Bear?s back in business
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Bear?s back in business

India must seek to get a sizeable chunk of the Russian energy pie, writes Vikram Sood.

india Updated: Jan 18, 2007 00:06 IST

It was Brezhnev’s blunder in Afghanistan that led to the first multi-billion dollar international jehad sponsored by the ‘free world’ out to settle old scores, which had its ultimate ugly trickle-down effects in India. Yet, India had been a treaty ally of the Soviet Union. The treaty had a Cold War relevance to both countries as Nixon’s America and Mao’s China warmed up to each other. But when the Soviet Union fell, India suddenly felt adrift in a Clinton-led world that lacked the vision to be the magnanimous victor and capitalise on this great opportunity. Instead of doing what they had done to Japan and Germany after World War II, the Americans continued to try and grind the Russians down to nothingness. Unfortunately, narcissism on a national scale can make nations forget that a people who resisted Hitler’s German army for nearly 900 days in Leningrad or defeated them in the bloodiest battle in history in Stalingrad were bound to rise again. All they needed was a leader. And Vladimir Putin is that leader.

In the last seven years, he has brought Russia back into international reckoning. Today, the Russians feel sufficiently confident to be able to cancel their production sharing agreement with Royal Dutch Shell in Sakhalin-2 and, Gazprom, the Russian energy giant has taken over. There is steely determination in approach, bordering on ruthlessness at times. Chechnya and the Dubrovka theatre hostage episode are indications of the latter; the manner in which the vast energy resources have been used as a strategic and tactical weapon is a sign of a single-minded desire — to protect Russia’s national interests.

The various tulip and orange revolutions in Russia’s neighbourhood to bring democracy to these countries, quite apparently encouraged by Washington, invited retaliatory action by Moscow. Ukraine flirted with the US and had to pay a price when its gas spigots were switched off last winter. Much of Europe too shivered, more in fright than in the cold. Uzbekistan, the most populous Central Asian State, has joined the Russian-led Eurasian Economic Community that is a customs union comprising Belarus, Kazakhstan, Kyrgyzstan and Tajikistan. Belarus was once a faithful Soviet satellite and then Russia’s loyal friend but it dared to step out of line and Putin came down hard to cut off its gas supplies.

Alarmed at the eastward expansion of Nato and US interests in acquiring energy and strategic reserves in Central Asia, the Russians got together with the Chinese to counter US advances. The Russian-Chinese relationship is marked by competition for resources and influence and cooperation against western inroads. The border issue is now settled and there have been military exercises and increased Russian arms sales and energy commitments to China. Forty-five per cent of Russian arms sales have been to China, at the rate of $ 2 billion annually. The first-ever joint military exercise of the Collective Security Treaty Organisation (Russia, Belarus, Armenia, Kazakhstan, Kyrgyzstan and Tajikistan) and the Shanghai Cooperation Organisation (SCO) will be held in 2007 in Russia’s Volga-Urals area. Heads of State of participating countries are expected to witness the exercise. SCO observer countries — Iran, Pakistan and India — could also be invited.

There was a time during Boris Yeltsin’s presidency when the impoverished Russians sold their giant companies to eager carpet-baggers in a desperate bid to stay afloat. It was Putin who decided to consolidate Russia’s vital assets of energy and strategic minerals. Gazprom, which today is estimated to control a third of the world’s natural gas reserves, plans to become the world’s largest energy company, once it diversifies into oil production.

The argument is very simple — Western companies will not get access to Russian energy resources unless Russian industry gets similar
access to European markets. Foreign participation in Shtokman, the world’s largest gas field, is no longer permitted. Gazprom and Gaz de France have signed a deal for supply of Russian gas to France until 2030. The Italians and the Austrians have agreed to similar deals with Gazprom that allow the Russian giant to strengthen its presence in Europe and integrate into the global economy.

Meanwhile, the Chinese too have been active in Kazakhstan having purchased a second oil-field since 2005. The Russian State-owned company, Rosneft, plans to enter the Chinese market for retail in petrol and petroleum products. Pipelines into China would be built by Russians and not by Western companies. The Russians have become more active in Turkmenistan and seem to be beating off competition from the US, the EU, China and Iran as the new regime seeks to strengthen its ties with Gazprom. The fear in the West would be that these long-term bilateral arrangements would knock out the spot market mechanism at the New York and London stock exchanges, while also undermining the production sharing arrangements that had benefited Western oil conglomerates. The Russians are back in business and US advances have been halted. Putin gets no popularity points in Washington for this but he does in Moscow which is important.

The other consolidation, of aircraft design and production, which includes MiG, Sukhoi, Illyushin and other aircraft, into the State-controlled United Aircraft Corporation should be of interest to India. After all, Russia remains our biggest source of armament supplies. The Putin visit could be an opportunity to sort out the defence production support problems while encouraging Russians to participate in India’s energy sector development. Consolidation in the Russian nuclear industry would be next and Russia would be keen to see how the Indo-US nuclear deal proceeds, as this would be an opportunity to invest in India.

There is unfortunately no Russian equivalent to CNN, Bill Gates, the Silicon Valley, Disneyland, Fifth Avenue or McDonald’s that a young Indian can relate to; above all, there is that ticket to ‘heaven’, the green card. There is also no equivalent to a tried and tested friendship that has never imposed sanctions on India, walked out of agreements or repeatedly armed Pakistan knowing that these arms would be used against India. Russia-India relations will thus remain more a staid State-to-State strategic arrangement and will never have the euphoria, glamour and effervescence of India-US relations.

India has done well to invite the Russian president to be the chief guest for the Republic Day. Born- again thinkers in India insist that the time has come to shed stifled old mindsets as the world was, now, a vastly different place and that new horizons were opening up. This is true as much as it is true that Russia too is a changed place. The policies of its leadership are driven by pragmatic economic considerations in a highly competitive globalised world and not based on Cold War defence mechanisms or sentimentality.

This means that Russia, as the next major energy power, will be assertive and self-confident. It has enough petro-currency that will enable it to take ‘merit’-based decisions on supplies of energy to buyers, not only from Europe, the US but also China and other Asian consumers, India included. What needs to be remembered is that as India seeks its place in the sun, it must ensure long-term supplies of gas and petrol.

Meanwhile, in the years ahead, Indians would do well to start mastering the Russian language for the Russian population is set to decline below sustainable levels. That is where more jobs will be available for our burgeoning numbers.

Vikram Sood is former Secretary, Research & Analysis Wing

First Published: Jan 18, 2007 00:06 IST