Chapter II

LITERATURE REVIEW
 CHAPTER II

LITERATURE REVIEW

1. Tanvi Madan (2010) has examined India’s current need and the projected energy
demand by the year 2030. She has discussed in her article ‘India’s international
quest for oil and natural gas: fuelling foreign policy’ that how India’s activities
abroad related to the search for oil and natural gas would affect India’s foreign policy.
In this article, she has concluded to follow multilateral framework i.e. to focus on few
major suppliers for energy security instead of overly depending on any one country or
regions.
Demand for larger qualities of energy to sustain India’s economic growth of an
average 8 % would be more than double by 2030. Between 2030 and 2050, China and
India together would account for around 50 % of the increase in global energy
demand. Domestic supply of oil and natural gas is projected to account for almost one
- third of consumptions by 2030. India’s dependence on oil imports is expected to
increase to 90 % by 2030 and in case of natural gas; about 50 % would be met from
abroad. Due to continuing geopolitical uncertainty in the Middle East region, the
Indian government has been following a strategy of diversification pursuing a number
of options related to various energy sources as both domestic and international front.
In this connection, there are four types of following activities which impact on India’s
foreign policy: i) Investment by Indian private sector and state-owned oil and gas
companies in oil and natural gas abroad ii) Proposed natural gas pipeline projects iii)
Bilateral purchase deals for oil and natural gas and iv) the energy diplomacy policy
designed to facilitate these efforts. To facilitate all above, Indian diplomats and
energy ministers have undertaken ‘energy diplomacy’ to supplement and diversify
supply and attract investment and technology. For this energy security unit has been
created and an international cooperation division to devise an international strategy to
organise India’s participation in bilateral and multilateral forums.1

16
 
2. The objective of the article ‘India’s Energy Security : Challenges and
Opportunities’ is to focus on the arising need of energy security issue as oil reserves
are limited, production is declining due to poor recovery factors and R/P ratios are
also declining . The author of present article, Bhupendera Kumar Singh (2010) has
explained that besides oil price variations which cause volatility in stock markets and
business aspects are to be faced by all energy importing countries. He has also
analysed that for enhancing energy security, energy market integration and diversity
of supply are important aspects securing reliable and affordable energy require
adequate investment.
Given the continuing uncertainties with regard to supplies, energy security has
emerged as a matter of priority and concern for India. Diversification of the oil and
gas supply base is key to India’s energy front. India has achieved some success on this
front. India has sourced supplies from countries in Africa (15.69 %), Latin America
(6.8%), South East Asia (0.038%) and CIS region (0.013 %) while maintaining its
traditional supply line from the West Asia region (72.08 %), in the year 2009. With
the aim of energy security, India has been developing more broad-based bilateral
relations with energy surplus countries. The way forward to achieve energy security
would include investments, free trade, energy efficiency and conservation. Energy
efficiency plan would save energy around 5% of energy consumption by the year
2015.2

3. The focus of the research article ‘The Changing Dynamics: Gulf Energy Security
(India and Gulf countries)’ is on increasing insecurity and uncertainty of energy
supplies from the Middle East countries, due to increase in their domestic energy
consumption, decrease in oil reserves, political crisis on gulf energy projects.
Bhupender Kumar Singh (2009) in this article has analyzed the ‘peak oil’ situation
with decreasing oil reserves discovery rate of gulf countries and their impact on India
and other Asian countries.

The author has explained that the energy security applies not only to oil importing
countries but also to exporting countries of energy resources. Gulf countries have
experienced many dynamic changes on the energy front. Firstly they are the main

17
 
 suppliers of petroleum energy, many Gulf countries have witnessed increases in
domestic energy consumption due to increase in per capita income (as a result of high
prices), compelling them to diversify their energy sources. Secondly many reports
indicate a declination in oil reserves. Gulf countries are going to face the ‘Peak oil’
situation combined with decreasing oil reserve discovery rates. Thirdly, the market for
energy exports is gradually shifting from the traditional destinations of the US and
Europe to Asia, which has new emerged as a major market for energy exports.
Fourthly, the global financial meltdown has drastically affected Gulf energy projects
and stalled many energy projects.

Gulf countries might have sufficient oil, but unprecedented demand for electricity is
staining and posing near-term challenges to growth. New oil field discoveries have
been declining steadily for 40 years despite extensive exploration using the most
advanced technology.

The global financial meltdown of the year 2008 has stalled many energy projects. The
author has stated that it has become imperative for India to find out alternative source
of supply of energy. It is surely possible for India to strive for good ties with the US,
Non-OPEC (Russia) and Israel (without identifying too closely with their agenda in
the gulf) and also maintain close ties with the Arabs and Iranians.3

4. An objective of the research article ‘Gulf-Asia historical relations: An overview’

has been stated by A.K.Pasha (2005) that India have been striving for good ties with
the U.S and Israel and also maintain close ties with the Arabs and Iranians. For this,
India has been following diplomacy with different countries. Indian diplomacy must
rise to the level as it is presented with both challenges and opportunities in the energy
rich but unstable Gulf. As India’s energy needs are growing and everything possible
must be done to secure close ties with oil producers in the Gulf and other energy rich
countries. This has become vital for India’s growth and prosperity. According to the
author, India’s policy in the Gulf should be free of US influence. After 9/11, it has
become obvious that some countries, especially, Saudi Arabia, are looking to the East
and finding an attractive partner as India. It has become essential to protect India’s
interests and prevent the spread of violence and terrorism from this volatile region.

18
 
 The GCC monarchies are willing to share power with their own people and reduce
their dependence on the US. Instability, religious extremism and terrorism in the Gulf
and West Asia have the potential to spill over into South Asia, since the security and
stability of both regions are mutually interlinked through a number of factors.4

5. Yergin Daniely (2006) has stated that Energy security has become a question of
national strategy, in his article ‘Ensuring Energy Security’. The author has stated
“Safety and certainty in oil” lie in ‘variety and variety alone’. The renewed focus on
energy security is driven in part by an exceedingly tight oil market and by high oil
prices. It is further fueled by the threat of terrorism, instability in some exporting
nations, a nationalist backlash, fear of a scramble for supplies, geopolitical rivalries
and countries fundamental need for energy to power their economic growth. The
author has focused on the key to energy security i.e. diversification. For Russia, the
aim is to reassert state control over strategic resources and gain primacy over the main
pipelines and market channels through which it ships its hydrocarbons to international
markets. For India and China, energy security lied on their ability to rapidly adjust to
their new dependence on global markets, which represents a major shift-away from
their former commitments to self-sufficiency.

A new energy security framework/model was created in response to the 1973 Arab oil
embargo. To maintain energy security countries have to abide by several principles as
below: i) Diversification of supply multiplying one’s supply sources reduces the
impact of a disruption in supply from one source by providing alternatives, serving
the interests of both consumers and producers, for whom stable markets are a prime
concern. ii) A second principle is resilience, a “security margin” in the energy supply
system that provides a buffer against shocks and facilities recovery after disruptions
iii) recognizing the reality of integration. There is only one oil market, a complex and
worldwide system that moves and consumes about 86mn barrels of oil every day,
iv) Fourth principle is the importance of information on an international level; the
IEA has led the way in improving the flow of information about world markets and
energy prospects.

