India and its oil policy

India’s foreign policy has ruffled a few feathers of late. Largely restrained and reactionary the Ministry of External Affairs has been working overtime to secure India’s energy interests. The global oil markets are going through a rough patch. Iran threatened to close the Strait of Hormuz; South Sudan stopped oil production in early January, loss of Syrian oil because of embargoes, drop in exports from Yemen due to strikes and closure of North Sea rigs due to repairs; all this has lead to a situation of panic in the global oil market. The Economist reported that all these disruptions have shaved off 1.25 million barrels a day of crude output globally. The situation might improve later in the year with most of the production resuming, however this is a clear signal to net oil importing economies that a small disruption in the supply chain can cause serious troubles at home.

India imports 80% of its fuel requirements and offers subsidies on diesel, kerosene and cooking gas. The provisions towards fuel subsidy in the budget of 2012-13 are Rs. 43,580 crores (USD 8.5 billion, at Rs 51.15 for a Dollar). Any increase in crude price will have a huge impact on India’s fuel bill. With a fast growing economy India cannot afford to be caught in a situation where its energy requirements are compromised with. At present India imports a lot of oil from the Middle East, Saudi Arabia being the largest exporter, followed by Iran. Together Saudi Arabia and Iran contribute one third of India’s imports, making India heavily dependent on these two countries. With uncertainty looming large over the region, India has rightly decided to revisit its global oil policy.

To diversify its oil basket India has started exploring other options. There are three instances where India has taken a stand contrary to its established foreign policy. The overseas arm of ONGC has engaged in off-shore exploration in South China Sea. China for long has claimed sovereignty over most of the South China Sea sighting historical evidences. In later 2011 and early 2012, China has raised concerns over Indian expeditions in the region. China also terms the Indian endeavours as provocative and urges restrain. So far the Chinese statements on this matter have been restrained and a direct reference to India is not made. On the other hand Chinese neighbours like Vietnam (which claims the oil reserves to be in its Exclusive Economic Zone), Taiwan, The Philippines, Malaysia, Indonesia, Cambodia and Thailand all have territorial disputes over the South China Sea. Some political commentators describe this region as the most dangerous point of conflict in the region. India’s attempt to seek commercial and strategic foothold in such a region is clearly unprecedented.

In early days of April 2012, India appointed as special envoy for Sudan and South Sudan, again a departure from India’s established foreign policy. For the first time India has categorically mentioned its oil needs as the prime reason for appointing a special envoy. Press statements quote ministry officials saying, "There were three main reasons to send a special envoy - ensure our oil interests are protected, communicate our support for the peace initiative between the two nations and strengthen our technical support to them." India is also challenging the Chinese claims of setting up an alternate pipeline through Kenya in less than two years time.

Lets talk crude

Of all attempts made by India to secure its energy needs the manoeuvres with Iran are the most interesting. International pressure on an Iranian oil embargo is such that it is impossible to pay for Iranian oil through conventional means of bank transfers. The US and EU have banned the payment mechanism in place in Dubai and have delisted all Iranian banks from the SWIFT facility (an electronic funds transfer facility). India as maintained that it will not stop its oil imports from Iran (so have China, Russia, South Korea and Japan). India is now exploring mechanisms to pay for Iranian oil in Rupees. There are technical difficulties in doing so (including many from the Iranian side), however India and Iran are trying to work together to find a solution. In the mean while government of India has announced tax breaks for exports to Iran done in Rupees. The Indian exports will be used to pay for Iranian oil.

These may be considered as bold steps by the Indian government, especially given the fact that they might annoy India’s two largest trade partners, the US and China. But these steps are also testimony to the fact that India is slowly but surely asserting itself in the global geopolitics. The far reaching implications of these actions are not clear as of now, however what is clear is the short term gain. India might get cheap oil from Iran, since less people are buying from it. This might prove to be a breather for a government which is unpopular with masses and high oil price is one of the reasons.  

Sri Lanka in a corner

The bloody civil war, which ravaged Sri Lanka for twenty five long years, came to an end in May 2009. However the battle of survival for the Tamils still continues in the island nation. There are no credible statistics to prove how many people were killed in the long civil war. Estimates put the numbers between 80,000 to 100,000 out of which close to 8,000 were killed in the final days of the war in May 2009. The dead include the Liberation Tigers of Tamil Elam (LTTE) insurgents and civilians. Millions of ethnic Tamils are still displaced and living in temporary shelters. The Sri Lankan army is accused of war crimes by the United Nations Human Rights Commission (UNHRC). On 23^rd March the UN body plans to move a resolution condemning the war crimes by Sri Lankan army.

Let me do some thinking. Again

The ministry of foreign affairs of India is in its usual state of flux. Newspaper reports suggest that the India wants to adopt the wait and watch approach. It does not want to comment without reading the text of the resolution. Parliamentarians from the southern Indian state of Tamil Nadu (who share ethnic links with the Sri Lankan Tamils) disrupted parliamentary proceedings on the government’s non committal gesture. Most of the shouting done by Tamil parliamentarians is for their electoral audience, but the government of India cannot ignore it. One of the Tamil political parties (DMK) is a major coalition partner in the ruling UPA government. The fortunes of DMK have sunk in the past state elections but nevertheless it holds 18 seats and is crucial for the survival of the government.

India’s policy of non interference into matters of other countries is used as an alibi. To make matters worse this is a case of insurgency, which haunts India in Jammu & Kashmir and some north eastern states. Supporting the Tamil cause would mean supporting separatist insurgency, something that India clearly does not want. Supporting the Sri Lankan government will pull India down from its self perceived high moral ground. It is not surprising at all that India is finding hard to take a call on the sensitive issue. But its time India takes a pragmatic approach to the situation.

For nobody but yourself

Monks protesting against the UN resolution in Colombo

India should use its influence on Sri Lanka to make Mr Rajapakse understand the follies of being in deliberate denial. The massacre by the Lankan army in the final days of the civil war is a reality. There are many cases with credible evidence (according to the reports of the UN delegation in Sri Lanka and the government’s self appointed Lessons Learnt and Reconciliation Commission or LLRC) of war crimes. Notorious “white vans” roam the streets of Sri Lanka to abduct protestors who raise voice against the president. Most of the people abducted were later found murdered and their bodies abandoned. Reconciliation and rehabilitation of the displaced Tamils has sadly stayed on paper with little to show to the international community. There is a clear lack of genuine efforts by Mr Rajapakse to assimilate Tamils into the mainstream.

India should make sure Sri Lanka shows credible and sustainable efforts to investigate the war crimes. Taking the “white vans” off the streets should be the first step. Abducted protestors who are missing and if still alive should be released. Humanitarian assistance offered by India should be made available to the Tamils and the reconciliation process should be pursued with the same excitement as shown in the final days of the war in 2009. An honest effort by the president will have far reaching impact on the present situation of the country. A disgruntled population is a sitting tinderbox, waiting for the spark.