Chapter I – Energy Security: The Changing Global Context – India: The Emerging Energy Player

Chapter I

Energy Security: The Changing Global Context

Energy security concerns have been articulated in the global context where hydrocarbon enjoyed dominance in the energy mix and the major importers were few. Energy was brought into the security domain for the first time in the seventies when oil-exporting countries decided to determine the price of oil by mutual consultations under the aegis of the organization of Petroleum Exporting Countries (OPEC). This was described as the rise and assertion of commodity power and was even perceived as a threat from the ‘oil cartel’.1 It acquired a strategic dimension when the organization of Arab Petroleum Exporting Countries (OAPEC) declared an embargo on oil shipments to the united States as retaliation against its assistance to the Israeli military on 20 October 1973. Ironically, oil trade is also used by the united States to further its foreign policy objectives. Sanctions were imposed on Iran, Libya and Iraq without recognizing the long-term implications for the market. Restrictions on oil flow from these three major exporters made the supply base further fragile and skewed, thereby increasing the dependence of the global oil market on countries like Saudi Arabia, accruing it the leverage of a swing producer, thus escalating the security risks.

Since the seventies, the debate on energy security has been largely defined in terms of the Western perspective. In particular, the United States has been leveraging its oil needs to rationalize its domination on the making of the global oil regime and even strategizing its relations and presence in the oil-rich region of the world, namely the Persian Gulf and Central Asia. This was eloquently put by the US president Jimmy Carter in his last State of the Union address when he went to the extent to say that ‘attempt by an outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States,’ and pledged to defend that interest by ‘any means necessary, including military force’.2 No wonder that the US forces are deployed in the oil-producing region and Pentagon seems to view the US military as ‘global oil-protection service’.3 It needs to be emphasized that the ‘US energy policy is seldom only about energy.’4

With the global context undergoing change, particularly in the last decade, the energy security concerns have become more complex. Many new parameters have made it more comprehensive. It is not confined to mere physical availability at reasonable price. It has many new serious issues to deal with like price volatility, inventory build-ups, spare capacities, environmental sensitivities and so on. With the community of stakeholders getting enlarged, the interests are more diverse and entrenched. Today, consumers are not confined only to Europe, Japan or the United States. Asia is an emerging market and Asians are equally, if not more, susceptible to the hazards of global energy market. Consequently, countries are defining their energy policy not merely around the domestic parameters but also in response to the global developments. In other words, today many countries besides the United States are debating and formulating their concerns in their own way. No wonder, a number of studies have been undertaken on the subject underlining its centrality from diverse perspectives.5

The policy moves of the new players have bearing on nuancing the global oil regime, for instance, the number of countries building strategic reserves is much more today and is likely to go up further. Apart from the United States, Japan, Italy, Germany and France, countries like Spain, Belgium, Turkey, Poland, Netherlands and Korea have strategic oil reserves, and the emerging consumers China and India have declared their intent to go for it. Though the countries are insuring against probable disruption of oil supply by building strategic petroleum reserve (SPR), in the process they are creating pressure on demand. Besides, they also acquire market leverage. Further, the new importers are emerging as competitors to the established players. China, for instance, is buying shares in oil fields, building strategic alliance with oil producers across the globe.6

The energy security issues are moving beyond the exclusive concerns of consumers. Producers too require a stable global oil regime. Unlike the seventies when oil exporters enjoyed high solvency and immunity to price fluctuations, they have become highly susceptible to volatile oil price regime due to excessive dependence on oil money as it affects their fiscal health and resilience. They are equally concerned about a stable regime, about investment in infrastructure and capacity building. The threat of environmental damage caused by energy production, its use, unequal access of energy, and its benefits to different regions and classes of the world’s population is yet another kind of issue increasingly impinging upon the energy security debate. Oil corporations are facing resistance from local communities. For instance, nowadays human rights have become a serious issue. Clearly, the energy security concerns have to be comprehended and redefined beyond the American/Western domain. The debate has to take cognizance of emerging concerns in a holistic perspective and redefine them in terms of a regime, which ensures the required availability of supply and demand at a price that provides sustainability to both the consumers and producers. Here, the term ‘producers’ also refers to the communities affected by corporatization of oil resources. Apparently, its scope has expanded as it has to address wider concerns. In the following section, attempt has been made to profile the issues in the energy security debate in the emerging global context.

