India’s energy worries spark fears of China

By Shi Ze and Yang Chenxi Source:Global Times Published: 2013-11-10 23:28:01

Recently when Chinese President Xi Jinping visited Kazakhstan, the Kazakh government agreed to give China 8.4 percent stake in its giant Kashagan oil project. The two thus signed a new energy cooperation agreement. The routine energy cooperation between the two, however, triggered intense attention from the Indian media.

According to the Hindustan Times, the US energy major ConocoPhillips used to hold the stake and wanted to sell it to India's state-owned Oil and Natural Gas Corp. But according to Kazakh law, the country has a right of preemption that allows it to acquire the stake. The Kazakh government exercised this right and then sold the stake to China.

In some Indian media's eyes, it is obvious that China "grabbed" India's contract. And in the energy sector, "India has lost at least $12.5 billion of deals to China in past years." Given the strategic importance of energy issues, it is not difficult to understand the Indian media's concern.

With huge populations but lacking oil and gas, both China and India are developing countries that require rapid economic growth and reliable energy supply. Their geographic positions make their competition in Central Asia inevitable.

Central Asia, thanks to its unique geography and rich oil and gas resources, has always been a playground for big countries' rivalries.

Beside China and India, the US, Russia and Europe have sought a presence there in order to ensure their economic development and geopolitical interests through energy cooperation.

At the same time, as Central Asian countries lag behind economically, they view energy as an important diplomatic leverage by seeking economic interests and striking a balance among world powers. For all parties concerned, Central Asia's energy issues are studded with both economic and political factors.

In recent years, China has achieved substantial results in cooperating with Central Asia over energy.

China and the Central Asian countries are close neighbors. The distance of pipelines connecting the two sides is relatively short, and capital investment relatively small.

In contrast, if India is to build pipelines to Central Asia, it has to go through Pakistan and Afghanistan, which will be difficult to implement and requires covering a long distance at high cost.

Meanwhile, as China develops rapidly and its energy demand remains stable, the country's economy has kept up satisfying performance even amid the world's financial crisis. Such a stable market indicates long-term purchasing capabilities, which is why Central Asian countries favor cooperation with China.

In addition, China's solid capital strength and advanced technology help it gain advantages in investment, exploration, oil and gas transportation and building pipelines.

Politically, China has been actively engaging in regional diplomacy, which has improved the relationship between China and its neighbors. China has also deepened communication with Central Asian countries through the Shanghai Cooperation Organization, which provides a framework for energy cooperation.

China does compete with India in Central Asia in the energy sector and has an advantageous position. Given the analysis above, this is due to the rules of international economics and international politics rather than that China intentionally squeezes out India.

As long as the market plays a central role in the competition and the two sides adhere to fair and just practices, the competition can help both in energy security and economic and technological development.

The concern of some Indian media outlets essentially reflects their anxiety about the country's energy security. China has similar concerns. Therefore, to establish a bilateral energy cooperation mechanism and avoid vicious competition is better than criticizing China for "grabbing" India's deals.

Shi Ze is director and Yang Chenxi an assistant research fellow of the International Energy Strategic Research Center of the China Institute of International Studies.

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