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Analysis: India eyes Kazakh energy

disclaimer: image is for illustration purposes only
by John C.K. Daly

India may be a relative latecomer in the rush for Caspian hydrocarbon riches, but its booming economy and stable democratic traditions make it an attractive market for Central Asian energy producers, particularly Kazakhstan.

Bishkek it adroitly seeking to diversify is markets, as Russia takes 33 percent of the country's exports.

To bolster India's presence in the Caspian and Central Asian energy bazaar, Vice President Mohammad Hamid Ansari undertook a six-day official visit to the region. Successes were not long in coming. In April 5, during a visit to Turkmenistan, he signed a landmark memorandum of understanding on energy cooperation.

But it is Kazakhstan that is the real rising Central Asian petro-state. It has the Caspian region's largest recoverable crude oil reserves, and its production accounts for more than half of the region's roughly 2.8 million barrels per day, including Azerbaijan, Uzbekistan, and Turkmenistan. Awash in a sea of petroleum, Kazakhstan's gross domestic product since 2001 has been among the world's highest. Oil exports underwrite its economy and have ensured that since 2000 the country's average real GDP growth has stayed above 9 percent.

Bilateral trade statistics indicate rising mutual interests, as Indian-Kazakh trade has soared from $60 million in 2002 to nearly $196 million in 2007. In 2006, Indian investment in Kazakhstan increased to $16 million, while among the Kazakh companies establishing a presence in India is oil exploration firm Kaspain Shelf. The growing interaction is spurred by the fact India is dependant on imports for 70 percent of its energy needs, a fact reflected in that, of Ansari's six days, four were spent in Kazakhstan.

"Greater economic engagement between India and the countries of the Central Asian region is not only mutually beneficial for the countries but also for the whole region and the world," Ansari told Kazakh lawmakers.

He said India views Central Asia as "our extended neighborhood."

Kazakh Senate Speaker Kassym-Zhomart Tokayev in a joint news conference with Ansari called the meetings wide-ranging.

"The talks were dedicated to the issues of strengthening Kazakh-Indian relations," he said.

Ansari was refreshingly forthright about New Delhi's agenda, telling reporters after his talks with Tokayev: "We held discussions on means of increasing bilateral trade and expanding the areas of economic cooperation, particularly in the hydrocarbon sector."

A senior Indian Foreign Affairs Ministry official said the two sides "agreed on enlarging exchange of visits and expanding cooperation in areas of mutual complementarities. In particular, energy, food production, IT and education were emphasized."

Ansari's delegation included Minister of State for External Affairs E. Ahmed and Indian lawmakers.

The political back-scratching included Tokayev hailing New Delhi as a "reliable partner" of Kazakhstan in international forums and reaffirmed Kazakhstan's support for India's bid for a seat on the U.N. Security Council.

Ansari's visit built upon consultations held last August between Kazakh Foreign Ministry delegates and their India Foreign Office counterparts. The discussions included trade issues, economic interaction, transport, cooperation at multilateral forums, Kazakhstan's entry to the WTO, energy, IT and science and technology, including space research. Post importantly for Ansari's visit, a Joint Working Group on Hydrocarbons was established during the discussions under the umbrella of Inter-Governmental Commission co-chaired by Kazakh Energy and Mineral Resources Minister B. Izmukhambetov and India's Petroleum and Natural Gas Minister Murli Deora.

For all the bonhomie, however, the fact remains Kazakh-Indian hydrocarbon remains a proverbial pipe dream for the simple reason of geography. There as yet exists no Kazakh-Indian pipelines, and any would have to traverse either Turkmenistan or Uzbekistan, which are stable, as well as Afghanistan and Pakistan, which are not. A proposed Trans-Afghan Pipeline for natural gas has been bandied about for years, the current state of political turmoil in Afghanistan has done little to advance it.

That said, besides hydrocarbons, New Delhi has another energy interest in Kazakhstan - uranium. India is increasingly looking to diversify both its sources of supplies and its energy projects, a concern heightened by the fact the India-U.S. civilian nuclear agreement is in cold storage. India has nine operational nuclear reactors and another eight under development, while Kazakhstan is the world's third-largest producer of uranium, and its reserves are the world's second largest, exceeded only by Australia.

While Kazakh-Indian bilateral trade remains modest, one of the world's 10 largest petroleum-exporting nations allying itself with the 12-largest global economy in an era of record high energy prices will doubtless fuel the rise of both.

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