Changing Structural Dimensions

The structural dimensions of the energy security could be seen from both the supply and demand sides. The supply side includes the volume of global reserves, their distribution pattern, their longevity, the new discoveries, capacity building and so on. On the demand front, the issues are related with the market size and its geography, logistics of transport and delivery, and others. Global reserves have been the principal factor in influencing, if not defining, the energy security debate. It may be recalled that the Club of Rome thesis cautioned the world community of limited lifespan of non-renewable sources of energy. This indeed had a critical impact on the policy posture including the intent to have control over it. What is important to note is that over the years, assessment has been undergoing change. In the seventies, estimates were that the oil reserves would last for another 20–30 years, and the expectations were that it would last at best up to the year 2000.7 In the early eighties, the proven oil reserves were calculated at 636 billion barrels. In the two decades since then, about 403 billion barrels were produced but what is significant is that the new discoveries led to the net addition of 415 billion barrels to the world reserves. OPEC estimates are that oil reserves are over one trillion barrels to meet the need for 40 years at the current consumption rate. Added to it, the recoverable oil reserves would enhance another 40 years to the lifespan. The global proven natural gas reserves are put around 15.9 trillion cubic metres, which is 38 per cent increase over the 1988 estimates.8 More recently, the International Energy Association (IEA) in its publication Energy Security in a Dangerous World pointed out that ‘The Earth’s energy resources are more than adequate to meet demand until 2030 and well beyond. Less certain is how much it will cost to extract them and deliver them to consumers.’9 The point, however, cannot be ignored that given the accelerated pace of energy consumption despite the enhanced recovery, the crisis of reaching the stage of decline in supply continues to loom large. However, their lifespan can be extended by a rational consumption regime. It is evident from the security perspective that the threat is not so imminent as far as the physical reserves are concerned.

Clearly, the availability of hydrocarbons is determined by geology, but other factors like economics, technology and politics too play a critical role. It needs no elaboration that the price of oil or gas has significant impact on reserve estimates. Increased prices make the higher cost of extraction from smaller and marginal fields economically viable, thus adding to the proven reserve estimates. In fact, the reserves figures are cited as an approximation of the size of reserves and volume of oil a region might hold for the future, and are more of speculative in nature, though the recent technological improvements have enhanced the reliability of these figures. Recognizing the importance of reliable and accurate database needed for ‘tracking global crude production, trade, transport, refinery, stocks and consumption level to planning energy investment,’ Joint Oil Data Initiative (JODI) was launched in 2001 to understand the volatility of price behaviour.10

Moreover, technological changes have further added to the reserves by allowing access to previously uneconomical oil deposits with deep offshore technology, horizontal drilling and the increased use of advanced seismic mapping technology and so on. Further, extensions of old fields or the discovery of new ones can be possible during the production process. Similarly, the technological revolution has dramatically changed the cost structure. It is argued that ‘upstream costs in non-OPEC countries are expected to fall by an average of 3 per cent per year to 2010—from almost $9 per barrel to little more than $7 (in inflation-adjusted terms). Cost reductions will occur fastest in the deepwater offshore, at an average of 4 per cent per year. Technology will also remain key to the downstream oil industry’s efforts to reduce costs, increase productivity and maintain competitiveness. Technology has increased the flexibility of the downstream industry in responding to changing regulatory and market conditions; shorter response times and adaptable operations have contributed to significant reductions in operating costs.’11 The changing cost structure has also added to the diversity of sources.

The promises of new sources of supplies specially from the Caspian, the Russian oil, and of late from Africa have further changed the dimensions of energy security. ‘For each of the past two years, Russia has quietly but persistently increased its annual oil output at a rate of nearly half a million barrels a day (mb/d)—the largest single increment of increased output of any country in the world. The Russian increases have come as a surprise, especially for OPEC. As recently as 1996, oil output from the post-Soviet states amounted to barely 7 mb/d. Many people forgot that Moscow’s state-owned enterprises once produced more than 12.5 mb/d before the Soviet collapse—the largest amount of oil ever produced by a single country, representing one-fifth of the global production. That sum is one-third more than Saudi Arabia’s peak share at the end of 2000.’12 The point made here is that compared to 1970s, oil sources are not only larger in volume but are much widely dispersed also. OPEC estimates are that with oil prices above $20 per barrel, ‘West Africa could find itself in for a bonanza in the next century. Today, around 220 fields are in production but the potential to find more oil is the thing that is sending pulse rates racing in oil company boardrooms. West Africa offers most exciting prospects of deep-water areas estimated to be 14 per cent of global offshore oil. About 17 billion investments have been planned. The countries likely to be beneficiary of it are Nigeria, Angola, Gabon, Equatorial Guinea and Cameroon.’13 However, despite the new discoveries and diversities, the cost advantage still remains with the Persian Gulf region to retain its centrality. ‘A recent study by Dresdner Kleinwort Wasserstein entitled “World Oil Supply—Cost Matters” emphasized the relative low cost of exploration and production in the Middle East of around $2 per barrel compared to the cost of $10 per barrel in North America or Russia at $6 per barrel (without the rail transportation costs).’14 This, however, does not minimize the significance of small and marginal players. Neither OPEC nor the oil majors can ignore the presence of these players in their marketing strategy including the price determination of crude.

The threat to energy security caused by supply disruptions in the past has been mitigated by the spare capacities in the market. As Ali Naimi, the Saudi minister of oil, recently reminded that it was his country’s spare capacity that came to the rescue during the Iranian revolution, the Iran-Iraq War, the Gulf War and the Iraq War. Of late, there has been a sharp deterioration of spare capacity making the supply chain vulnerable. According to one estimate, ‘In 2002, spare capacity amounted to nearly 10 per cent of the 76 mb/d global oil market. A year later, with demand climbing to 78 million barrels, spare capacity dropped to about 5 per cent. This cushion was sufficient to prevent an oil crisis when a labour strike in Venezuela, ethnic riots in Nigeria and a war in Iraq took major producers out of the market for extended periods.’15 In the absence of adequate cushion, the prices become vulnerable to ‘liquidity’ shortage. In other words, maintenance of spare capacity is necessary for stable oil prices. Apparently this requires investment. World Energy Outlook estimates are that ‘total investment in the global oil industry will amount to almost $3.1 trillion over the projection period (2001–30)—$2.2 trillion, or 72 per cent, of this devoted to exploration and development for conventional oil.’16