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 The challenge of energy security would be growing more urgent in the years ahead
because the scale of global trade in energy would grow substantially as world markets
become more integrated. Inevitably, there would be shocks to energy markets in
future mainly because of disruptions in the Middle East and Africa or Latin America.
So diversification would remain a fundamental starting principle of energy security
for both oil and gas besides developing a new generation of nuclear power and ‘clean
coal technologies’ and encouraging renewable energy sources. In a world of
increasing interdependence, energy security would depend much on how countries
manage their relations with one another, whether bilaterally or within multilateral
framework.5

6. The objective of the article ‘Asian Energy security: The role of China and India’ is
to present the argument that energy security threat does not necessarily come from
resource depletion alone but inefficient and demand-driven production, are also
responsible for supply shortages. Jiejum Ni and Fengying Chen (2008) have stated
that energy security has made the global security indispensable as the interests of the
energy-producing and energy consuming countries are now closely inter locked.
Economics globalisation, coupled with geopolitical instability and international
terrorism has made it impossible for any single country to secure its energy supply
entirely on its own. The article focuses on the need to expand energy security. The
real risks are not ‘below ground’ (a lack of resources) but ‘above ground’ (political
instability). India and China could find out the ways to corporate on energy rather
than taking adversarial position. Both together could help to strengthen Asian unity,
stability and prosperity and thus significantly can contribute to the world order.
The article is based on IEA forecast which asserts that two-thirds of the rising energy
demands between 2002 and 2030 would be from developing countries with their
consumption ratio rising from 38 % to 48 % and that for OECD members dropping
from 52 % to 43 %. OPEC dominance is being challenged by non-members suppliers
like Russia and countries in central Asia, Africa and Latin America.
The author has focused to have diversity and cooperation as the main principles to
maintain energy security in the Asian region. All Asian members have common
interests in price stability, ensuring energy supply, protecting environment,

20
 
 conservation and energy security. The authors have emphasized the necessity to set up
a regional energy organization like the IEA and Asian Financial Cooperation to allow
all key players to work together to deal with challenges of energy security.6

7. The focus of the article ‘The new Energy Order-the way to energy security
‘Managing Insecurities in the twenty-first century’ is regarding the new ways for
managing insecurities in the twenty first century i.e. the new energy order, when
producers and consumers are not sure of each other. David G.Victor and Linda
Yueb (2010) have stated that a nimble energy agency focused on practical approaches
to the new realities of the world energy market can fill the gaps of demand and supply
of energy market.

For the world energy system, the last decade has been an extraordinary shift in
expectations when prices for oil and most energy commodities rose sharply and
become more volatile. Energy security became an important issue of concern.
Producers and consumers were not sure of each other. It had become difficult for
governments to manage the world energy system as the crisis was increasing. The
issues of concern are:

Shift in sources of consumption- Most of the future growth in demand would be from
emerging market countries, notably China and India. An era of growing demand for
oil and other fossil fuels in the industrialized countries is over.
Environmental impact of energy use is also of growing concern especially emissions
of carbon dioxide.

OPEC, the big oil producer i.e. the cartel even has no power to guarantee demand for
the products i.e. demand security. So, a ‘Energy Stability Board’ could be created to
help government and existing international institutions to better manage energy
problems of 21st century like the ‘Financial Stability Board’. It could work with major
energy consumers like China and India to set investment standards that both align
with their interests and are consistent with the market rules that govern trade in energy
commodities.7

21
 
8. Global energy security was traditionally viewed from importer’s perspective. Adil,
Bagirov, (2008) in his Article ‘Global Energy security and Russia-U.S.
Cooperation’, has viewed Global energy security to be based on equitable economic
interdependence. Russia proposes strengthening energy cooperation through mutual
penetration, asset swapping, a new energy participation and effective interaction. He
has specifically stated that Russia, together with other oil and gas rich FSU countries,
can become an alternative to the Middle East countries. Russia has the world’s largest
natural gas reserves (45 % of global reserves) and shares third and fourth position,
together with Iran, for oil reserves (13 %).
An objective of this article is to state that diversification of energy sources supplies i.e.
from Middle East to other oil and gas rich countries like Russia for energy security
has been followed. United States and Europe would not be able to achieve energy
security without diversifying towards non-middle East countries. After the September
11 terrorist attack, US made a key decision to reduce its dependence on oil deliveries
from Middle East countries and to expand cooperation in the energy realm with
independent producers, in particular, Russia and other oil rich FSU countries, with the
aim of consolidating Russian-US relations and enhancing global energy security and
strategic stability. Despite of huge oil and gas reserves, supply from Middle East has
become uncertain due to instability of political and economic situations. Most of the
importing countries like India and China are expanding their cooperation in energy
sphere with independent producers, in particular Russia and other rich FSU countries.
Russia and the United States, alongside China and India, are the world’s largest
consumers of primary energy resources. Russia is the only large energy exporter,
which is a member of the G-8. In this respect, Russia’s role as a kind of a
communication channel and ‘intermediary’ between industrialized nations and BRICs
countries on one hand and oil producing countries from the ‘Third World’ on the
other side, is unique.8

9. The objective of the article ‘India and its Energy Security Strategy’ of ‘Devika
Sharma’ (2010) is limited to a specific theme of India’s energy security strategy to be
followed at domestic level and at external level. The author has stated that energy
diplomacy policy to be followed by India to achieve energy security. Energy security

22
 
 is more than just about managing the demand-supply dynamic or energy trade
between nations. In reality, countries attempt to address their energy needs in multiple
ways at multiple levels. A decision to expand nuclear energy is not only about
sourcing uranium and inking civil nuclear energy deals with leading nuclear energy
countries but equally about putting in place a financial plan that apportions priority to
nuclear energy infrastructure.

An objective of this research article is to state the rising importance of energy in the
country, energy security as one of the prime goals of foreign policy and to focus on
energy diplomacy. The last decade has witnessed several vision and strategy
documents to the energy sector. The author has highlighted India’s strategy on energy
priorities in the energy sector as follows:
i. Recognition of India’s growing demand for energy has brought about a multi-
faceted attention to energy that straddles reform in the regulatory sector.
ii. The integrated energy policy stated the internal ‘energy poverty’ dimension
clearly: the broad vision behind the energy policy is to reliably meet the demand
for energy services for all sectors at competitive prices. Lifeline energy needs of
all households must be met through safe, clean and convenient forms of energy at
the least cost in a technically efficient, economically viable and environmentally
sustainable manner (Planning Commission 2006).
iii. A major component of India’s energy security strategy is about seeking self-
reliance and energy independence. The ‘India Hydrocarbon Vision- 2025’
document has focused mainly on assuring energy security by achieving self
reliance through increased indigenous production (and investment in equity oil
abroad).
iv. Diversification of India’s energy basket has been another major plank of the
country’s energy strategy.
v. As India becomes a bigger energy consumer, it needs to ensure that energy
services are provided in an efficient, transparent and accountable manner.
vi. In the last one decade, energy has become a critical component of almost all
bilateral and regional/ pluralateral (such as the BRICS, SAARC) high levels

23
 
 meetings that India has been part of priorities of India’s external energy security
strategy:
vii. India has been making concrete efforts to cast its net wide imports from not only
Africa but also Latin America and Central Asia. The diversification of fuels has
been responsible for India building new energy India has inked civil nuclear
agreements with seven countries, namely, the US, France, Russia, Namibia,
Mongolia and Kazakhstan and Australia.
viii. India is to move towards greater self sufficiency expanding the role of solar
energy i.e. renewable sources of energy.
ix. Apart from diversification of sources, India’s external energy strategy has also
included the identification of alternative routes, focusing on the possibility of not
only pipelines but also swap arrangements that would help circumvent routes,
which are unsafe
x. Identifying secure ways of bringing energy to India through maritime security of
the Indian Ocean.
xi. The growing competition between India and China is to be managed in a balanced
manner not only within South-Asia but also in Africa, West-Asia and Central-
Asia.
xii. Equity investment in overseas oil and gas fields have been crucial aspect of
India’s energy security strategy
xiii. India’s growing role in energy arena in its growing participation in the various
energy related institutional frameworks at different scales that is from regional to
the Multilateral like IBSA/ BRICS/SCO. India has already been involved in the
International Energy Forum (IEF) and expanding interaction with IEA and the
Energy Charter Treaty.9

10. Chen Fengying and Ni Jiejun (2009) have emphasized in their article “Asian
Energy Security: The role of China and India” that the concept of energy security
needs to be expanded as it defines international relations. They have further explained
that the real risk of energy security are not ‘below ground’ (a lack of resources) but
above ground (Political Instability). A new energy security concept is needed to
ensure global energy security. Economic globalization, coupled with geopolitical

24
 
 instability, resource availability and international terrorism, has made it impossible for
any single country to secure its energy supply entirely on its own. For Asian (India
and China) energy security, stability and prosperity, with clear identification of shared
interests, could together strengthen and help.

