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Letters to the Editor

India and China’s evolving competition for resources

Stratfor Global Intelligence - The Philippine Star

ONGC Videsh Limited (OVL), the overseas arm of India's state oil and gas firm, announced Monday that it may invoke its right to block Brazilian state firm Petrobras’ sale of an offshore oil block to Chinese state firm Sinochem. Under the proposed $1.54 billion deal, Sinochem would acquire a 35 percent stake in Brazil's offshore Parque das Conchas oil project — a project in which OVL has a 15 percent stake. Interestingly enough, India did not express an interest in acquiring Petrobras’ stake when the sale was announced last Friday, instead waiting for Sinochem to make a bid while the Indian firm mulled its options.

At first glance, OVL’s decision to block Sinochem’s purchase of Petrobras’ stake in the Parque das Conchas field may seem like the latest proxy battle in the ongoing competition between India and China. OVL is still reeling from its recent loss to China in the bid to acquire an 8.4 percent stake in Kazakhstan’s Kashagan field project for $5 billion. India faces declining oil and gas production at home at a time when the country’s energy needs are growing. OVL and its overseas operations are becoming a critical component of India’s effort to secure energy supplies for its domestic market as New Delhi aggressively attempts to expand overseas operations and investments.

There is good reason for this competition over natural resources. India’s population, the second largest in the world, is growing. New Delhi faces the daunting task of managing a population set to increase by nearly 400 million — more than the entire population of the United States — overtaking China as the world's most populous nation by 2050. Taken together, China and India account for more than a third of the world's population, and both are significant importers of fossil fuels such as crude oil, coal and, increasingly, natural gas. Competition over water resources is also expected to rise as both Asian giants seek to provide food and electricity for their enormous populations.

Their size, their proximity to one another, and their similar regional ambitions make India and China natural competitors in the Indo-Pacific basin. But as India and China's consumption of strategic commodities such as oil rises, their competitors are growing to include not only Brazil and Kazakhstan, but Colombia, Afghanistan and African nations as well.

Still, reality is more nuanced than the media's easy portrayal of India and China as intractable competitors, locked in a zero-sum Great Game over land, sea and resources. India and China obviously pursue their own national interests and policy prerogatives, and these clash at enough points to prevent a formal alliance, but this does not close off all avenues of cooperation. In Brazil, OVL’s much larger operating budget versus Sinochem’s oil and gas exploration division make the Indian bid much more likely to be about business competition, and not a strategic blow to China’s ability to secure energy resources abroad.

Their size and proximity also reveal similar vulnerabilities, and in recent weeks we have seen China and India undertake strikingly similar policy decisions regarding imported commodities. It is Indian and Chinese refusal to continue importing Belarusian potash at high prices that is helping break suppliers’ price controls of the fertilizer. Though no formal announcement of coordination was made, both Beijing and New Delhi announced domestic price hikes on natural gas in July, paving the way for increased imports of liquefied natural gas.

Rising exports of liquefied natural gas to China and India are coupled with Japan and South Korea’s already high levels of consumption. This could very well lead to a strategic, geographic concentration of liquefied natural gas importers with enough leverage to push suppliers such as Qatar to abandon the premiums they charge Asian nations for the fuel.

India and China share long, storied and often intertwined mercantile traditions. As in the case of the Brazilian oilfield, sometimes business is just business. But as India and China's scramble for resources increasingly turns global, there are signs that the costs of direct competition between the two Asian giants are becoming too high, leading to more profitable avenues of cooperation instead.

vuukle comment

AFGHANISTAN AND AFRICAN

BEIJING AND NEW DELHI

CHINA

CHINA AND INDIA

GAS

INDIA

INDIA AND CHINA

NEW DELHI

PETROBRAS

SINOCHEM

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