New Delhi: India has recently surpassed the UK to become the 5th-largest economy and may surpass Germany and Japan to be the 3rd-largest economy anytime between 2030-37 with over $10-trillion GDP. India also aims to reach the developed country status with over $30-trillion economy during the Amrit Kaal, or at least by 2047, if not before. To put an economy of this scale in place, while the energy usage and the mix need to be diversified, it is equally important that the security of long-term energy supplies is assured and ensured. India is largely dependent on hydrocarbon imports from a dozen or so countries from West Asia to Africa to Latin America. Most recently, India has stepped up imports from Russia in a big way. This commodity is on a premium being a fungible asset. India and China are the largest importers and consumers of oil and gas in the world.
Energy supply is also a tool for geopolitics and geoeconomics, especially for oil and gas producers and suppliers. India and other importing countries have faced the brunt since the 1973 Arab-Israel war when it was for the first time used as a negotiating leverage. Iraq wars and interrupted supplies and the high cost of oil stressed the domestic economies even more. In 1991, India was forced to pawn its gold to pay back the debt and due servicing charges while embarking on far-reaching economic reforms with the troika objectives of privatisation, liberalisation and globalisation. Once again, during the Covid pandemic, one witnessed that due to lax demand the oil exporting countries faced their own crisis and several of them had to dip into their sovereign wealth reserves. Hence, ironically, to many of them, the Russia-Ukraine war and demand generation due to the dipping of the virus load, and the consequent rise in oil and gas prices was a booty. The OPEC+ countries (cartel of oil-producing countries and Russia), despite US and western pressure and unpleasantness, did not increase the production targets. One also witnessed the weaponisation of energy as an instrument to exercise power in the international domain.
India, being the third-largest consumer after the US and China, was not untouched and had to diversify its imports to keep the domestic prices and public sentiment in check. Russia, under severe western sanctions and market access constraints to Europe, offered India oil at discounted prices, making it highly competitive, and assured it of supplies. Although New Delhi has significant lucrative investments in the Russian oil and gas sector, it has not been importing much directly from Russia due to distance and other logistical issues. That is why when the West started criticising India for financing President Vladimir Putin's war chest, asking it to stop imports, Indian External Affairs Minister Dr S Jaishankar famously called out their hypocrisy, by asking, "I understand that there is a conflict situation (in Ukraine). I also understand that Europe has a point of view and Europe will make the choices it will make that are Europe's right. But for Europe to make choices which prioritise its energy needs and then ask India to do something else…?"
"I think, first, we need to establish the facts very clearly. Between February 24 and November 17 (2022), the European Union imported more fossil fuel from Russia than the next 10 countries combined. The oil import in the European Union is like six times what India has imported. Gas is infinite because we do not import it, while the European Union imported 50 billion Euros worth (of gas)," Jaishankar said. Even coal imports from Russia by the European Union is 50 percent more than India's imports. Then again, in the wake of the West capping the Russian oil price, he drew attention towards the fact that increased imports of oil and gas by Europeans from the Middle East have put pressure on international oil prices as well as on its availability to countries like India.
Consequently, Russia, which in October 2022 for the first time surpassed India's traditional sellers Iraq and Saudi Arabia to take the No 1 spot, supplied over one million barrels per day to the country in December 2022. And currently, it accounts for 25 percent of India's total imports. This could cause the West to attack India a bit more, but the national interest of India is supreme and non-negotiable and this was the message that has been repeatedly conveyed to them by the Indian government.
Traditionally, India's energy security is directly entwined with its extended neighbourhood in West Asia, especially the Gulf Cooperation Council (GCC) countries. Iraq, Saudi Arabia, UAE and Kuwait are the major suppliers of oil, while Qatar accounts for 90 percent of gas imports by India. They are robust strategic partners of India and have stood by India during times of need and are even investing in the country's downstream sectors and strategic reserves. Most of these countries are following an 'Act East Policy,' following their major Asian markets and partners in China, India, Japan and South Korea, among others. And this is also dictating their foreign policy choices, especially with regard to the Russia-Ukraine war. Indian companies, of course, had to forego imports from Iran which accounted for 11-12 percent of the total crude oil imports, under the severity of the USA's unilateral CAATSA sanctions. Witnessing New Delhi's stance on Russian oil, Tehran is advocating for the resumption of supplies to India.
Climate Change and the fungibility of hydrocarbons have forced countries, including oil producers, to diversify their energy basket towards renewables. Under Prime Minister Narendra Modi, India has set ambitious yet achievable targets to increase the contribution of renewables through solar, wind, tidal, nuclear and green hydrogen. The energy transition is going apace. The Ministry of New and Renewable Energy (MNRE) has announced that out of the 175 GW installed RE capacity target to be achieved by 2022, as announced in 2015 by Prime Minister Modi, India has already attained the 100 GW milestone (excluding large hydro) in 2021. It also said that as of now, India has only tapped a fraction of the vast potential for renewable energy and, therefore, India has raised the RE installation target to 500 GW by 2030. India has also reached the target much faster by producing 40 percent of energy via non-conventional methods and at the same time meeting Nationally Determined Contributions (NDCs) ahead of the timelines. India also aims to produce 5 MT of Green Hydrogen by 2030 and has entered into large-scale collaborations with European nations, especially Nordic countries and African and Arab countries. Another alternative for India is to add ethanol to petrol and there again, India has achieved the 10 percent target well before time. Now, it is targeting 20 percent ethanol blending from sugarcane by 2030.
In 2015, along with France, India launched an International Solar Alliance (ISA) whose membership has grown to over 110 countries spanning across continents.
Given the fast implementation of policies and achievement of targets, one has to agree with Petroleum Minister Hardeep Singh Puri when he says, "India has been able to navigate through the most formidable energy crisis the world has seen since 1973, thanks to its four-pronged energy security strategy which includes diversification of energy supplies, increasing exploration and production footprint, using alternate energy sources and meeting energy transition through the gas-based economy, green hydrogen and Electrical (EV) vehicles."
Despite global conundrum and headwinds, India, the fastest-growing major economy, is well placed to ensure its energy security and transition successfully and to meet the net zero emission target by 2070 or even before. Of course, for that, Indovation (India+Innovation) is a prerequisite both in policies and technologies and their implementation and deployment.
The author is a former Indian Ambassador to Jordan, Libya and Malta and a Distinguished Fellow at the Vivekananda International Foundation.
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