IEA information has been used, which believes the current deposits could satisfy
energy demand for next 30 years and as per EIA report forecast, oil production of
OPEC would increase around 55 % by 2025, from the year 2005. Russia’s production
would increase to 17.5 million barrels per day by 2025 with optimistic prospects for
the Caspian sea area. In terms of supply and demand there would be much change.
Demand would remain much higher than supply, despite conditions have improved
for the global spare oil production capacity.

The author has stated that the multi-polarity trends are increasing. OPEC dominance
is being challenged by its non-member suppliers like Russia and countries in central
Asia, Africa and Latin America. The urgent energy security issue has resulted in brisk
energy diplomacy for cooperation among both producing and consuming countries.
Asian reliance on oil from Middle East and Africa has become a heavy burden and a
great risk to national energy security.10

11. Biju Thomas (2007) in his article ‘Putin’s India Policy: Mutual gains for future’,
the importance of India in Russia’s foreign Policy is rather strategic than economic
and increased after Putin became the president. Despite Putin’s westward orientation
much of the contradictions remain. Putin’s policy is to retain India as a major strategic
partner not only to balance China but also because of India’s unique geographical
position in the Indian Ocean. It is gainful for India as its relations with the US remain
unpredictable and Russian support is essential to take part in the political and
economic developments in central Asia. Russia could also satisfy the arms and energy
requirements of India. India and Russia are complementary to each other for defense
and energy.

In the East, Russia is anchoring on India in the sphere of security while in the West, in
old Europe, Indo-Russian relations, centering their status in today’s uni polar world.
The article states that Russia sees in India a power and ally in building a multipolar

25
 
 world, an ally to balance China in any future Russo-Chinese tension and India takes
Russia as long term ally in its problems with neighbors like Pakistan. The
strengthening of ‘Shanghai Cooperation Organisation’ (SCO) has been aimed at
promoting multipolarity. An important step in the direction of promotion of
multipolarity is the regular trilateral meetings between Russia, India and China. High
cost, long duration of transportation, lack of connectivity has made Indian goods less
competitive in the Russian market. North-South Corridor between India, Iran and
Russian Federation would facilitate easier movement of goods along the corridor
connecting India through sea to Iran and then via Caspian Sea to the Russian
Federation and beyond. Biju Thomas has emphasized that there is high potential for
cooperation. There are mutual interests in expanding cooperation at bilateral, regional
and multilateral levels.11

12. To achieve energy security by India, the policy to be followed has been given by S.R.
Yadav (2008) in his article, ‘India’s Energy security Policy’. He has stated that in
the energy sector including nuclear energy, security has emerged as the key
dimension of India-Russia future economic partnership. India agreed to promote
investment into Russian energy sector and Russian investment into Indian energy
sector. Indian at present imports around 70 % of its total oil requirement which is
expected to go up to 91 % by the year 2025. So the gap between demand and supply
would be wider as India’s annual production is not even equivalent even to one third
of its consumption.

This article has examined how India’s foreign policy would project its energy
interests in this unequalitarian order. To meet the gaps between production and
consumption, the following measures of energy security policy are to be followed:
i. To increase the domestic production by increasing the involvement of private
companies.
ii. Making investments in Sudan, Russia, Libya, Vietnam, Iran, Kazakhstan,
Indonesia, Myanmar, Bangladesh and Sri Lanka.
iii. To have strategic petroleum reserve.
At present, India is also involved in the purchase of liquefied natural gas(LNG) from
abroad and building of terminals to receive such imports. Nuclear energy programme

26
 
 has also been launched for nation’s security, energy security and self reliance in its
energy needs and to consolidate its relations with the NSG countries. USA, France
and Russia are particularly in the need for energy have been working as compulsion to
take tax policy initiative towards the improvement of relations with neighbouring
stated in the west (Afghanistan and Pakistan) and east( Myanmar and Bangladesh) .
S.R. Yadav has stated about enhancement of alternative fuel and renewable sources of
energy.12

13. Mikhail Y. Pavlov (2006) has focused on economic and environmental conditions,
which require seeking global, long-term energy security based on renewable, non-
polluting sources and technologies. He has emphasized in his article ‘A new energy
Paradigm for the third millennium’ that the era of fossil fuels is gradually drawing
to an end and a new energy paradigm for the third millennium would be required. The
energy basket changes in time and its dynamics might not coincide with the dynamics
of economic growth. Energy saving technologies can transform the whole basket. The
new paradigm ‘energy of the future’ focuses on the effective utilization of the
potential energy resources giving priority to energy to energy saving, innovative
technologies and renewable energy sources as the basic for human development
taking into account the interests of the present and the future generations.

The overall objective of the new paradigm ‘Energy of the Future’ is the transition
from our imbalanced ‘energy, ecology, economic’ to a harmonious one. One of the
priorities of the new energy paradigm is to support those technologies that are capable
of raising the economy to a completely new stage of development based on the
inexhaustible renewable energy sources while providing safety for the environment.13

14. “Markal based Pakistan’s Energy System Model” ‘Analysis of Energy security
using Partial Equilibrium Model: A case of Pakistan’ by Javed Anwar(2004):
Restricting energy imports and total primary energy supply are the two direct policy
options used for the improvement of energy security. Restricting energy imports
directly reduce energy import dependency that leads to diversification of energy
resources and ultimately enhances energy security. Total energy supply reduction
affects the energy security through the diversification of efficient technology mix and

27
 
 energy resources supply mix. The paper has examined the effects of restricting energy
import and primary energy supply on diversification of energy resources, technology
mix in energy supply side and demand side, energy efficiency, energy conservation
and energy security during the planning horizon 2005-2050. The analysis are based on
a long term integrated energy system model of Pakistan using the MARKAL
framework to analyze the long term affects of different policy options during 2000-
2035. The study makes use of MARKAL based least cost energy system model for
the analysis of energy security in case of Pakistan (Ioulou et al., 2004). The effects
related to energy security are represented through a set of energy security indicators
such as energy import dependency, diversification of energy resources through a set
of energy security indicators such as energy import dependency, diversification of
energy resources through DOPED and SWI and vulnerability. Three energy security
indicators used are:

Net Imports
Net Energy Import ratio (NEIR) =
Domestic production + Net Imports

Shannon wiener Index (SWI) = -∑xi In (xi)

Diversification of Primary Energy Demand (DoPED):

_________________________________________________________
√Coal2 + Oil2 + Natural Gas2 + Hydro Electricity2 + Nuclear Energy2
=
Total Primary Energy demand

The study found that energy import dependency, diversification of energy resources
and vulnerability show an improvement under energy import restriction, as compared
to the base case.14