The issue of price factor is vital in energy security regime. Oil at reasonable or affordable price has been the axiom of oil security. Of late, however, it is the volatility of the oil prices that has received more serious attention because it affects not only the consumers and producing countries but the oil industry as well. The oil price regime today is no more governed by the mechanism where the seven sisters or OPEC administered it. Over the years the leverage enjoyed by either the oil majors or OPEC in determining price has been eroded. Many new factors have made it a more complex issue. As Mabro points out, ‘OPEC no longer fixes the reference price. The exporting countries now sell oil in international markets on the basis of price formulae which use as reference the spot or future prices of certain marker crudes, namely WTI, Brent or Dubai. The behaviour of prices in the world petroleum market is essentially that of these marker crudes. Volatility, therefore, arises in the complex and interrelated set of spot, futures and other derivative markets.’17 The volatility creates a sense of uncertainty, consequently affecting the future investments and financial and political instability in case of oil-exporting countries that rely on oil revenues. To quote Mabro again, ‘price instability feeds itself on itself because it induces OPEC into remedial courses of actions that backfire sometimes, given uncertainties about the forces at work, misinformation and faulty interpretation by the market of OPEC’s intentions.’18

Further, as the oil market is undergoing change and acquiring global profile, it is becoming sensitive to turbulence of any dimension in any segment of the market as it gets transmitted across the globe. With oil transactions increasingly moving away from long-term fixed-price contract arrangements, ‘no single consuming country can insulate itself from oil price shocks, no matter its level of self-sufficiency (provided it does not impose import and export controls on energy). Price arbitrage would ensure one price in all markets. Thus, the focus on the share of imports in total consumption for a particular country, which is often cited as evidence of increasing energy dependence, does not make economic sense; the price shock experienced by any nation from a disruption will be independent of its import share of petroleum supplies so long as free trade in oil is permitted. Shortages will not manifest themselves by a physical shortfall but rather in the price of oil, which will rise as it allocates available physical supplies to the highest bidders.’19

What is significant is that unlike the past, price volatility is hurting the oil exporters too. They are also looking for a dynamic price stable regime. ‘It is the oil exporters, particularly those in the Gulf, who now face the more serious energy security problem.’20 OPEC and the oil- exporting countries have recently raised the issue quite eloquently. Their concern is largely regarding the ‘demand security and the long-term viability of being so dependent on oil.’ It is rightly pointed out that ‘in planning for our investments, one major uncertainty is the security of demand. As you all are well aware now, there are so many assumptions built into the long-term demand and supply forecasts, and any of them could change. So, as a major resource holder, there is always the risk that the capacity you build will not be required. This could not only result in higher operating costs but also be a waste of resource allocation.’21 An interesting development from the producers’ perspective is the growing competition among themselves to have a market share and investment flow in their hydrocarbon sector. If China is intensifying its efforts to have enduring oil supply by building strategic ties with the Gulf countries, the latter too are very keen to have market and investment ties with them. After September 11, the Gulf countries have particularly started a special drive to establish long-term ties with the emerging Asian market. With the prospects of Iraqi oil coming to the market, Gulf Cooperation Council (GCC) is gearing up to save its share. Reportedly, the GCC states are losing some of their traditional oil export markets. ‘For instance, in the past, roughly 60 per cent of the UAE’s exported oil flew into Japan. However, since last November, Japan has reduced its oil import from the UAE from 987,000 to 793,000 b/d at a rate of 19.5 per cent. At the same time, Japan reduced its oil import from Saudi Arabia, Qatar and Oman correspondingly.’22 The emerging profile of Saudi-China hydrocarbon ties reflects the new realities. The sentiments were eloquently expressed by the secretary general of International Energy Forum (IEF), ‘This year, the IEA’s experts’ meeting has her feet firmly planted in Asia. It is highly appropriate that our venue is Asian. This part of the world has increasing impact on global energy and environmental and economic developments. This follows suit with the last IEF Ministerial which took place in Japan late 2002, reflecting the importance attached to Asia also at the political level.’23

The most decisive development has been in the demand profile of the oil market. According to OPEC’s World Energy Model (OWEM) projection, the future market for oil is in developing countries. The world economy will be growing by 3.6 per cent over 2003–25. Global oil demand is projected to rise from 38 mb/d to 115 mb/d by 2025—annual average growth of 1.6 mb/d, or 1.7 per cent, over the years 2002–25 (see Table 1.1). This crucial shift in direction, as shown in Table 1.1, has its wider implications. The Organization for Economic Cooperation and Development (OECD) countries will continue to account for the largest share of oil demand. However, almost three-quarters of the increase in demand up to 2025 will come from developing countries, whose consumption will almost double. Asian countries will remain the key source of demand increase in the developing world, with China and India central to this growth.’24

 

Table 1.1 World Oil Demand (In mb/d)

Source: OPEC bulletin, October 2004, p. 22.

