Pallavi Aiyar

SCO participation comes at a critical time

India looks forward to close ties with SCO to promote economic tiesIndia, China planning joint bids for Kazakh oilfields

Beijing: Petroleum Minister Murli Deora on Wednesday arrived in Shanghai, where he will represent India at the Shanghai Cooperation Organisation (SCO) Summit to be held on Thursday. The SCO is a six-member regional grouping of several major oil producing nations in addition to the world's second largest consumer China. India, Pakistan, Iran and Mongolia have the observer status.

Apart from attending the summit proceedings, Mr. Deora will hold several bilateral meetings. On arrival, he said, "India looks forward to associating closely with SCO members" on a variety of initiatives to promote economic cooperation. He expressed the hope that the organisation would soon announce its policies on the opportunities for observer-countries to have "meaningful and substantive collaboration within the SCO framework."

Flagging the point that his visit comes in the "Year of India-China Friendship," Mr. Deora said the rapidly growing trade and economic ties were pointers to the fact that the two countries were now steadily engaged in mutually rewarding pursuits as friends and partners. "India-China relations have now acquired a long-term, global and strategic character."

First visit

This is Mr. Deora's first visit to China after he took over the petroleum portfolio from Mani Shankar Aiyar in late January. A few weeks before the change of portfolio Mr. Aiyar signed a memorandum of understanding with China aimed at boosting energy cooperation, pooling resources and bidding jointly for assets and investments in oilfields.

Mr. Deora's visit comes amid reports that the Himalayan neighbours are planning to make a joint bid of $2 billion for oilfields in Kazakhstan. The official China Daily recently ran a story, according to which the Oil and Natural Gas Corporation and the Citic Group, China's largest investment company, will jointly bid for more than 400 million barrels of Kazakh deposits owned by the Calgary-based Nations Energy. Kazakhstan is an SCO member.

Bidding wars

The attempts at cooperation in the energy sector follow a period of intense rivalry in which bidding wars between Indian and Chinese firms shopping in the same neck of the woods have pushed up the price of energy assets. Given the voracious appetite of their fast growing economies, the neighbours together account for some 35 per cent of the world's energy demand.

Mr. Deora's participation in the SCO meeting comes at a critical time, as India is trying to diversify its energy suppliers, seeking hydrocarbons in Central Asia. Iranian President Mahmoud Ahmadinejad will also attend the summit. India is looking to build an oil pipeline from Iran via Pakistan.

Energy corridor

Pakistan will be represented by President Pervez Musharraf, who has recently gone on record saying he would like China to consider creating an energy corridor through the Gwadar port in his country. He is expected to ask for Chinese assistance in constructing two nuclear plants in addition to the two already built with Chinese help at Chashma.

Mr. Deora's visit will thus be a crucial test for him. He will need to build on the foundations for cooperation with Beijing that Mr. Aiyar laid in January, in addition to courting the oil-rich Central Asian States and Russia, amidst the background of some aggressive energy diplomacy by Pakistan.