Wednesday, February 09, 2005

India's Energy Diplomacy

Image Hosted by ImageShack.usThe PR machine of union oil minister Mani Shankar Aiyar has been in overdrive in recent weeks with news of all sorts of mega deals.
I developed an extreme dislike of him from his days as the leading Congress party/Gandhi family sycophant at the Indian Express newpaper. Just looking at the smug half psychotic smile plastered on his face makes me sick. Little did i know then that his unashamedly biased views as a self-proclaimed "secular fundamentalist" columnist would eventually land him to a plum job within the new government.

This is something that has always puzzled me about Parliamentary democracy. How is it that politicians that have little or no knowledge about their respective ministries are expected to run them effectively.

Mani "madman" Aiyar for instance, has apparently just signed a massive US $40-60 billion deal with Iran for gas supply over 25 years as well as a 20% stake in the another oil field, but during a press statement made the factual blooper that Iran had the world's largest gas reserves when in fact it is Russia. How can we have confidence in his ability to negiotiate crucial details such as the price where the Iranians tried to break our balls when he cant even get such simple facts right.

Also when speaking on the status of the US $4.5 billion gas pipeline from Iran to India through Pakistan, he said he was very keen and confident a deal would be reached soon. In my view he's being way to eager when he should be playing his cards close to his chest as the number one rule of diplomacy is reciprocity. In any case i generally believe the pipeline to be a very bad idea that is being pushed for very dubious reasons. To have a country like Pakistan controlling the tap on a major future source of energy to India and paying them $700 million in annual transit fees for the privilege is like hiring someone to guard your store even after knowing he's a felon who used to rob stores.
Even if the pipeline goes ahead, how is it that Pakistan will be able to ensure the safety of the pipeline when they cant even prevent their own domestic pipelines from being blownup by Baluch militants who are engaged in an increasingly intense insurgency.

Speaking of our search for global energy sources, India's Oil & Natural Gas Corporation (ONGC) is bidding for a US $9 billion 15% stake in the troubled Yukos oil company of Russia. ONGC and GAIL are also bidding against each other in tie-ups with Rosneft and Gazprom respectively for the Sakhalain 3 project. Given our supposedly very close friendship with Russia, this would be an excellent chance for us to secure a couple of major energy assets in the new Great Game of the 21st century. So far we've been able to clinch sizeable deals in Sudan, Vietnam, and Sakhalin, but this would be by far the biggest.

Coincidentally the IAF is currently shopping around for 126 fighter jets in a deal worth US $3 billion at roughly $25 million a piece. The main contenders are the Russian MiG-29, the American F16, Sweden's Grippen, and the French Mirage. Given that India has historically been a major consumer of Russian military hardware exports and practically bankrolled much of their defence industries in the 90's, we could use this also as a bit of a bargaining chip to secure access to Russia's vast energy resources.

Interesting the lastest news out today is that the IAF has just signed a US $1 billion contract for 40 indigenously built LCA supersonic fighter aircraft powered by the GE 404F engines from Hindustan Aeronautics Limited (HAL).

While its good to see that India, which possesses some of the finest engineering minds on earth is increasingly competing head on with other advanced nations by designing, developing and marketing its own sophisticated weapons systems such as the Brahmos missile, i have read too many disconcerting articles on the dreadful track record of government defence establishments ability to meet the army's stringent specifications on major weapons systems without huge cost and time overruns. One can only hope that in the future private sector companies like Larsen & Toubro, the Tatas and others play a much greater role in such defence procurement contracts as is the case in the U.S, which will almost certainly be much more effective in reducing our dependence on foreign suppliers.


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