 

The emergence of Asian players like China and India along with Malaysia and Indonesia as net oil importers has transformed the direction of global flow of hydrocarbons. It may be noticed that in 1972 North America/Europe accounted for 52.2 per cent of the world’s primary energy consumption. The projections given by IEA in the 2002 report says that the developing Asia, which was consuming 53 per cent of world primary energy, consumed 67 per cent in 2000. The Asian regional oil demand is projected to increase from 19.2 mb/d in the year 2000 to 37.1 mb/d by the year 2030. This implies that the share of Asia-Pacific oil demand in total world demand is expected to rise from 25.6 per cent to 30.9 per cent over the same period. This means that Asia will be the leading energy-consuming region in the world. What is important is that the region is not in a position to meet its demand and, hence, will be looking for external supplies. The net import of oil for the region in 2001 was calculated at 12.6 mb/d, making the region’s dependence on imports 62 per cent compared to less than 50 per cent in 1990.25 It is a serious issue that Asian players are heavily dependent on the Persian Gulf for its supplies of hydrocarbon due to its availability in the Gulf and also the region’s proximity to the Asian countries. The three major Asian energy consumers and importers, namely, India, China and Japan are aggressively pursuing strategies to secure stable supplies of energy. The geopolitical implications of this for the oil market are going to be serious. The China factor has been of particular significance as its demand is reportedly growing by 7.5 per cent, which is possibly seven times faster than the American demand.26 ‘Beijing is rapidly becoming a major player in world oil markets and increasingly sees access to energy resources as a critical component of its national security and long-term military strategy. It has assiduously cultivated ties with Riyadh since the mid-1980s, when it sold CSS-2 nuclear-capable intermediate-range ballistic missiles (IRBMs) to Saudi Arabia. Some reports indicate that Saudi Arabia has been involved in funding Pakistan’s missile and nuclear programme purchases from China, which has resulted in Pakistan becoming a nuclear weapons-producing and proliferating state.’27 Intensity of competition generated by the entry of the Asian players is altogether a new dimension of contemporary security concern. It is argued, ‘with the end of the Cold War, economic competition may replace ideology as the focus of international conflict. Oil will remain the critical strategic and economic commodity. Most importantly, developing oil shortages in East Asia could lead to stress on a global scale and if not handled well the situation could lead to a new global war.’28 In other words, Asian competition for oil and gas is going to be an influential factor in the making of the global hydrocarbon regime in the coming years. Apprehension has already been expressed; ‘over 60 per cent of Middle East exports go to Asia and nearly 70 per cent of all Asian imports come from Middle East oil producers. About 84 per cent of all crude oil refined in Singapore comes from the Middle East, while 78 per cent processed in Japan originates from that region.’

An alarming prognosis of the Asian competition is given by Robert A. Manning. ‘As oil commerce, in increasingly global and transparent markets, has come to be shaped more by transport costs than political relationships, a largely bifurcated global market has arisen: oil flows from the Middle East gravitating to Asia; oil supplies from the Western Hemisphere (Mexico, Venezuela, Colombia and Canada) and the Atlantic Basin (the North Sea and West Africa) to a large degree displacing Gulf oil in the US market.’29 With Pacific region importing 20–24 mb/d from the region in 2020, the benign commercial relations between the two regions are likely to see a qualitative change including the possibility of an ‘Islamic-Confucian civilizational alliance, one of the West’s worst nightmares.’30 The implications of this emerging energy linkages can be seen in three different scenarios—the near-term (to 2010) and tangible, the long-term and intangible, and potential nightmare scenarios.

The first scenario underlines the growing interdependence in terms of mutual need to trade and invest in the energy sector. According to one estimate, by 2010, if Asia is importing 17 mb/d from the Middle East at $20 a barrel, the result would be capital transfers to the Middle East of $124 billion annually. Even in today’s global financial markets, where nearly $2 trillion a day floats through cyberspace, that is serious money. Such revenues could, in part, be recycled into downstream investment in dynamic Asian economies. Expanding capital flows to the Middle East would also go some distance towards ameliorating a growing list of problems in major oil-exporting countries such as Saudi Arabia, Kuwait, Iran and Iraq. Riyadh, for example, has seen a significant decline in living standards over the past 15 years, has a large demographic bulge of young adults to absorb into its economy, and has accumulated foreign debt of $130 billion.

In the second scenario, it is visualized that such capital flows could also accelerate efforts to obtain a new cycle of modern weapons, including weapons of mass destruction. If at least the rough outlines of the anticipated economic and financial consequences of the Middle East-Asian energy relationship for the global economy are discernible, the political and security implications enter the realm of the intangible and the speculative. In the 1930s, it was energy security that led Japan to occupy Indonesia (then the Dutch East Indies) and take control of its oil fields. Indeed, the US oil embargo was an important factor leading Tokyo to attack Pearl Harbor, bringing the United States into the Second World War. Some analysts see in China, a rising power with a new-found energy dependence, the potential for twenty-first century repetition of these experiences. ‘The problem for Asian stability, growing with each barrel of Chinese oil imports, is now clear,’ writes Kent Calder in an influential book on energy and security in Asia. ‘It is the danger that China’s attempts to safeguard its oil supply lanes and defend its historical sovereignty in adjacent seas poses for other nations, especially Japan. China claims 80 per cent of the South China Sea as territorial water, 70 per cent of Japan’s oil supplies pass that way.’ Thus, this logic runs, ‘as Chinese imports steadily rise, defending the fragile sea lanes to the far-off Persian Gulf becomes a new security imperative for the PLA Navy.’

