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Walker's World: Struggle For Mastery In Asia

China will need more oil than the world has.
Washington DC (UPI) Jan 17, 2005
Over the past 13 years since BP and Chevron began drilling in the Caspian basin after the collapse of the Soviet Union, the term the new Great Game became popular to describe the discreet tussles between Moscow and the West over the massive oil and gas reserves of this region, newly opened to Western exploration.

Much of the struggle took place over pipelines, and the Western companies sought to break the Russian stranglehold on the delivery system by which the oil and gas of Kazakhstan, Azerbaijan and Turkmenistan could reach Western markets.

The Americans, it must be said, were quite as foolish as the Russians. By far the easiest route to access the energy supplies of the Caspian Basin would have been through Iran, which had a sophisticated pipeline network that ran most of the way to the Caspian, and the oil loading facilities in the Gulf.

But American politics prevented such a logical solution. The West finally won, by routing a new pipeline from the Caspian Sea through Georgia.

This modern version of the Great Game should henceforth be known as the Little Game, because it pales into insignificance beside the new Great Game that is unfolding in Asia, as China and India start to compete for the energy supplies they will need to sustain their great spurts in growth.

Last Friday, Subir Raha, chairman of Oil and Natural Gas, announced that the company was buying a fifth of Iran's giant Yadavaran oilfield and was also in the market to buy assets of Yukos, the Russian energy giant stripped from jailed tycoon Mikhail Khodorkhovsky.

The Indian company had already invested nearly $2 billion in buying a 20 percent share of the Sakhalin-1 field in Siberia, run by Exxon-Mobil.

India has $10 billion to spend on exploring for oil and securing supplies over the next three years, Raha said. India has to import over two-thirds of the oil it uses - although the UK-based Cairns group announced a new oil strike in Rajastan this week.

India this week signed a $40 billion deal with Iran to import liquefied natural gas and join in developing three Iranian oilfields.

Indian Oil, the biggest refiner in the country, is to build a liquefied natural gas plant with Petropars, a unit of National Iranian Oil, capable of producing 9 million tons a year. Another company, Indian Oil and GAIL (India), a gas supplier, is to import 7.5 million metric tons of LNG from Iran for 25 years.

The announcement in New Delhi came hard on the heels of reports that the giant China National Offshore Oil Corporation (CNOOC) is planning a $13 billion takeover offer for Unocal, the U.S.-based group that held talks with the Taliban regime of Afghanistan (before the 9/11 attacks) about the prospects of a pipeline to bring Asian oil to India.

Japan is also deeply involved in this same race for the energy of Asia. Indeed, it was this Great Game that helped doom Khodorkhovsky, although his political ambitions may have been decisive in persuading the Kremlin to move against him.

The Kremlin had decided to build a new pipeline that would take Siberian oil to Japan. Yukos had wanted to extend the pipeline to sell the oil to China.

But nervous of giving China too much access to its vulnerable Siberian resources, the Kremlin decided that Japan was the more useful customer - and was reminded just how strategic its oil supplies were, even when they were in the hands of Yukos and the private sector.

China is also in the market for some or all of the Yukos assets, whether they are for sale direct (unlikely) or whether the only way into the deal is to buy into Sibneft, the company that seems to be the Kremlin's favored conduit for the Yukos reserves. Whatever the fate of Yukos, the Kremlin must be delighted at this now open rivalry between India and China for the oil.

With China growing at 8 percent a year, and India growing slightly more slowly, the hunger of these two Asian countries, who between them account for over 40 percent of the global population, has been a factor in driving up the oil price over the past year.

And the pace of exploration, development and deal-making is intensifying. Pakistan sent a delegation this week to Turkmenistan, a former Soviet Republic with a population of 5 million, and the world's fifth-largest natural gas reserves.

The geopolitics of oil and gas and pipelines can promote harmony as well as rivalry. Pakistan and Turkmenistan have signed a Memorandum of Understanding on a multi-billion-dollar gas pipeline through Afghanistan that could eventually end in India, in what would be a major breakthrough in Indo-Pakistan relations.

For the moment, there is enough oil and gas to go round, but as the growth of India and China increase their appetites, and rising prosperity means more private cars that need gasoline, the pressure on supplies, and the competition, is going to sharpen.

India, panicked over future oil supply, went after international oil assets competing directly with China, was how India Daily reported the moves by the country's big energy companies this week.

And geography may give India an advantage, and leave China with a problem. All of China's oil imports currently come by sea, mainly from the Persian Gulf, which means they pass through the Indian Ocean, which India is in a position to dominate.

China's plans for a land pipeline from Central Asia (at a cost estimated to be as high as $12 billion) give only relative security. In the event of real tension or hostilities, land pipelines are vulnerable to sabotage, air strike or missile attack.

One of the classic histories of the 19th century diplomacy between the great powers (by the Oxford historian A. J. P. Taylor) was titled The Struggle for Mastery in Europe. For the 21st century, the Struggle for Mastery in Asia already seems to be under way.

All rights reserved. � 2004 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International.

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