15. The focus of the article ‘The Myth of Energy Security’ is to assure energy security
by following the European Union’s “20-20-20” climate plan. Bjornomborg (2011)
has stated that the European Union has offered “20-20-20” climate plan, by far the
most comprehensive climate-change policy in effect anywhere-aims to reduce
greenhouse gas emissions by 20% from 1990 levels by the year 2020, ensure that
renewable energy delivers 20% of energy consumption and cut primary energy use by

28
 
 20%. The researchers measure the impact of the 20-20-20 package through
independent energy security indices. The EU ‘20-20-20’ plan aims to do more than
just reduce emissions; it attempts to increase renewable energy use and cut overall
energy consumption. The researchers find that the full ‘20-20-20’ plan would actually
mean ‘increased energy imports and increased price risks’-mainly because the tax
imposed on electricity to achieve the efficiency target of the ‘20-20-20’ plan would
affect nuclear power the most. It would likely to lead to greater reliance on energy
imports and to hike prices. These outcomes are based on the optimistic reference
scenario used in the US department of Energy’s Outlook, under which renewable
energy use would grow at much higher rate than in the past.15

16. The objective of the article ‘Strategic Partnership and the future of India-Russia
relations’ by Sahashrabuddhe Uttara (2002) is to state that India has to balance its
bilateral relations with Russia along with multilateral regional developments. Russia
was the first country with whom India had entered into a strategic partnership. The
author reviews the evolution and prospects of India-Russia relations against that
backdrop of emerging partnership. Indo-Soviet friendship was partly a product of the
global politics of the superpowers, and partly of India-Pakistan rivalry. Both India and
the Soviet Union identified the US and China as their rivals and had an interest in
coming together against the two.
Since the end of cold war, most countries are seeking partnerships and friendship
among themselves. From the perspective, India’s relations with Russia, France and
Germany or the European Union, in general as well as with China became extremely
significant.16

17. Pavel K. Baev (2010) in the article “Russia abandons the ‘Energy Super Power’
idea but lacks energy for modernisation” has attempted to analyse that Russia has
abandoned reserves of natural gas and oil, could easily become ‘Energy Super Power’
but lacks energy for modernisation. He has stated that Russian state affairs energy
sector has acquired top priority but still Russian ex-president Medvedev has discarded
the notion of Russia as an energy super power. Medvedev has been focusing on
modernization of Russia’s development. For this, it is essential to have large

29
 
 investments in energy sector to sustain the high revenues. The main flow of revenues
comes from Europe, but Gazprom’s position in this market is seriously undermined.
Since the late 2008, it has become the epicentre of the economic disaster that still
continues to affect Russia. The sharp increase of ‘shale gas ‘production in 2008 took
Gazprom by surprise. In the year 2009, the US produced more than Russia. Even in
EU gas market, Gazprom could only keep its share by accepting shrinking margins of
profits. Russia’s plans for developing the vast energy resources in Eastern Siberia and
the proposition for increasing energy export to Asia Pacific would be a perfect match.
Still, the main strength of Russia’s energy complex is in close and profitable ties with
the EU. Russia does not want to make a China a priority energy partner in Asia. It is
essential for India to work pro-actively for building reliable and self-sustaining energy
networks.17

18. The Article ‘Energy Security in near future: Asia-Pacific Energy race hots up,
Gazprom bets big time on India’ has concluded that how Russia has been
transforming global energy market by diversifying from European market to Asia
Pacific. The author of this article, Venera Reztsova (2011) has stated that there are
three key areas in which the gas dialogue between Russia and India is active: gas
exploration and production, LNG supplies and Gas transport projects.
With Russia’s ambitious plans to expand into the Asia-Pacific region, Russian gas
giant Gazprom considers India as an important and a promising partner. The
stagnation in the European gas market and booming Indian and Chinese economies
are transforming the global energy market. Gazprom seems to become a much more
prominent player in the Asia-Pacific region before international energy giants such as
Exxon, Chevron, BP and the Chinese state oil company CNPC get to hold in it. At the
end of the year 2010, Oil India Ltd. invited Gazprom for becoming partner on two
projects, one offshore and another onshore. The focus is on the Krishna Godavari
offshore field located in the country’s southeast and on another field in India’s north
eastern Mizoram state.
LNG is another sunshine area of bilateral cooperation. India is potentially a large
LNG market that the Russian gas giant intends to start tapping as early by summer
2011. In December 2010, Gazprom Marketing & Trading and Gujarat state Petroleum

30
 
 Corporation has signed an agreement whereby the Russian holding company has been
planning to supply 300000 tons of LNG to India in the next two years (2012-13). In
2009, Gazprom and its Sakhalin-II partners finished building the first Russian LNG
plant on Sakhalin Island. The project made it possible to start supplying Russian LNG
to the Asia-Pacific markets on a regular basis. India is a strategic market for Russia
and would be given a preference for LNG supply.18

19. Vladislav Kuzmichev Konstantin Gegalov(2011) has mentioned an important point

in the article ‘Siberia, the New Promised Land’ regarding the Siberian region, the
new promised land of Russia. This would be showing closer economic ties with India.
Siberian deposits of uranium might become accessible to Indian business to enhance
nuclear energy in India. Siberia, potentially the richest region on this planet, is now
seeking closer economic ties with the dynamic Asia-Pacific region. Rosatom has
invited its Indian partners in the year 2011, to develop the Elkon uranium deposit in
south Yakutia in Eastern Siberia. For Siberia the future depends on modernization and
transition from a mining economy to an economy of innovation, without this any
development would be impossible. Siberia’s natural resources are richer than any
other regions in the world. It has 80% of Russia’s coal and gas, 70% of the oil, copper
and nickel and 99% of all platonic metals. This Eastern Siberia also have diamond
region of Yakutia, home of world’s largest diamond deposits. It is expected that
Russian Siberian potential would allow it to develop cooperation with the Asia-
Pacific region based on the fact that the Russian government has recently adopted a
program for energy development in Siberia and the Far East. This is a part of strategy
to re-orient the export of Siberia’s raw materials to the Asia-Pacific region.19

20. Amos Howard (2011) in his article ‘From Arctic to Asia, Oil and Gas go up and
East’ has stated that Russia's oil giant Rosneft deal with BP has whetted global
appetite of Russian energy companies. An objective of this research article is to state
that Russia has been looking towards South-East Asia for its energy supplies with the
joint exploitation of large untapped reserves of Arctic shelf. Russia would create a
favorable tax regime for the realization of the project. Russia’s diversification towards
South-East Asia is mainly based on predictions that its energy deficit would grow by

31
 
 seven fold over that of Europe and America’s in the next 20 years. Besides that the
demand from America of gas from Russia would fall, due to increase in usage of
unconventional gas and shale gas.
The East is their new promised land. Russian gas supplies to Asia may reach the same
level as that of Europe in a very short time. Rosneft - BP deal would have joint
exploitation of large untapped reserves on Russia’s Arctic shelf. Russia’s Arctic zone
of 51 billion tons is enough to fully meet global demand at current levels for about
five months. But the problem arises over the project’s financial viability because of
the fall in the demand for LNG in the US, which is increasingly turning to
unconventional gas reserves, including shale gas. The decision on Shtokman (Europe)
has also been postponed. So, Russia looks to increase the energy supplies to the
South-East Asia. First of all, oil exports shot up. Moscow’s increasing interest in the
East is underwritten by predictions that South East Asia’s energy deficit could grow
sevenfold over that of Europe and America’s during the next 20 years and that the
area would provide 75% of world demand growth. Due to such price volatility of oil,
the Russian government would be finding solutions using fiscal instruments and
exploring Arctic region and diversifying Oil & Gas supplies towards Asia.20

