Oily Politics

Published: Mon, 05/06/2013 - 10:51 Updated: Mon, 05/06/2013 - 10:52

Big stories, ironically, do not show up on the front pages of newspapers. They are either tucked away in the inside pages or not given any space at all. One such story is about US and European pressure on India to halt oil imports from Iran until the latter ends its nuclear programme. India has responded by meeting the demand half-way. It has curtailed its imports from Tehran, but not ended them. India has anyway been compelled to lower its exposure to a sanctions-trammelled Iran due to the latter’s inability to find a bank where India can pay for the oil. No western company is willing to insure the tankers that ship oil from Iranian ports to India. Various ways have been explored to beat the strangulating sanctions — from payment for the oil in rupees to payment in gold, but it just gets more difficult each time.

The US government has magnanimously accorded a waiver to India as long as the oil imports from Iran show a secular decline. In terms of statistics India imported 21.8 million tonnes of crude oil in 2009-10 from Iran. It was the second largest importer after Saudi Arabia then. Now Iran’s position has slipped to seventh position with approximately 13 million tonnes of imports in the 2012-13 fiscal. On the other hand, oil from Saudi Arabia has zoomed to more than 34 million tonnes. India imports 79 percent of its crude oil needs, spending $140 billion every year. Quite evidently, Iran’s loss is a gain for Saudi Arabia and Iraq.

The Indian government realizes the imperatives of diversifying its energy supply lines, it equally understands the implications of Iran’s decline as an oil supplier and the leavening of Saudi Arabia. As the world’s biggest oil exporter, Saudi Arabia has the capacity to impact oil prices with its supplies like no other oil-producing country. The richness that comes to the country from a high price oil regime allows the country to exercise inordinate influence in the Arab world and beyond.

The global high price of oil, though, has been contingent on conflict in the Arab world and the manner in which oil supplies from Iran, Libya and other countries have been suppressed from time to time. It would also have to depend on the demand for fuel from countries like India, which have created phenomenal refining capacity. When India buys more oil from Saudi Arabia, it helps to keep the demand for oil at a high level, ensuring that the price of oil does not fall below a certain level. The high demand for oil from India, China and Japan, thus  offsets, to a large extent, the fall in fuel demand from haemorrhaging US and European economies.

Although India is still trading with Iran, it is a matter of time until we stop oil imports. Saudi Arabia, that funds many Islamic seminaries in India, and Qatar would get greater sway over Indian domestic politics 

Expectedly, the price of Brent Crude has remained in excess of $100 per barrel thus saving oil-producing economies like Saudi Arabia and Russia that had lost heavily if the price of oil would have fallen below it. Oil experts claim that Saudi Arabia would find oil production untenable if the price is less than $80. Qatar can continue to rake in profits till the price of liquid oil remains in excess of $58. The market prognostication is that oil prices will be in a secular decline and that means, according to observers, turbulence in the oil-exporting countries of Saudi Arabia and Russia.

What kind of implications does this shift in favour of Saudi Arabia, under pressure from the US and Europe, mean for our foreign policy?

Although India is still trading with Iran, it is a matter of time until we stop oil imports from there. Saudi Arabia, that funds many Islamic seminaries in India, among other charitable activities, and to a lesser extent Qatar, would get greater sway over Indian domestic politics and also over how New Delhi countenances issues in Pakistan and Bangladesh. Both our neighbours are under the spell of Saudi-bankrolled illiberal Wahabism and the patronage that it provides to obscurantist Sunni organizations like the Jamaat in Bangladesh that brings them in direct conflict with Indian interests. In Pakistan, too, rise of Sunni fundamentalism that has seen Shias coming to grief has been sustained with funds from oil-rich Sunni Caliphates.

It is these kingdoms that are increasing their arc of influence from Middle-east to South Asia, trampling secular voices and indigeneous cultures to fit them into their version of Islam. India has to protect and preserve its secularism against the dark threat of rising fundamentalism. Also, it has to ask this question that when it increases its dependence on Saudi oil does it impact its secularism and its foreign policy objectives in the neighbourhood?  

Editor of Delhi's Hardnews magazine and author of Bad Money Bad Politics- the untold story of Hawala scandal.

Read more stories by Sanjay Kapoor

This story is from print issue of HardNews