energy Resources’ Marcellus Shale acre- breach one million b/d by the end of 2010. borrow a meagre $10 billion for overseas age in the United States (US). Further Beijing has been busy securing west acquisitions over the next decade suggests south, ONGC and Oil India managed to and east Siberian pipelines with Russia. its hands are still tied. strike a $2 billion deal to develop the Kazakhstan is increasing its oil supplies to Carabobo blocks in Venezuela. China by 4,00,000 b/d to 2013 in res Gas Glut in a Crude World Perhaps most critically, Delhi broad- ponse, and also plans to complete a new But what if Delhi had got it right so far? ened its foothold in the Gulf. India gas pipeline carrying 10 billion cubic What if a new “scramble for resources” currently sources over two-thirds of oil metres (bcm) to China. Even Uzbekistan turns out to be a profit-making exercise imports from the region, drawing heavily is in on the act, selling all its spare 10 bcm for ONGC rather than propelling Indian on reserves and concessions in Iran, of gas to China, while Turkmenistan is growth? In this scenario, surely bureau- Kuwait, Oman, Iraq and Yemen. Its key locked into a 40 bcm/year gas contract crats are wise to keep their energy firms supplier remains Saudi Arabia, currently with China for the next 40 years. on a tight leash and to prevent them from accounting for around 21% of oil imports. Meanwhile, Beijing’s position in Angola getting India into deep political waters? The Kingdom recently agreed to double its is so dominant, it is using it as a testing And should not recent developments in output to India, building on the sevenfold ground to let Sinopec play a little further the gas market allow government officials increase in supplies seen from 2000-08 upstream. China has also become the key to sleep a little easier? Well, yes and no. to stand at around 8,00,000 barrels player in developing Iran’s Yadavaran and Taking gas first, it is quite likely that it per day (b/d). While for gas, Qatar North Azadegan fields, and has not exactly will increase as a percentage of India’s has been India’s main supplier of ������lique- been backward in coming forward to sign generation mix from the current 9% to fied natural gas (LNG) since 2004, a rela- deals in Iraq. No doubt Beijing banks on roughly 23% by 2030. The regular up- tionship that New Delhi is keen to extend Baghdad shipping a rough equivalent to grades of national and global shale gas by seeking an additional five million the one million b/d Chinese ports current- prospects amid increasingly ample LNG tonnes, not least because pricing differ- ly get from the Saudis. Qatar has similarly capacity have certainly created greater ences and India’s support for the US earmarked a further 10 million tonnes of elasticity of supply. Yet the silver linings position on the nuclear question have put LNG to head to Chinese ports; this is in could be just that. The passage to India a $20 billion deal with Iran, signed in addition to the five million tonnes that could easily become clogged if others – June 2005, on ice. already head out east. including Beijing – snap up more of the
16 september 25, 2010 vol xlv no 39 EPW Economic & Political Weekly COMMENTARY new finds, or once broader market funda- If India goes down the competition path that policymakers are aware that the path mentals begin to tighten. two things are likely to happen. The first towards an “Asian third way” on energy re- The awkward truth is that India does is that Indo-Chinese resource contestation quires not just commercial clout to make not possess a single gas pipeline that will sharpen and asset prices will rise. In new inroads, but political skill to avoid dip- would hardwire supplies into the country the worst case, conflicts over upstream lomatic skirmishes. should competition get tougher. Unless concessions will exacerbate tensions over The other question is how far the west relations with Islamabad take an improb- the safe flow of hydrocarbons through the will go to accommodate Chindia’s energy able turn for the better, neither the pro- Indian Ocean. Both nations have already needs. Unless US and European govern- posed Iran-Pakistan-India pipeline, nor dipped their toes into the Gulf of Aden, ments recognise the need to give Chinese the alternative $3.5 billion proposal for a and it does not take an environmental dis- and Indian energy firms enough room to Turkmenistan-Afghanistan-Pakistan pipe- aster to show that oil is one of the more allay Asian fears that western majors will line put forward by the Asian Develop- effective lubricants for interstate colli- prevent a market shift to the east, they ment Bank will see the light of the day. sions. The second is that Sino-Indian com- will force Beijing and Delhi to compete for Those assuming that shared infrastruc- petition will