21. Alexandrov Oleg (2009) has focused the ways in which Russia would be able to
solve an equation with many countries regarding an exploration of Arctic region in
article ‘Labyrinths of the Arctic Policy’. Russia needs to solve an equation with
many unknown regions regarding Arctic region. He has stated that Arctic region has
enormous natural resources potential. It has been estimated by experts that oil and gas
deposits in the Russian part of the Arctic are at 25 % of the world’s hydrocarbon
reserves. The resumed demand for hydrocarbon resources has exacerbated the
problem of the international legal status of the Arctic and the need to resolve long-
standing territorial disputes among all the Arctic states-Russia, the United States,
Canada, Norway and Denmark. According to Norwegian Foreign minister Jonas Gahr
store, the Arctic Ocean could be Ice-free for a large part of the year by 2040, which
could make it possible to open new transportation routes. Moscow launched an Arctic
expedition in 2007. Things changed in spring 2008, when five countries that border
Arctic ocean-Russian, Canada, the U.S, Norway and Denmark-met in Ilulissat,

32
 
 Greenland, for the first international Arctic Ocean Conference. Russia being non
regional offers some advantages, the main one is that Russia’s needs are not tied and
it can conduct a flexible multi-vector policy and form alliances with other interested
parties.
At the boom of the ‘Arctic boom’ in September 2008, Russian president instructed the
Russian Security Council to turn the Arctic into a resource base of Russia and to fix
the Borders of Russia’s continental shelf as soon as possible. At the same time, the
Security Council approved the fundamentals of the state policy of Russia in the Arctic
in the period until 2020. But the economic crisis has already caused Russia to amend
and partially suspend its plans. Geological prospecting in the Arctic has been frozen
and the deployment of an Arctic military group is still a dim prospect. Russia may
either try to fully integrate into the multilateral cooperation system, or put an
emphasis on selective cooperation presupposing the solution of the most acute
problems on the bilateral basis. An estimated 30% of the world’s undiscovered gas
and 13% of its undiscovered oil may be in the Arctic- as per US Geological Survey
2000 (USGS). The findings are important to the interests of the Arctic countries.
Russia has sought to claim its rights to the Arctic. Surrounding nations, including
Russia, United States, Canada, Denmark and Norway, have all already sought to
assert their jurisdiction over parts of the Arctic.21

22. Shri Prakash (2005) has analyzed dimensions of a new world order and stated that
the India-Russia-China trilateral consultation and coordination is meant to offset
unilateralism and uni polarity objective within the global system. He has explained in
the present article ‘Contemporary India-China-Russia relations: Dimensions of a
New World order’, the main mechanism for decision making within the international
system specifically, an anti-US move. The major points of agreement were the
preservation of global peace, active opposition to terrorism, a goal common with
USA, mutual cooperation for ensuring energy security by building new pipelines and
ensuring lower as well as more stable prices for oil. Energy security is a point of
common interest to both China and India from Russian resources. Mutual need a
growing set of trilateral relations between India-Russia-China would enable non-
conflictual strategies to be used for solving any disputes between them. It has been

33
 
 concluded that trilateral cooperation between, India, Russia and China would enable
them to minimize expenditure on security, solve any disputes through negotiations
and promote trade, communications, tele-links, and tourism cultural and educational
exchanges, development of technology, good administrative, political and fiscal
governance as well as literacy and social modernization. A multipolar world order of
trilateral cooperation will be an essential dimension especially in defense and energy
sectors.22

23. The research article ‘Iran-Pakistan-India Natural Gas Pipeline: Implications and
Challenges for Regional Security’ by Anjali Sahay and Roshandel Jalil (2010) has
examined the rationale for Iran, Pakistan and India entering into a trade agreement to
meet their economic, political and strategic needs. Using the gas pipeline project as a
‘case study’, the issues of energy security (as independent variable) and of economic
interdependence (as dependent variable) highlight the importance of cooperation
among these countries. Energy security is a multi-faceted, multi-dimensional
argument. The focus of this research article is more on consumers rather than supply
and transit. Iran is the supply side and all three countries are the transit side because
the transit starts from Iran and runs through different territories inside Iran, Pakistan
and India. Increasing attention has been paid to the issue of energy security. There are
number of concerns such as:

i. Depletion of oil and other fossil fuels (Peak oil etc.)

ii. Reliance on foreign sources of energy
iii. Geopolitics (such as supporting dictatorship, rising terrorism, stability of
nations that supply energy)
iv. Energy needs of poorer countries, and demands from advancing developing
countries such as China and India;
v. Economic efficiency versus population growth debate and
vi. Environmental issues (climate change) and
vii. Renewable and other alternative energy sources.

34
 
 The game theory to the IPI gas pipeline project has been applied to explain why
incentives for the pipeline project would be a positive thing (for three countries) and
have negative implications for the United States. So the main argument is that
cooperation between India and Pakistan is the need for multilateral agreement with
Iran to go through.

According to the author, the IPI gas pipeline would be a big step in regionalizing the
global energy trade within Asia’s major sub regions: South Asia and West Central
Asia. It would stabilize the region by creating interdependencies in trade and also
drastically reduce transportation costs and other logistical considerations. Even after
seven years of IPI pipeline project, the project remains promising due to the direct
link between the availability of energy and the economic development of a society.
For the success of the project, the biggest challenge remains sanction on Iran and the
possibility of blocking trade links with other countries. A lot would depend on other
members often UNSC, such as Russia and China, to veto any sanctions on Iran.23

24. ‘Oil Empty Prospects’ paper, published in August, 2009, with the objective to warn
Dr. Faith Birol, chief economist of the international Energy Agency (IEA)
regarding “energy crunch” within coming five years in the world economy by Senina,
Olga. The author has used IEA estimates for analyzing the global oil production level,
which would peak in 10 years, based on geological data, taking into account the
concerns of the Peak oil theory developed by M.King Hubbert. According to IEA
estimates, global oil production will peak in 10 years, which would be followed by a
decline. By the year 2030, six Saudi Arabias would be required for the global
economy to meet its energy needs, stated by Dr. Birol. Till 2008, IEA oil production
forecasts were based on demand analysis, but now Agency also takes account of
geological data, taking into account the concerns of the Peak oil theory developed by
geophysicist M.King Hubbert. Mr. Dmitrievsky of IEA has stated that Peak
production forecasts are driven by economic and resource factors. As oil is a non-
renewable resource but some reserves are yet to be explored with new developments
in Eastern Siberia, the Arctic Shelf and other regions of the world. Mr. Dmitrievsky
has stated with certainty that Russia will surely launch 60Pc of new oil fields. It has

35
 
 not past the peak just yet. In fact, Russia has its special way of working. In fact, the
production policies of OPEC as well as (2008) financial challenges indicate that lower
depletion rates could be expected in the future. IEA has maintained a link between
increase in GDP growth and the increase in the use of oil.24

25. A.Sengupta (2010) in his article ‘LNG: A must for Energy Security of India’ has
aimed to state the role of LNG in meeting the clean energy demand and further energy
security of India. India, as one of the fastest growing economies of the world is facing
challenges to ensure reliable and affordable energy to fuel its transformation. Given
India’s growing energy supply deficit, as well as global concern over CO2 emissions,
natural gas has emerged as a fuel of choice for India and the future. During the last 2-
3 years, LNG imports and supplies have also grown by 22% and would be playing an
important role in fulfilling the energy deficit of India. In case of LNG, Carbon
Dioxide Emissions are the least compared with oil and coal.

