Four corners of a good deal

For India, a closer relationship with the U.S., Japan, and Australia should not only be seen in defence terms — it could help secure its energy supplies

March 10, 2016 02:03 am | Updated September 08, 2016 07:25 pm IST

“Economists say that for Indian economic growth to return to double digits, energy supplies must increase by three to four times over the next few decades.” Picture shows coal workers in Dhanbad, Jharkhand. Photo: Manob Chowdhury

“Economists say that for Indian economic growth to return to double digits, energy supplies must increase by three to four times over the next few decades.” Picture shows coal workers in Dhanbad, Jharkhand. Photo: Manob Chowdhury

On March 2, speaking at a conference in New Delhi, the head of United States Pacific Command issued a clarion call for more robust U.S.-India cooperation in the Asia-Pacific. >Admiral Harry Harris observed that India is “beginning to exert its leadership” in the region, which he referred to as the “Indo-Asia-Pacific”. His appeal for partnership was strikingly direct. “We are ready for you,” he declared. “We need you. Let’s be ambitious together.”

Of particular note was Admiral Harris’s pitch for greater cooperation between the U.S., India, Japan, and Australia. The U.S.-Japan-India trilateral has gained momentum in recent years, with regular meetings and a variety of collective exercises. Conversely, the four-way arrangement has made much less progress and has largely been limited to some meetings and naval exercises several years back.

This quadrilateral relationship is typically depicted in defence terms. It is undoubtedly a national security-based arrangement. It is therefore a sensitive matter, particularly given the message it sends to Beijing. This helps explain why Indian officials have not reacted warmly to Admiral Harris’s proposal.

Michael Kugelman
Raymond Vickery

However, something significant gets lost amid all this loud talk of national security and China concerns: a closer relationship between these four key democracies can also boost India’s tenuous energy security in a big way.

Growing energy appetite India’s yawning energy needs are well-known. Economists say that for >Indian economic growth to return to double digits, energy supplies must increase by three to four times over the next few decades. Deficits, however, are immense — including, for electricity alone, peak demand deficits of 25 per cent in some southern States.

This helps explain India’s addiction to overseas energy. Eighty per cent of its oil is imported, as is about 20 per cent of its coal — though in recent years, coal imports have increased by as much as 56 per cent in a single year. India also imports 40 per cent of its uranium. And it is increasingly importing natural gas.

Import-dependent energy policies are always fraught with risk, and India’s is no exception. Many, if not most, of its hydrocarbon imports come from unstable or faraway regions; two thirds of its oil comes from West Asia, and distant Venezuela is also a key source of oil. Additionally, India sees great potential in gas-rich Central Asia. However, because Pakistan denies India transit rights to Afghanistan, India lacks direct access to the region.

Though New Delhi has scored some successes in Central Asia — including uranium cooperation with Kazakhstan — it has largely lost out on many opportunities, even while China has seized them. New Delhi seeks to enhance its access to Central Asia by developing the Chabahar port in southern Iran; however, so long as Afghanistan remains unstable, access to Central Asia via Chabahar will be difficult. Afghanistan’s security problems also make the TAPI gas pipeline an unlikely prospect.

Meanwhile, the lifting of sanctions on Iran following its nuclear deal with the U.S. opens up energy possibilities for India, which has reduced its imports from Iran in recent years. However, New Delhi faces serious competition from other importers rushing to cash in.

Enter the quad Australia can provide immense energy benefits to India. It already provides sizeable quantities of coal. The two sides have explored uranium cooperation. And most importantly, Australia is a top global producer of LNG. In recent weeks, New Delhi has telegraphed a strong desire to capitalise on Australia’s gas riches. With LNG prices having fallen by 75 per cent since 2014, the timing could not be more ripe to explore deeper energy cooperation — particularly given the volatile location of Qatar, the top current source of India’s LNG imports. The quadrilateral would boost India-Australia relations overall, and better position New Delhi to negotiate workable LNG agreements with Canberra.

Additionally, >India could leverage a closer relationship with Australia to engage more deeply with the latter’s neighbour, Indonesia, which provides India more than 60 per cent of its current coal imports. This would help advance New Delhi’s “Act East” policy. Cultivating deeper energy relationships with these two relatively close-by Southeast Asian countries — an objective that the quadrilateral relationship can help bring about — would ease the burden on India’s naval forces of protecting energy assets in areas more far-flung than Southeast Asia.

Additionally, Indonesia and Australia — despite their proximity to the South China Sea and their susceptibility to Islamist militancy, including attacks by the Islamic State — are far more stable than West Asia, which would ease concerns about the security of Indian energy assets and imports originating in these two countries.

More broadly, for India, the quadrilateral relationship could enhance energy engagement with the U.S., Japan, and Australia across the board. These three countries have signed on to the India-led International Solar Alliance. Japan and India are offtakers for U.S. LNG projects. And all four countries have an interest in energy infrastructure development.

In recent years, a major roadblock to the quadrilateral relationship was Australia, which withdrew from the arrangement in 2013, citing concerns about China’s reaction. Today, however, Canberra has a different government and has expressed support for resurrecting it. For New Delhi, reviving the quadrilateral relationship may not make much sense from a national security perspective. However, viewed through the lens of energy security, it arguably makes very good sense.

(Michael Kugelman is the Senior Associate for South Asia at the Woodrow Wilson International Center for Scholars in Washington, D.C. Raymond Vickery is a Global Fellow at the Woodrow Wilson Center; a senior adviser at Albright Stonebridge Group; of counsel at Hogan Lovells; and a former U.S. Assistant Secretary of Commerce.)

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