make international energy scraps, despite their best interests and in- ture and shared supply options can bridge markets even more vulnerable to statist tent. If this happens, the Chindia energy political division might want to consider interference. Even if Beijing and Delhi use dilemma will surely give the “resource that Iran and Pakistan recently cut India market mechanisms to gain influence and curse” an entirely new dimension. But if out of the loop by signing a $7.6 billion increase efficiency, an ever-growing share the west comes to its senses and lets deal to supply 750 million cubic feet of gas of energy flows will be steered by the not emerging majors play for significant daily to Pakistan from 2014. Even if India so “hidden hand” of the state. In a long assets, India might have an advantage. were to reach out to west Asian or central game, inflated signature bonuses, equity Since firms such asRIL carry far less politi- Asian suppliers, the upstream difficulties oil deals, ample credit lines, major infra- cal baggage than China’s state controlled associated with filling such routes, and the structure provision and a political light behemoths, they can open up prospects in political wrangling they would engender touch in producer states will undercut advanced markets. In fact, RIL just an- across transit states, remain formidable. “mundane” commercial price risk con- nounced its second major US shale gas Arguably, India could count on domes- cerns and undermine efforts to improve contract this year. The chances of a tic coal to plug some of the gas gaps, but governance standards. Chinese firm getting to play in deepest the “crudest” truth of all for India still re- However, it does not have to be all Texas would be unthinkable. sides with oil: Delhi is fast running out of about competition. If Delhi put its finan- The lesson for Delhi should be clear; indigenous reserves, which means it simply cial and political capital behind the likes tone down resource competition across cannot afford to sit this one out. Even if of ONGC, China might start to take Indian developing states where Beijing holds the the overall energy mix changes, India’s oil energy needs more seriously. Even if India aces, and offer firms like RIL and OVL suf- needs will continue to rapidly grow. The cannot match Beijing’s political or finan- ficient financial backing to move into ad- International Energy Agency (IEA) forecasts cial clout, burgeoning competition with vanced markets. Rather than trying to that India’s oil demand will rise on average India would be a serious distraction from play China head on, focus on developing by 3.9% a year between now and 2030 China’s own energy strategy, and Beijing an Indian game: compete, but compete outstripping Japan to become the third certainly shares Delhi’s desire to reduce where you have a comparative advantage. largest oil importer after the US and China the “Asian premium” on energy prices. If this means reducing the state’s stake in before 2025. India’s own projections predict Serious competition between Beijing and OVL, and funnelling the proceeds into a oil import dependency increasing to 80% Delhi could thus provide a more substan- fund to support private enterprise, so be in 2011-12 and over 90% by 2024-25 beyond tive rationale for dividing up reserves it. Indeed, India’s smartest move might be the 75% (two million b/d) it currently ac- rather than entering dog fights over the to take the state out of state capitalism. It counts for. India’s oil import bill of $85 bil- same assets. Here, much will depend on would be music to regulators in advanced lion today will look like short-change com- how India goes about its business. markets, and as of yet, it is a tune that pared to the invoices it faces in future. China has not learnt to play very well. Tackling the Biggest Buts Cooperation? Whether competition will lead to coopera- With these kinds of figures in play, it is quite tion, or conflict, will depend largely on how clear that India should target a greater India plays its hand. Triumphalism over stake in future supplies. But the gaping new acquisitions or a surge of resource na- available at question remains: Can India muster the tionalism would irritate Beijing and – per- CNA Enterprises Pvt Ltd means and the muscle to match China, haps more worryingly for both Beijing and 27/13 Ground Floor and if not, where should India aim with its Delhi – inflame Chinese nationalist senti- Chinna Reddy Street, Egmore resource diplomacy, not only in relation to ment. The good news is that Delhi’s reluc- Chennai 600 008 producer states, but in relation to potential tance to hand foreign reserves to its energy Ph: 44-45508212/13 competitors, and in particular, to China? firms and its curbs on acquisitions suggest
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