Carbon Dioxide Emission LNG Fuel Oil Imported Coal

Pounds per billion Btu of 1,10,000 1,64,000 2,08,000
energy input

India has been regularly achieving a growth rate of 8-9 % except the year 2008 where
7% growth rate was achieved in spite of the global meltdown. It is likely to maintain
the same growth rate in the coming years. India being one of the fastest growing
economies of the world is facing challenges to ensure reliable and affordable energy
to fuel its transformation. The Author has stated that as per EIA and Planning
Commission ‘B.K. Chaturvedi’s’ estimates, India’s total primary energy consumption
is expected to grow at CAGR of 6% over next 20 years. It is projected that India’s
primary energy consumption is to grow significantly from current level of 500 Mtoe
in 2010 to 1217 Mtoe in 2030 i.e. gap increasing from 32% to 73%.
Given India’s growing energy requirements and unlikely of matching increase in the
domestic supplies, despite some significant oil and gas finds recently, the import
dependence is going to increase sharply in the coming years. Acquisition of energy
assets, recently in Russia and supplies from overseas and efforts to promote infusion

36
 
 of new emerging technologies in the energy sector in both conventional and non-
conventional areas, assumed utmost urgency. With the expansion of gas infrastructure
in India, the industrial sector has been growing constantly at around 10 % even in the
recession. In such a scenario , acquisition of natural gas assets offshore with efforts to
secure long term LNG supplies at globally competitive terms, are key to support
India’s growth. The findings of Goldman Sach have stated that the share of natural
gas in India’s energy basket would be 20% by 2025. The LNG share would be
substantial.25

26. Yury K. Shafranik (2006) has focused in his article ‘Russia in a multi-polar
energy world’ to analyze how Russia is striving to use its vast energy resources as a
foundation for diversified economic and industrial development. Modern economic
realities show that stakes development on oil exports do not do well in the long run
since they often fail to build an autonomous manufacturing sector and rely on ‘easy
influx of foreign Cash’. To that end, the country should give priority to the domestic
utilization of the fossil fuels reserves and to the acquisition of oil and gas fields
abroad.

The basis of new multi-polar world is energy its poles are USA, an OPEC, Non-OPEC
like Russia, Norway and others; two new powerful poles of energy consumption-India
and China. The author has aimed to analyze, ‘Can Russia retain its place in this multi
polar world of energy’, in the future. In fact, it depends upon Russia’s choice of
development. Russia occupied second place after Saudi Arabia (since 2002) in the
sphere of oil production in the world.

According to research Analyst, Yury K.Shafranik,, by the year 2020, the share of
Russian oil would remain at the same level in the global energy balance. The US, the
largest oil consumer in the world (29%) is expected to maintain this position till the
year 2030. Russian economy is mainly hit by fluctuations in global oil prices because
of its heavy dependence on hydrocarbon exports. The only way out is to actively
participate in regulating the world oil market along with OPEC and other oil
producing countries.

37
 
 The Caspian Sea region is a zone of conflict for Russian and US interests; So, the US
has a clear edge over Russia. Russia should follow a strategy of large scale investment
in Azerbaijan, Kazakhstan and Uzbekistan with the objective of bringing one-third of
the hydrocarbon resources of these countries under the management of Russian
companies. The cost of extraction in these countries is substantially lower than in
many regions of Russia. According to author, in the foreseeable future, Azerbaijan,
Kazakhstan and Uzbekistan would turn into Russia’s competitors in the world energy
market, especially in Europe.

The demand for energy resources in the past several decades grew in proportion to the
growth of the world GDP. Oil would keep its dominant position in the structure of
world energy consumption for the next 20-30 years. The research analyst has clearly
stated in Russian context, it is not possible for Russia to ensure long term and
sustainable growth of the economy only through the growth of hydrocarbon exports.
Russia would become a great economic power only when major part of the oil
produced in the country is used in the domestic market for industrial products also.

The author has focused on Russia’s position in the present multi-polar energy world.
The contemporary Russian state does not have a comprehensive long term economic
development policy. From author’s point of view, the Russian Fuel and energy
complex, including the oil industry, does not have the potential either to generate
resources for purchasing the required machines, equipment and material for
industry.26

27. Pathak Vidhan (2007) has discussed importance of energy cooperation between
India and China in the Francophone Africa. An objective of the article ‘India-China
& Energy cooperation for energy security’ is to focus on the evolving Indian
energy diplomacy in Francophone Africa, ‘competitive cooperation’, with China in
the region by situation China and India in the demand and Francophone Africa in the
supply side the diversified world energy regime.
India and China are oil deficit countries depending extensively on the acquisition of
oil from external sources. Both are major Asian players to undertake trans-
nationalised process of exploration, production and transportation oil. The nature of

38
 
 interaction that emerges between two countries in overseas oilfields is that of
‘competitive-cooperation’. India-China energy partnership is based on the readiness
of both countries to proactively secure the energy sources by investing in the oilfields
abroad- in Africa, central Asia and the Middle-East. India’s energy diplomacy in
Francophone Africa-Competitive Cooperation with China- energy security issues
have brought Francophone Africa recently into India’s strategic map. In fact, India
has recently taken initiatives and turn towards Francophone Africa for diversifying its
energy sources. While US, Europe and China have already started into oil exploration
process in this region.27

28. Kharitonov Nikolai. N. (2007) in the article ‘India and Russia: Forging inroads in
vital areas of co-operation’ aims at analysing Russia’s increasing cooperation with
India to extract gas from coal using Russia’s technology i.e. coal gasification. Besides
Oil, Gas and Nuclear Energy co-operation, Russia has started co-operating with India
for solar energy joint projects.

The cooperation between Russia and India covers several important areas such as
defence, science, technology, culture, trade and economy. Cooperation in the energy
sector is of great importance. Russia has the world’s largest gas reserves estimated at
69.1 billion barrels. Russia is emerging as one of the major suppliers of Indian
demands. The ongoing supply demand equations worldwide would entail a scenario
by the year 2020, when 45% of growth in demand for oil is anticipated from India and
still larger extent from China. Gas pipelines from Russia through Iran to India are in
process. The northern part of the Caspian Sea belonging to Russia is very rich in oil
and gas that could be transported to India through the newly conceived North-South
transportation corridor. An agreement has been made on using Russian technology
for large underground coal gasification. This technology enables India to extract gas
from coal reserves. It will help India to overcome the gas shortage and get 200 million
cubic metres of gas. This could give an entirely new dimension to Indian energy
security through Russian collaboration. This is the new platform of cooperation
between Russia and India on the gas front. Using solar energy is another direction of
prospective mutual cooperation. India has more than 200 sunny days a year

39
 
 Exploration of this renewable energy would become eco-friendly and commercially
feasible. The author has stated that the basis for this would be availability of new
technologies and investments.28

29. Himangshu Watts has focused in his article ‘Nuclear-Programme may be set back
by ten years after Japan’s nuclear accident, safety measures are equally
important as security measures’ on safety measures to be adopted along with
security measures. India would need new designs and new technology that are safer.
Despite of accidents like Japan’s, Nuclear power plant’s construction has always been
carried on, especially when oil Price rise.
The following safety measures are to be followed:-
i. Enhancing accountability and qualifications of government and corporate officials
who make decision on nuclear safety- is an important safety measure.
ii. Introduction of mandatory international regulatory Agency authorized to introduce
to mandatory International Safety Standards and mandatory inspections.
iii. To create centers for training specialists for countries those are recipients of nuclear
technologies.