Such speculation begins to move from the merely intangible into the category of nightmare scenarios in which China deploys destroyers and aircraft carriers to interdict tanker traffic in a confrontation over the disputed Spratly Islands in the South China Sea, goes to war with Japan over the virtually uninhabited Senkaku islands, or, worse still, allies with Iraq or Iran in a future Gulf War. It is easy to conjure up such scare stories. The number of oil tankers navigating the waters of the Indian Ocean, through the straits of Malacca and the South China Sea for ports in Pusan, Yokohama and Shanghai, in the two decades ahead are likely to increase three-fold. But whether this prospect poses a security threat depends to a considerable degree on whether China elects to view energy security geostrategically or geoeconomically.31

Discounting the possibility of tensions among the Asian consumers, Fesharki argues that the ‘new pattern of supply and transport has created a reasonable rather than destructive rivalry among the Asian countries. There is no stampede to sign contracts at any price or to offer unreasonable terms. In today’s transparent oil market, prices are based on future markets or other formulas. Indeed, no major producer in the Middle East sets its own prices anymore. The Asian rivalry is based on an economic mandate to form strong economic and energy bonds with the Middle East and to create linkages that ensure the smooth flow of oil. This is a two-way street. Key Mid East suppliers recognize that Asia is their best market and try to ensure credibility and consumer satisfaction. The Asians seek to negotiate the best deals, but do not wish to depend solely on one economy or region. All this has mitigated the fears regarding Asia’s energy security problems. The issue of the reserve base is no longer a critical energy security concern because there are enough identified resources in the Middle East.’32 However, this does not ensure security in case of potential disruption. The IEA projects that the Asia-Pacific region will be importing 20–24 mb/d from the Middle East by 2020. In fact, Fesharaki points out that the threat is more to Asia than to the United States. ‘These oil linkages could present new political and strategic challenges in light of the emerging geopolitics of the post-September 11 period.’33

September 11 and the US Hegemonic Concerns

The growing number of stakeholders and the structural changes outlined above have undermined the centrality of the United States in the emerging energy regime. The US efforts, thus, have been to consolidate its control by integrating the new areas into its fold. An interesting parallel can be seen between the British imperial interests creating the geographical contours of the oil-rich Persian Gulf region and the American attempt to unfold the map of the ‘New Middle East’, which includes oil-rich Central Asia. It may be mentioned in passing that if the British search for energy contributed to the making of the oil monarchies, the US government’s patronage to them, even at the cost of nationalist and democratic aspirations, has eventually manifested in the violence of September 11.

The twin tower tragedy though compelled the United States to reassess its preferences for sources of energy supplies, it did not minimize the primacy of the Gulf region. However, a nuanced shift can be discerned in the US foreign energy policy both in its relations with the Gulf countries and its efforts for new sources particularly in Africa. But at the same time to consolidate its influence on the energy regime, the US administration is also exploring the possibilities of reconfigurating the power profile of the Gulf region. It is apparent that since September 11, relations between the United States and Saudi Arabia are not the same, though the two are trying to undertake all steps towards confidence building. The American thinking seems to be inferring that the present forms of regimes in the region have become dysfunctional in protecting its interest, so regime change could be a way out. The Pentagon at some stage did consider the idea of regime change in Saudi Arabia as it was warned by Lawrence Murawiec of the Rand Corporation that ‘the Saudis are active at every level of the terror chain—from planners to financiers, from cadre to foot soldier, from ideologist to cheerleader.’34 Importantly, the subject of regime change and oil security in Saudi Arabia was also explored in Oil and Security, Executive Session held on 14 May 2003 at Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University, 2003. Ironically, the Saudi regime, which became the suspect in the eyes of the Pentagon, has come under attack from the terrorist groups. The bombing in Saudi Arabia in oil-producing areas like Khobar demonstrates that by attacking the oil installation, the terrorists are hitting at the very strength of the Saudi regime putting on test the Saudi state’s capability to secure the oil installations and its supplies. The attack on expatriates engaged in hydrocarbon sector is aimed to cripple the oil-based system managed by the foreigners. The point made here is that by targeting the oil supplies, terrorists are not only threatening to destabilize the Saudi system but posing danger to global oil supplies.35

American policy on Iraq has implications for energy security regime. It reiterates eloquently that regimes are favoured conditionally. Saddam, the dictator, the possessor of weapons of mass destruction (WMD) did enjoy the American support as long as he served their purpose. When the American interest was over, he was needed no more. By invading Iraq, a message has been sent to all the Gulf governments to comply with the American concern, which in the context of September 11 is articulated as war against terror. However, it is not only high price but high risk policy too. Further, the attempt for regime change by the military might remove an authoritarian ruler, but it would not ensure the coming up of a democratic government. On the contrary, there are possibilities that an extremist government not very friendly to the Western concerns could come to the power. The leading opinion maker, The Economist did express apprehensions of such a takeover and its possible consequences:

The previous arguments assume that Middle Eastern oil producers will know what is good for them. But if a Taliban-like regime were ever to gain control of the Saudi oilfields, could it be relied on to maximize profits in a sensibly self-interested fashion? It might decide to blow up the wells, in pursuit of devout poverty and to punish the West for its corruption. An indefinite cessation of production from what is now Saudi Arabia is not something the West could take in its stride, with or without flexible markets. And going to war for the oil might not be straightforward, especially if one postulates nuclear arms in the possession of such a state.36

Apprehensive of anti-American sentiments in the region, the US administration under the Bush-Cheney doctrine has launched an active campaign to diversify sources of hydrocarbon supply. What is significant is that the search for diversification for oil has also led to the expansion of ‘strategically’ important regions. So, the deployment of the US forces to these sites to guard the oil interests is justified.

