Analysis: India, Mideast cozy over energy

WASHINGTON, May 21 (UPI) -- India's economic growth is driving increasing energy ties with the Middle East, at a time when China, the United States and Japan are all ramping up efforts to lock in access to oil and natural gas in the region.

India has shown explosive growth over the past several years. Real gross domestic product grew by 9.1 percent over a six-month period in 2006, according to the Energy Information Administration, the data arm of the U.S. Department of Energy.

That growth is being fueled in large part by foreign oil and natural gas. India was the world's sixth-largest oil importer in 2004, and it imported more than 812 million barrels of crude oil in 2006-2007, up more than 11 percent from the year before, according to the Indian Ministry of Petroleum and Natural Gas.

With about 65 percent of those imports coming from the Middle East, India is attempting to secure supplies from the region. Indian company Essar Group is considering a $3.4 billion refinery in northern Egypt that will process 300,000 barrels per day.

Middle East countries, especially those bordering the Persian Gulf, are also conscious of the opportunities India represents. The Middle East sends 66 percent of its exports to Asia each day, a percentage that will almost certainly increase in the coming decades.

In early May, Riyadh hosted the second (the first was held in New Delhi) Asian Ministerial Energy Roundtable to discuss energy cooperation among 17 Middle East and Asian nations.

"Today, Asia is a massive oil market, and it is the most important oil market. Moreover, it has a vital role in the world economy. It is also expected that a big share of the oil demand in the future will be from Asia," Ali Ibrahim Al-Naimi, Saudi minister of petroleum and mineral resources, said at the meeting.

Indeed, in Asia, India is not alone in its efforts to guarantee energy supplies from the Middle East. Along with quickly expanding efforts in South America, Africa and Asia, China is aggressively approaching oil and gas producers in the Middle East. And Japan's prime minister recently toured the region, putting in place the foundation for energy agreements.

While India will face competition from other major developed and developing countries for oil and gas, it is at the same time reaching out to form cooperation agreements with its competitors as well.

"It would much rather cooperate in terms of global energy markets than compete, as well as with companies of other countries, because it doesn't have the resources to compete and win in a number of these fields," Tanvi Madan, an authority on Indian energy issues, said in January during a panel discussion at the Brookings Institution in Washington.

In fact, India is not only working with countries in the Middle East for its future energy supplies, it is also reaching out to China to expand oil and gas pipelines, as well as working together in developing their petroleum know-how, according to the Paris-based International Energy Agency.

"India's basic approach to energy diplomacy -- both oil and gas -- has been to develop as many potential supply arrangements, with as many potential suppliers, as it possibly can, and to try to neutralize its potential competitors (principally China) with cooperation agreements," Vibhuti Hate wrote in a report about India's energy future for the Washington-based think tank Center for Strategic & International Studies.

And its approach to energy diplomacy bleeds into every aspect of its foreign relations.

"Almost every of India's main geopolitical relationships these days have an energy dimension to it, whether it's the U.S., Russia, even China," Madan said.

Iran, which is desperate for development of its oil and gas industry, has also been eager to increase relations with India.

"The Indian government has signed a $40 billion gas deal with Iran which guarantees India 7.5 million tons of LNG over a 25-year period," Hate said.

A planned pipeline to move gas from Iran's massive South Pars fields through Pakistan to southern India has been discussed for more than a decade, but U.S. pressure on India and political tensions between India and Pakistan have delayed the project.

The United States has been pushing the international community to stop investment in Iran, hoping the pressure will drive Tehran to abandon its ambitions to develop the capability to build nuclear weapons. But Iran may prove an undependable source of energy for India for more than political reasons.

"When it looks for energy security with countries like Iran, it has met with failure in some instances. Iran recently canceled a major LNG deal at the last moment on the issue of price. That has given many Indian analysts a reason to doubt they can depend on Iran in the future," Madan said.

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