For new Power plants, Passive safety systems must be used along with modern
technology for system design construction of N-plants slow down after any accident
but governments go whole hog in building new ones when oil prices rise sharply.
Experts of Planning Commission have stated that India’s nuclear program may be set
back by 10 years. The impact of the earthquake and tsunami might be sharper in
India, which has aimed to have a Capacity of 63,000 megawatts in two decades from
the current 4,780 megawatts. So, India might need for new designs and newer
technology that is safer. These new technologies and designs would have to be tested
and lived before employing them. Himangshu Watts has stated that it is important to
be sure whether the country would be able to cope with radiation leaks etc.29

30. In the article ‘Study on human health. Impacts of nuclear power’, Anil
Markandya (2011) has given comparative benefit analysis of nuclear energy over
fossil fuels. He has stated that making electricity from nuclear fuels is far less

40
 
 damaging to human health than making it from coal, oil or natural gas. Over a range
of studies conducted in Europe and the US, the health costs of nuclear power have
come out lower than those from fossil fuels. Fossil fuels generate emissions of various
pollutants that result in significant health impacts, including respiratory and
cardiovascular diseases like chronic bronchitis, loss of life in mining accidents and
waste disposal and so on. Premature deaths from coal combustion are estimated to be
in the range of 150000 in India. But with Nuclear Power, there are no such problems.
Nuclear fuels increase the risk of cancer from exposure to radiation and in special
cases, hereditary effects passed on through people exposed to high levels of
radiations. But these are spectacular, accidents such as those at Fukushima and
Chernobyl are rare and resulting losses are not that large compared to the amount of
Power generated. The author has analysed in Indian context and stated that India has
learned from different accidents to make sure that the errors that led to it, are not
repeated. In India it is imperative that such plants be located, designed and operated
according to the highest possible safety standards.30

31. Gidadhubli.R.G.(2009) has analyzed and stated that in the last one decade how
Russia had been at an advantageous position in trading with India and enjoyed
positive balance of trade. Different reasons for the same have been examined. In the
present Article, ‘Indo-Russia Economic ties: Advantage Russia’, the published data
of centre for Monitoring Indian Economy has been used for analyzing the trend and
volume of trade between India and Russia. The trade data from 1991 to 2007 has
shown virtual stagnation in total trade turnover. As per CMIE, India’s exports to
Russia were the lowest in 2004 due to various reasons-complexities in the utilization
of the rupee-debt repayment funds of the soviet era’, multiplicity of trade and
payment channels such as rupee trade, hard currency trade, increasing role of ‘shuttle
traders’ often resorting to unfair trading practices in the 1990’s,trading in goods of
substandard quality dumping of low quality goods to make quick profits, role of mafia
elements in Russia; economic crisis conditions prevailing in Russia in the 1990’s ;
growing competition in the Russian market. But Russia performed better in Indian
market and increased exports to nearly four times, so an advantageous for Russia.
There have been drastic changes in the commodity composition of India-Russia trade.

41
 
 Indian exporters face number of problems like the insurance market in Russia has not
been adequately developed and there are hardly any products covered and insurance
for stocks and raw materials, difficulties in getting Russian visas and a major problem
of delays. There is information gap about different trading institutions and business
opportunities in Russia. There is a long duration of about two to three months
alongside the high cost of transportation of goods to be exported from India to Russia.
But Russian companies do not face such problems because; it continues to deal with
state sector units and government bodies. Joint study groups were formed to promote
trade and economic cooperation. Some analysts have observed that as Russia was not
able to utilize the rupee-debt repayment funds for importing goods from India, it was
converted into equity in Indian companies, which is advantageous to Russia.31

32. Nivedita Das Kundu (2008) has aimed to analyse in her article, ‘India’s strategic
Cooperation with Russia and its ‘Near Abroad States’ that the emergence of
fifteen independent states as a result of the collapse of the soviet union in 1991, has
offered new challenges and opportunities for India to broaden its bilateral and
multilateral relationships with Russia and its ‘near abroad’ states. She has also stated
that Indo-Russian relations are old but at present there is a new focus on their
relationship i.e. Cooperation in Energy sector. According to her, Russia is expected to
play a greater role in global energy security and as well as of India’s energy security.
By 2020, 45% of the growth in demand for oil is anticipated from India. Hence, there
is a need to improve Pipeline connectivity between Russia and India. Some proposals
are given by energy experts for possible pipeline connectivity between two countries
which both countries are looking into, like the East Siberian Oil Pipeline that runs
from the Siberian city of Angarsk of China’s Daquing, which could help India pick up
Siberian Oil Market, India’s ONGC has proposed an energy highway to construct a
Russia-China-India (RCI) Pipeline.

India has geared up its energy diplomacy and is now moving quickly to penetrate into
the Russian energy market. India’s ONGC Videsh Limited (OVL) and Russia’s
Rosneft are jointly bidding for Sakhalin III project. Both have agreed to cooperate in
the civilian nuclear domain with the highest standards of safety and security. She has

42
 
 concluded that India and Russia are fast growing economies, so there is a need to
make greater efforts to penetrate into each other’s market and strengthen the forums
like SCO, RIC and BRIC through which both the countries can further intensify the
trade and economic cooperation.32

33. Mahapatra, Aurobindo. Debidatta,(2007) in his article “Indo-Russian economic

cooperation: surmounting the Rupee-Reactor Syndrome” has given the reasons
behind the poor bilateral India- Russia economic relations. The main argument which
the paper puts forward is the excessive reliance on cooperation only in the field of
defense and negligence of other vital sectors of economy is the prime reason behind
the sluggish economic relations. Lack of connectivity could be one of the factors
hampering the growth of Russian-Indian economic relations.
Indo-Russian relations have reoriented in the changing world order. In 1993, the
major irritant ‘rupee-rouble exchange rate’ was resolved. The idea of a strategic
triangle comprising Russia, India and China as a counter balance to the US hegemony
as a strong pillar for a multipolar world structure was introduced. The main factor
behind the sluggish performance of bilateral economic relations had been Rupee-
Reactor Syndrome. The lack of diversification of economic cooperation and its
confinement to few sectors: arms and armaments including arms transfer, joint
development and design, space and nuclear energy. The author has concluded that
economic cooperation between the two countries could be full fledged only with
Investment Cooperation in the Energy sector. Energy sector is of fundamental
importance for Indo-Russia relations in the present scenario.33

34. Bloomberg (Researcher) (2011) of China has analyzed in his article ‘End west’s
Monopoly’, of World Bank, IMF, that the BRICS countries are on a course of
convergence, motivated by growing realization that together they are capable of
creating a new economic and political architecture. BRICS is like a small scale model
of the contemporary world and its activities present an excellent opportunity to create
a consolidated view of global problems and find way of tackling them. The group has
pressurized for a revamped global monetary system i.e. to seek lower dependence on
dollar, higher scrutiny of commodity futures. BRICS countries are worried that

43
 
 America’s large trade and budget deficits would eventually debase the dollar. Five
BRICS nations agreed to establish mutual credit currencies not the US currencies.
Five of the largest emerging nations would push the US and Europe to end their 65-
year monopoly on leadership positions at the World Bank and International Monetary
Fund. It has been insisted that governance at the IMF and the World Bank cannot be a
systematic rotation between the US and Europe, with the other countries excluded.
So, there is a call for bigger role of developing countries in global institutions with
high foreign exchange reserves.34

