India tiptoes to the new Middle East

China currently imports 40% to 50% of the oil it consumes, out of which close to 60% comes from the Middle East. The dependence is expected to rise to 70% by 2015. “Therefore,” as Professor Weiming Zhao of the Middle East Studies Institute of the Shanghai International Studies University recently wrote, “China has a significant interest in the Middle East, and any changes in the situation there will affect China’s energy security. It is only natural for energy factors to play a role in China’s policy toward the Middle East. Although China’s opposition to the Iraq war and to the use of force to resolve the Iranian nuclear issue is not purely based on considerations of energy security, this is a key factor. In a word, energy diplomacy constitutes an important part of China’s diplomacy.”

Delhi is learning to manage China’s growing Middle East influence.
The Indian petroleum minister is currently visiting Saudi Arabia. Mukherjee visited Riyadh in April. A visit by Indian Prime Minister Manmohan Singh is in the cards. Saudi Arabia, which is India’s principal supplier of oil, aims to double its oil exports to China in 2008. By 2010, Saudi exports to China are expected to touch 1 million barrels a day, which would place China as Riyadh’s number one destination for its petroleum.

Again, China has an agreement with Iran to buy 250 million tonnes of liquefied natural gas over a 30-year period and to develop Iran’s Yadavaran oil field, which has the estimated potential to yield 150,000 barrels a day over a 25-year period.

China also takes great care to develop energy cooperation with the US. The fourth round of the China-US Strategic Economic Dialogue held in the US this week focused on the two countries taking “shared responsibilities” on energy issues on the basis of developing “a lot of converging points of interest”, exploring “broad cooperation prospects with great mutual complementarities”, tapping the “tremendous business opportunities involved” – to quote from a People’s Daily commentary.

The commentary pointed out that in the energy sector, “China and the US are not only each other’s stakeholders but construction partners … the US has become the nation to be involved in the most cooperative items in China’s petroleum industry. Persevering, unremitting efforts made by both sides have enabled such kind of cooperation to be imbued with an increasing global significance … By working hand in hand, China and the US are meant not only to have common interests but to bear their shared responsibilities.”

Equally, India sizes up China as a rival investment destination for sovereign wealth funds (SWF) of the oil-fired economies of the Persian Gulf. The cumulative value of SWF in the Middle East currently is estimated to be in the region of $1.5 trillion and is expected to triple or quadruple in the coming five to 10 years if oil prices remain at their current high level.

AsiaTimes