Oil rich, terror wracked Iraq offers itself as India’s energy partner

Iraqi Deputy Prime Minister for Energy Hussain Saleh al Shahristani in Mumbai on Wednesday declared “India can count upon Iraq as a dependable long-term supplier of its crude oil needs.”

New Delhi has heard this before: King Abdullah of Saudi Arabia, when he came to India as its Republic Day guest a few years back, similarly promised that his kingdom would fulfill all the energy needs of a rising India. If anything, New Delhi’s domestic energy mess have only made India even more a slave of imported oil and gas. Going by present trends, India will import over 90 per cent of its oil — mostly from the Persian Gulf — in 20 years.

Oil exporting giants like Iraq see this big picture: fuel-thirsty India and China on one side and the falling oil and gas imports of Europe and the United States. Suddenly India is more than just a land of servants for the Gulf. One reason Iraqi Prime Minister Nuri al Maliki is coming to India on his first state visit on the 24th of this month.

Iraq is on its way to becoming a global oil giant. War, sanctions and Saddam Hussein’s incompetence reduced oil production to 1.5 million barrels per day. Today, even while Al Qaeda bombs wrack Baghdad, production is up to 3.3 million. Shahristani predicts this will rise to 4 to 5 million barrels by 2015 and a staggering nine million by 2020 -- putting it in the Saudi and Russian league.

Baghdad has emerged as India’s number two oil exporter thanks in part to the sanctionsaffected decline of Iranian crude exports. Only Saudi Arabia provides more to India.

Iraq has an additional interest in India. Shahristani urged Indian companies to invest in Iraq’s efforts to rebuild and expand its energy infrastructure. Unlike the Saudis, the Shia regime of Iraq is open to foreign exploitation of oilfields. Bidding rounds for its massive Nasiriyah oilfield, the building of an export refinery and exploration of its western desert for gas are about to be held. Shahristani notes that it is not the United States which is the main beneficiary of all this. “It is China which is bidding aggressively every time Iraq has called for bids,” he says. “Most of our oil is today contracted to China.” And it is Beijing that is pouring billions into rebuilding Iraq’s infrastructure.

Baghdad hardly wants to exchange US military domination for Chinese economic control, one reason for wooing India Inc.

As anyone who keeps track of the news knows, Iraq may have a gargantuan 250 billions in proven oil reserves but it is also home to a vicious Shia-Sunni sectarian struggle.

The Iraqi number two says that while the terror problem is genuine, the oil-bearing parts of the country -- the Kurdish areas in the north and the Shiadominated deep south of the country around Basra -- are largely peaceful. “Basra is very calm. Most of the oilfield workers there are mainly Indians working for foreign companies. I can’t see why they can’t be working for Indian firms instead.”

There are other political risks to which Shahristani has a less clear answer. Namely, that the Kurdish area, controlled by the Kurdish Regional Government, is just a step away from independence. The KRG has been offering oil and gas at a steep discount to foreign companies in an attempt to get the economic wherewithal to wave goodbye to Baghdad.

Shahristani vaguely says “negotiations are continuing” with the KRG and that Baghdad has sought a “unified oil and gas policy” for the country. The statements are about pricing, but the subtext is secession. At least one Indian firm, Reliance, which parachuted into the Kurdish area early on, is now caught in the web of politics between Arbil and Baghdad. Mukesh Ambani was seated in the front row when Shahristani delivered the IISS-Oberoi lecture in Mumbai on Wednesday.

The Kurdish question is a geopolitical maze all off its own, quite separate from the larger one surrounding the Persian Gulf. “The country that has Iraq in a bind on this is Turkey,” says Tony Dodge, Iraqi expert of the London-based Institute of International Strategic Studies. “If the gas pipeline being talked about from the KRG area to Turkey goes through, the door tto Kurdish independence opens up.”

Even as it tries to hold on to the Kurds, Baghdad is trying to resolve the dispute over IIran’s nuclear programme. The Persian Gulf is now so shot through with political risk that New Delhi would prefer to import oil and gas from almost anywhere else. Geography alone ensures that it will remain wishful thinking. IIndia is now hopelessly dependdent on what is arguably the politically most volatile region of the world.

Like all Iraqi officials, Shahristani invokes the fact India and Iraq have remarkably old historical ties. Iraqi diplomats like to preface their speeches with talk about how Sumeria and the Indus Valley may have had the world’s oldest trading relationship. He himself has Indian ancestry in his lineage. Not that such factoids really mean anything in the marketplace. He strikes down any talk of India getting anything other than the global price for Iraqi oil. “Against our laws,” he says. A reminder that ultimately all is fair in love, war and energy.


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