There is a striking correlation between the presence of oil and the deployment of the US military globally.

  • In Somalia, just before pro-US President Mohamed Siad Barre was overthrown in 1991, nearly two-thirds of the country’s territory had been granted as oil concessions to Conoco, Amoco, Chevron and Phillips. Conoco even lent its Mogadishu corporate compound to the US embassy a few days before the Marines landed, with the first Bush administration’s special envoy using it as his temporary headquarters.
  • The Andean countries of Colombia, Venezuela and Ecuador together produce about 20 per cent of the oil imported by the United States, more than two mb/d. Venezuela is often the top supplier of oil to the United States. Observers have long suspected that the oil in this region was a central motivation for the US involvement in Colombia’s civil war. In 2002, the Bush administration allocated $98 million to deploy 60–100 Special Forces troops to train a ‘Critical Infrastructure Brigade’ of Colombians for the explicit purpose of protecting an Occidental Petroleum pipeline.
  • In the Caspian region, which may contain as much as 200 billion barrels in oil reserves, the US military has been actively working to combat terrorism and to secure possible pipeline routes for the export of Caspian oil. In March 2001, the United States pledged $4.4 million in military aid to oil-rich Azerbaijan.
  • Deputy Assistant Secretary of Defense Mira Ricardel said the aid was ‘to counter threats such as terrorism, to promote peace and stability in the Caucasus, and to develop trade and transport corridors’. Azeri President Heydar Aliyev more specifically intermingled fighting terrorism and protecting oil pipelines, stating, ‘Guaranteeing the security of the Baku-Tblisi-Ceyhan and the Baku-Tblisi-Erzurum oil and gas pipelines is an integral part of our struggle against terrorism.’
  • In February 2001, Washington said it would provide the country of Georgia with $64 million in military support, and promised to dispatch 180 Special Forces ‘advisers’ to train up to 2,000 Georgians in anti-terrorism techniques. According to an Interfax News Agency report, the Georgian Defense Ministry said that ‘servicemen trained under the US Train and Equip Program might help provide security for the [Baku-Tblisi-Ceyhan] pipeline.’
  • In 1997, BP and Halliburton (headed at the time by Dick Cheney) proposed the trans-Balkan pipeline (TBP) that would provide another export route for Caspian oil via tanker to the Bulgarian Black Sea coast and through Skopje in Macedonia to Vlore, a port in Albania. Two years later, the US forces in south-east Kosovo began construction of Camp Bondsteel, which has become the largest new military base since the Vietnam War. In December 2002, Exxon Mobil and Chevron Texaco both announced they were considering participation in the trans-Balkan pipeline.
  • From Nigeria in the north to Angola in the south, West Africa holds in excess of 33 billion barrels of proven oil reserves, already supplies 15 per cent of US oil imports, and could supply one-quarter of US imports by 2015. In June 2002, a report from the private but well-connected ‘African Oil Policy Initiative Group’ recommended that the United States declares the Gulf of Guinea a ‘vital interest,’ and that the United States ‘should strongly consider the establishment of a regional homeport, possibly on the islands of Sao Tome and Principe. Fradique de Menezes, the president of Sao Tome and principe, announced in August 2002 that the United States had agreed to build a US naval base in his country,’ though the Pentagon denies any such plans.37

Threat to physical safety of energy installation and transport is another facet to the energy security concerns added by September 11. Oil wells and the pipelines known as soft targets of guerrilla attack are now in the terrorist lists. The linkage between terrorism and the physical security has emerged as a serious concern. According to the US Department of State’s Patterns of Global Terrorism 2000, rise in terrorist attacks in 2000 by 8 per cent was mainly due to upsurge in the number of bombings of multinational oil pipeline in Colombia by two terrorist groups.38 So far, these attacks were seen more from a regional perspective as local resurgency or rebellion. The September 11 attack though targeted at the United States has been projected as an attack on the custodian of global order. The issue of global dimension thus needs to be fought collectively. Certainly, the targeted attack has enhanced the vulnerability of the only super power. No wonder the gas pipeline companies have been directed by the US Transportation Secretary Norman Mineta to take immediate steps to protect their systems.39 Further, since the targets have been American companies, it is apprehended that they might feel restrained in making investment in energy sector in the Persian Gulf and Central Asian region.40 This compounds the problem as the region has limited technical and financial capacity to make necessary investments to meet the growing global demand. Interestingly, the debate witnessed a new twist when doubts were expressed about the quality and size of the reserves in the Gulf region, questioning the ability of the region not only to increase production but also to maintain it at current levels. According to Exxon Mobil, ‘about half of the oil and gas volume needed to meet the demand of 10 years from now is not in production today. Therefore, the industry will have to add capacity equal to two-thirds of today’s production levels.’41 According to IEA, total investments in the range of $16 trillion are required for the energy supply infrastructure needed to satisfy expected demand in 2030.

