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RussiaProfile.Org: Russia Looks to Meet India’s Growing Energy Needs

April 11, 2006
Passage to India
By Shaun Walker
Russia Profile

Russia Looks to Meet India’s Growing Energy Needs

The topics of volatile energy markets and the Sino-Indian economic boom often overlap. As these two new regional powers emerge, they will develop greater demands for energy to fuel their expanding economies, pushing up the price of oil further and putting more strain on the markets. For Russia, however, with its vast energy reserves, higher demands for oil and gas do not present the same worry as they do for Western Europe and the United States. Still, for a country anxious about its bleak demographic outlook, the growing populations of India and China, who together make up one-third of the world’s population, have to be a cause for concern.

Russian Ambassador to India Vyacheslav Trubnikov seemed to be unfazed by the burgeoning populace of India and China, and their unrelenting procession towards superpower status. Instead, he emphasizes the idea that Sino-Indian demands for energy are in fact a positive factor for Russia. “Yes, both India and China have tremendous human resources, rich histories and unique cultures, and they are both developing very fast in the most advanced spheres of industry,” said the ambassador. “But they lack energy resources, so both countries remain dependent on the rest of the world.”

To this end, Indian Prime Minister Manmohan Singh told journalists after meeting with Russian Prime Minister Mikhail Fradkov in New Delhi on March 17 that India hopes to receive one million barrels of oil a day from Russia by 2010. “The necessary infrastructure for this is already in place,” the Indian prime minister said.

When it comes to gas, the partnership is already in full swing, with Indian energy giant ONGC owning a $2.7 billion 20 percent stake in the Sakhalin-1 oil and gas development project, as well as expressing great interest in the proposed Sakhalin-2 and Sakhalin-3 sites. “India is prepared to take all the gas from the Sakhalin-1 site – probably in liquefied from, and probably on the basis of a swap agreement, to make it economically viable for three countries – for example by involving Japan,” said Ambassador Trubnikov. “We have very good experience with India here – when Iraq sold oil to India at our expense, and we sold our oil to the West at Iraq’s expense. We had a similar deal with Venezuela and Cuba during Soviet times. These swap deals are very efficient and this is an option to deal with the gas in Sakhalin.”

Another giant project that could come to fruition during the next decade is the long-discussed Iran-Pakistan-India pipeline. “This pipeline is tremendously important for India, though I think we are still some years away from its realization yet,” said Jyotsna Bakshi, a specialist on Russo-Indian relations at the Institute for Defence Studies and Analyses in New Delhi.

Although the three countries still have many issues to sort out before the pipeline becomes a reality, one major obstacle was removed recently when long-held U.S. objections to the pipeline were tentatively dropped during U.S. President George W. Bush’s visit to South Asia in March. “Unlike some other global powers that have been trying to pursue a policy of dictating to India and Pakistan with which of their neighbors they may or may not establish long-term relations in the oil and gas sector, Russia has always supported the pipeline project,” said Trubnikov. He refused to see the potential pipeline as a threat to Russian interests: “The pace of development in this region is so high that it will easily absorb any amount of hydrocarbons supplied to it, so we in no way see the gas pipeline hampering any future plans to deliver Russian crude oil or liquefied natural gas to India. Moreover the unique experience of Russian companies in pipeline construction with the Blue Stream project means that we are very interested in cooperating on this venture.” Gazprom representatives traveled with Fradkov to Delhi in March to begin discussions on construction of the pipeline, which is expected to cost around $7 billion.

For all the attempts to increase oil and gas imports, India is clearly aware of the dangers of fully relying on imports to fuel its economy. “At the moment we have to import 70 percent of our energy, and so it’s not a good strategy to remain reliant on hydrocarbons,” Bakshi said. “For successive Indian leaders, the nuclear issue has been hugely important to the strategy of Indian national development.”

Russia is currently at work on the construction of the nuclear plant at Kudankulum in India’s southern Tamil Nadu region, which will feature two reactors of 1000 megawatts each, and will be commissioned in 2008. Sergei Kiriyenko, head of Federal Atomic Energy Agency (Rosatom) was in India on April 6 to inspect the plant and hold talks with Indian officials. He became the first Rosatom head to visit the site of India’s nuclear plant, and promised that the Russian specialists aimed to have the plant up and running as soon as possible.

There are 24 Russian specialists working at the plant, and 70 percent of the equipment will be imported from Russia. The station has created 8,000 jobs for local residents. Kiriyenko spoke with local schoolchildren and explained to them that the plant would help boost the local economy. He also reinforced the importance of the Russo-Indian partnership, and took a swipe at unnamed Western countries, saying that Russia and India had a robust and friendly mutual relationship, and “unlike some countries, we actually reinforce it with action.”

Currently, Russia is unable to increase cooperation with India due to the informal requirements of its membership of the Nuclear Suppliers Group (NSG). India is not a signatory to the Non-Proliferation Treaty (NPT), and NSG members are not supposed to supply nuclear fuel to non-member states. As it is, the Russian supply of uranium to the Indian reactor irritated other NSG countries. But after visits to New Delhi by the French and U.S. presidents recently, all signs indicate that this could change.

“Russia fully supports the recent U.S. steps, and wants India to be treated differently from other non-signatories to the NPT, because it sees India as a reliable country,” said Vladimir Orlov, director of the PIR Center, a Moscow-based think tank dealing with nuclear issues. “I think that if France, Russia and the United States are agreed that there should be a new approach to India from the NSG, this is something the other members will find very hard to ignore.”

Likewise, Trubnikov welcomed the U.S. initiatives, suggesting that they were more likely to prompt further co-operation with Russia than squeeze the Russians out of the market. “We are not worried about other countries entering the market for civilian nuclear energy in India, because the market is huge,” said the ambassador. Moreover, Russia is in a prime position to win new contracts “The role of nuclear energy in India is going to significantly increase in the near future,” Sudhinder Thakur, the executive director of the Nuclear Power Corporation of India told RIA Novosti. “The fact that Russian companies are already working in India clearly gives them an advantage over companies from other countries,” he said.

Trubnikov expressed hopes that other countries will follow Russia’s lead in recognizing the uniqueness of India’s situation. “Russia has long been trying to convince its partners that the status quo with regard to India should be changed,” the ambassador said. “India has asserted itself as a country with an impressive democratic setup, a good non-proliferation track record, and strong export control over nuclear technology.”

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