35. Michael, Ellman (2004) has focused in his article ‘Russian Economic Boom, Post
1998, Illusion, Miracle or recovery’, on Russia’s economic boom, Post-1998 to
analyze, whether the boom was illusion, miracle or recovery. The Russian economic
in 1999-2004, was entirely unexpected. It was neither a statistical mirage nor a
miracle. The author has stated it was a recovery in the Soviet economy in the 1920s,
combined with favorable world market prices for Russia’s chief exports. Since
recovery is inherently temporary and at diminishing rates and commodity prices are
notoriously fickle, 1999-2004 period boom is likely to be temporary, in the absence of
further growth inducing factors.
An illusion:
Russian GDP 1999-2004 (Percent change per annum)
1999 2000 2001 2002 2003 2004
6.4 10.0 5.1 4.7 7.3 6.3
Above figures are reasonably accurate by international standards, at any rate when
averaged over a number of years. It is mainly price increases for Russian oil and
natural gas exports but not statistical manipulation. A Miracle?: Russia perhaps
brought his faithful people to the promised land of Economic growth more forces at
work like import substitution, favorable prices for Russia’s experts, reduced inflation,
increased monetization of the economy, a recovery in gross investment, a revival in
domestic consumption and political stability. A high proportion of Russia’s experts
are oil, oil products and natural gas and also high proportion of Russian GDP. A
Recovery: Gaidar (2003) has stated that the economic growth in Russia in the Post
1998 period should be seen as recovery from a depression of Yeltsin’s period and

44
 
 Gady (2003) expressed the view that Putin would achieve the doubling of GDP by
resorting to old soviet methods of production. It can be concluded that The Russian
economic growth in 1999-2004 was entirely unexpected as per most observers in
1998, is neither a statistical mirage nor a miracle. It is a real phenomenon and a
very positive one.35

36. Neeraj, Kaushal (2011), in his article ‘Slippery forecasts on energy’ has stated
positive view for energy security for the world as a whole.US would gain energy
independence in the next 8 years which would lead to global energy independence.
The US imports have reduced to 46% in the year 2011 from 60% in 2008. Partly due
to recession and partly due to increase in Shale gas production.US might not have to
import Oil from outside the Western hemisphere. A reduction in America’s oil
imports would reduce pressure on Oil prices and make more energy available for the
rest of the world. Global energy independence would depend upon energy demand in
Asia , mainly China and India , which are the fastest growing economies. It has been
stated that America reducing dependence on energy imports would leave sufficient
energy for rest of the world.36

37. Swaminathan, S. A. Aiyar, (2010) in the article, ‘India’s energy hope- Shale Gas,
not Iran Pipeline’ has aimed to analyse Shale gas revolution, which would transform
Geo-politics. Shale gas is found in almost all the countries across and can surely
reduce the dependence of importing countries on energy imports and pollution. Large
scale gas discoveries could embolden India to convert transport fleets in all the cities
from petrol and diesel to CNG. India need not pay Gas prices linked to oil but to the
‘Henry Hub’ price i.e. determined by the interaction of the multiple buyers and
sellers, replacing prices link to oil.

Iran-Pakistan-India gas price has become quite high in the light of new technology for
extracting gas from shale, a common sedimentary rock found across the world. The
US has pioneered shale gas technology, sent gas prices reduced from $4/mmbtu at
present even if the price of oil has been more than double. India can’t accept such a
price formula when shale gas technology has sent prices on track. The gulf countries
Iran, Qatar and other gulf countries behaved as a rival at the emergence of shale gas

45
 
 and want to stick to the gas oil price link. Swaminathan has stated that India must
refuse to do any gas deals with them until they drop the link.

India has huge shale deposits spread across the Gangetic plain, Assam, Punjab,
Rajasthan, Gujarat and southern Coastal areas. All these are potentially gas bearing.
The government has no policy framework for shale gas and needs to devise one
quickly so that exploration can begin. With large shale gas deposits and new
technology to extract it, India can afford to act tough Russia, Iran and OPEC are
going to be greatly weakened, while the US, Europe and China will be greatly
strengthened. India can be a major beneficiary. Shale is a common sedimentary rock
found in most countries, so shale gas can hugely reduce the dependence of most
including India on imported energy.

Shale has long been known to contain natural gas, but this was not worth extracting
with conventional technology.. Now a new technology, ‘fracking’ plus horizontal
drilling have greatly increased shale gas productivity, so extraction is now viable at
$3-4/mmbtu. The new technology has been pioneered in the US so successfully that
the US has overtaken Russia as the world’s biggest gas producer.
Russia has an iron grip on its ‘near abroad’ countries that used to be part of the USSR.
So if shale gas is found in large quantities in Eastern Europe then Russia’s grip will
loosen dramatically. Many Western European countries are rushing to acquire shale
gas technology. Gazprom, the Russian gas monopolist admits that it has been forced
to delink 15% of its supplies from the price of oil and accept links to spot gas prices at
trading hubs. The author has emphasised that shale gas would transform geopolitics.
India must change and tell all Gulf producers that it would pay gas prices linked not to
oil but to the Henry Hub price. The best starting point is not Iran but Qatar, which has
just completed a gigantic expansion to become the world’s largest LNG supplier.37

38. Nikolai, Ivanov of ‘Oil and Gas Research Institute’ has stated that Shale gas
production is currently underway in the USA and Canada only. According to US
forecasts, by 2030 LNG imports may drop by 30-40 % with the increase in domestic
shale gas production, which would also allow for liquefied natural gas imports
reduction. In this research article, it has been estimated that Russian gas would be

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 demanded on the US market as the USA is interested in reducing the dependence on
LNG Supplies mainly from the Middle East and Central Asia. In this situation
Russian energy supplies would have to prove that stability of supply is more
important than the instantaneous benefit for the customer. The author has stated
further that it is still difficult to state about how strong shale gas production might
influence the global energy market. Irina Gaida, Boston Consulting group has
stated that Shale gas in Europe have not been investigated so far. The deposits could
be large enough for Europe to repeat the US experience. So, in this situation Russia
should in any case try to maximize the profit from gas exports to Europe. Svetlana
Meinikova, Global Energy Markets Research centre under the Energy Research
Institute of the Russian Academy of sciences, has provided information that the world
was twisted by the ‘Shale gas hurricane’. Shale gas revolution is based on only 3 to 4
years of operations in a single field, Barnett Shale, At the Initial stage of production,
the flow rate of shale gas wells is very high and the profit is high. But how would the
cost curve behave at further stages of development, environmental impacts are
difficult to be answered. So the serious conclusions on the prospects of shale gas
production development are premature. It has no deferred results to estimate long
term consequences; it would take at least another five years to be answered.
According to Vladimar Vysotsky (EIA), under U.S department of energy, shale gas
production in the USA would grow till 2035 with the annual average growth rate of
5.3 %. Shall gas production would gradually substitute conventional gas production
technology features broad utilization of horizontal drilling and a lot of hydraulic
fracturing operations required with injection of water and proppants. The shale gas
well lifecycle is 8 to 12 years. But conventional gas wells may be operated during 30
to 40 years. It is too early to state anything of changes on the global market. Since
shale gas production is not carried out in Europe and Asia pacific. So, it is important
to wait until the changes occur beyond North-America say for 5 years. 38

39. Bill Holland & Samantha Santa-Maria (2011), in their article ‘Will India Emerge
Energy Powerhouse via Shale gases have stated that within five years, India has the
potential to transform into a gas exporter. Only big countries, such as India have the
means to scale up shale drilling and output. India’s first natural gas well targeted at

47
 
shale has been drilled by ONGC. Engineers have been pegging the country’s
resources somewhere between 600 and 2000 trillion cu. feet of potential gas, which is
equal to about two centuries worth of gas at the country’s current consumption rate.

India would become a gas exporter, selling gas to Japan and South Korea at prices 2-3
times as high as the government’s administered price. Many experts as researchers
believe that the potential for India to become an energy Power house is closer than
ever before. Only the big countries like US, India and China have feasible ability to
scale up shale, gas production and its thousands of wells. According to Bill Holland,
researcher, this big gas from rocks can provide the country energy security. He has
further stated that Shale Gas could bring riches and Energy independence but
development creates a continuous series of tough decisions on how to balance public
benefits against the costs to the same public.39

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39 www.economic times.com accessed on 17-2-11.

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