There is another side of the energy security, which is not adequately appreciated in the debate. The stakes in the hydrocarbon energy have been blown too high to make it a subject of high politics. According to the World Watch Institute, the Pentagon is the world’s largest oil consumer, burning ‘enough energy in 12 months to run the entire US urban mass transit system for almost 14 years.’ ‘In peacetime, the US military consumes more than 150 million tonnes (mt) of oil annually. Oil supplies approximately 34 per cent of the world’s energy needs, but 79 per cent of the Pentagon’s energy. A US aircraft carrier burns 5,628 gallons per hour, while a B-52 bomber swallows 3,612 gallons per hour. At full throttle, an M-1 Abrams tank burns through 252 gallons of fuel per hour, while an F-15 on afterburners can torch 240 gallons per minute. Like the weapons industry, the petroleum industry prospers on the revenue of conflict. Many members of the Bush administration were drawn from the ranks of the petroleum industry and the military-industrial elite. Dick Cheney’s former employer, Halliburton, not only builds oil pipelines around the world, it also provides security for 150 far-flung embassies, supplies housekeeping services for the US armed forces abroad and has recently begun offering teams of “privatized soldiers” to pump up the ranks of foreign armies.’42 There is strong lobby, which does not endorse a global energy regime aiming at reducing dependence on oil. These stakeholders are not limited to America but are equally, if not more, strong outside the United States. There is a community of stakeholders in the oil-exporting region undermining all efforts to look at the energy security beyond the hydrocarbons. The point made here is that by bolstering strategic salience of the hydrocarbons, a good case is made to have military presence in the oil-rich regions to provide security to the so-called vital supplies. This precisely is made the rationale for the US troops in the Persian Gulf and the Central Asian region.43

Hegemony and Its Contradictions

The American establishment never looked at the global hydrocarbon security regime in narrow terms of its import requirements. Today it is viewed as part of the wider agenda of consolidating and strengthening of the unipolar world. It requires no elaboration that since the Second World War, control and command over hydrocarbons has been considered critically important to acquire the strategic lead. But as the developments of the last five decades suggest, authoritarian regimes are no guarantee for the smooth flow of energy supplies. The oil-rich regions like any other region ought to be allowed to evolve by their own dynamics. The excessive penetration in the Gulf in the name of security turned out to be more destabilizing. It was the bolstering of rentier systems and not Islam that thwarted the seeds of democracy in the region. Such an approach has further eroded the resilience of the fragile system. Apprehension has been expressed in some sections in the United States, that ‘the administration may be repeating mistakes of the past, when the United States tolerated questionable practices by allied governments to advance its Cold War and energy security interests.’44

The adverse consequences of Venezuelan strike, the political tension in Nigeria and the resistance faced by the oil companies in Africa including the well-known Chad-Cameroon pipeline project have brought the need to factor in the issues of local tensions and conflicts into the global oil regime. With the expansion of global resources base the supply side is becoming more diverse, but it does not ensure stability unless the global oil interest takes care of local developmental aspirations. It is rightly observed:

More than any other group of countries, oil and other mineral exporters demonstrate the perverse linkages between skewed economic performance, poverty, injustice, and conflict. Countries dependent on oil and other mineral wealth are far more likely to have civil wars than their resource-poor counterparts, and war disproportionately harms the poor. The gap between expectations and the dismal economic performance of oil-exporting countries is politically explosive. Because oil governments funnel petrodollars to their own friends, family, military and political supporters, social class, ethnic or religious groups, their populations see foreigners and favourites getting rich, but their own lot does not change. In the context of apparent oil riches, it may even get worse. Over time, this is not a formula for stability.45

Apparently most of the oil exporters are facing serious internal and external pressures leading to supply disruptions due to unequal distribution of gains from oil prosperity. It has, thus, become imperative that the hydrocarbon-producing system is strengthened so that it could face the internal security threat. But this does not have to be obtained by either bolstering the authoritarian regime or by militarizing the issues. It is precisely for these reasons, there is a strong resentment in the producing regions about the external agents exploiting their mineral wealth. So far, such disruptions have not been taken seriously because of the availability of spare capacity and by drawing distinction ‘between large commercial suppliers like Russia, the Caspian, and Angola versus strategic suppliers like Saudi Arabia and the Gulf countries, which are prepared to maintain spare capacity.’46 This approach is flawed. Spare capacity certainly insures against the immediate crisis, but from a long-term perspective it would be desirable for the major oil consumer to look into the resolution by reviewing their policy ‘to enhance the reliability of those on whom dependence is inevitable for many years to come.’47 Moreover, the market today as pointed out above is facing the constraints of spare capacity. This demands understanding the systemic links between oil dependence and conflict. It also underlines the possible specific political and economic dynamics that contribute to the instability in oil-dependent countries and address it by correcting the policy measures that may include issues related with skewed distribution of gains. In this context, even the prospective oil from Iraq has to be seen in the light of the political developments. Iraqi production has been assumed to gradually increase to between 2.8 and 3.5 mb/d by 2008, but internal political culture may interfere with the ability of Iraqi National Oil Company (INOC) to maintain production and in particular export capacity. A democratic Iraq might have a different perspective of utilizing its oil wealth. Moreover, the fragility of nascent post-Saddam Iraq does not rule out the continuation of low intensity of internal political strife, which could interfere even with the low-production scenario. In the first decade after the Iranian revolution, oil production averaged less than half of pre-war capacity and even in the next decade (1990s), Iran’s production capacity was not much more than 60 per cent of pre-revolution capacity.

