ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Chindia's Energy Curse

After mulling over whether China and India should divide hydrocarbon reserves among themselves, the Government of India has told its energy majors to sign up more contracts no matter what. But Delhi is in a bind. To compete with China's oil giants, India's energy firms will have to bulk up. If they do, they risk triggering a new round of resource contestation India cannot win - or can it?

The Chindia cracks have been showing for some time now. The widely hailed 2006 memorandum of understandings on upstream exploration, oil refining and pipelines was a bold political gesture invoking “South-South” cooperation to quell a long-standing regional r ivalry. But it was not designed as a framework to manage the political frictions that usually come with competitive upstream resource acquisition. Without significant follow-ups, it failed to gain operational traction and fell short of dividing substantive reserves under a “gentleman’s agreement”, let alone a common energy policy. Discreet blocs in Sudan, Iran, Ecuador and Syria were the only assets that ever made it on the collective table.

In the meantime, China has been busy expanding its presence in central Asia; grasping new reserves in Australia and south-east Asia; and cementing its position as the leading Asian energy player in west Africa (including Nigeria, Angola and Guinea). It is fast closing in on the largest producers in west Asia by building vertical linkages across the energy “value chain”,and is courting supply agreements with Russia. It also spread its horizons to Latin America, tapping deep into Venezuelan and Brazilian reserves. Distracted by its nuclear ambitions and environmental chatter, India ended up in China’s energy wake. According to some calculations, energy firms in India lost business worth more than $12.5 billion to their Chinese competitors in 2009 alone. There simply is too much China in Chindia, and it is too close for comfort. A brief glimpse on a map leaves no doubt that I ndia ought to hold the geographical aces in the Bay of Bengal. But the generals in Naypyidaw thought it more expedient to sign pipeline contracts that will fuel the development of China’s western regions. To say that Delhi must catch up would be an u nderstatement.

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