The major contradiction that the emerging energy regime has to resolve is the insecurity that it faces from the US hegemonic concerns. In the unipolar and pre-emptive strike regime, whether the American empire will be able to establish its order is not the major issue for energy security regime, as the question is of mounting opposition that it will invite, in the process creating grounds for resistance impinging adversely on energy security. The US policy of imposing its designed political order described as democracy project in West Asia is facing resistance if not for its content, for its being very American. The hate-America sentiment in the region cannot be addressed by electoral processes. The hatred is inherent in the very logic of hegemony, which gets further compounded by the historical baggage of Israel-Palestinian conflicts. It cannot be ignored that in the political chemistry of the region, Palestinian issue has been a factor to reckon with. It cannot be ignored that the developments in Palestine and more recently in Iraq have contributed to the political radicalization and strong anti-Western feelings among the younger generation throughout the Arab and the Islamic world. The combination of serious socio-economic and internal political pressures with the feeling of humiliation caused by the continued occupation of Arab lands by foreigners has heightened political tension in West Asia to a level not known before. Since the Gulf region is a leading supply base of hydrocarbon, the hegemonic concerns demand controlling of the region, which is being attempted by pushing vigorously the so-called democratic measures or posturing for cleansing the region of WMD. Developments in Iraq are going to be the trendsetter. US posturing to Iran is not very assuring. Saudi Arabia, the most important oil producer and exporter in the world, the only country with significant spare capacity, which has saved world oil markets from steeper price hikes during the Iraq-Iran War, the Gulf War and again recently during the war on Iraq, is today most vulnerable to domestic strife. Though the Saudi government is taking measures to address the new security issues, it cannot be denied that there are worrisome signs about future stability if reforms are not implemented soon at many levels. Demographic trends, inability to diversify the economy away from the capital-intensive petroleum industry, declining per capita income, rising unemployment among Saudis, failed educational system, lack of popular participation in government, and rising tension between traditionalism and modernism all point towards rising tension within the Saudi society. The world has been able to cope with production disruptions in Iran, Iraq, Kuwait and Venezuela in the past, but in case of a major and prolonged supply disruption in Saudi Arabia, it will be a difficult situation.

Some analysts believe that even today there may be as much as a $3–4 per barrel premium in the oil market because of regional political tension and the continued uncertainty in Iraq. Issues of internal stability and geopolitical problems in West Asia, including possible outburst of new conflicts, may keep oil prices above market equilibrium levels for much longer than what it was in the past. In tight oil markets, even minor geopolitical disturbances will have an impact on the oil market and tension may result in a premium well-above- the-normal market-clearing prices. In potentially weaker markets, as projected for 2004–08, minor disruptions can be dealt with but major supply disruptions can still play havoc with the market.

Clearly, the parameters of global energy are changing. Correspondingly, the security regime too has to be revised. It is rightly observed that, ‘The United States should recognize that there is really only one oil market. The United States is part of a global oil market, an extraordinarily huge logistical system that moves 80 mb/d of oil around the world everyday. So, US security resides in the stability of the overall market. So, it does not make sense to focus on imports or reliance on one region.’48 This can be seen by the fact that the growing volume of oil trade is reflecting a distinct pattern. In 1980, the total oil trade was 29 mb/d, it went up to 32 mb/d by 1991 and 43.7 mb/d in 2001 and49 is likely to double over the next 25 years. ‘This will increase the world’s vulnerability to supply disruptions,’ said IEA, which advises 26 oil consumer nations. It expects oil exports from West Asia to triple to 46 mb/d in the period.50 The Table 1.2 below shows that the volume of trade other than the United States, excluding Europe and Japan, has gone up from 8.3 mb/d in 1981 to 16.2 mb/d in 2003, suggesting the dispersal of stakeholders and the risk factor. The global energy security, thus, has become sensitive to developments in wider segments of the market. With Russia emerging as the second largest exporter, the internal developments there have to be taken note of in assessing the expanse of oil regime. Changes in Russian oil policy following the arrest of Khodorkovski and the break-up of the promising Yukos-Sibneft joint venture could reduce the incremental Russian oil production from earlier more robust projections, thus influencing the oil market adversely.

The geographical concentration of location of oil resources too have security concerns related with the transit route. Since the bulk of hydrocarbon reserves are in the Persian Gulf region, strait of Hormuz is counted as the potential choking point. Cordesman estimates that ‘over 14 mb/d of oil flows through this strait to Japan, the United States, Western Europe and other countries. It is the world’s most important oil checkpoint. At its narrowest, it consists of 2-mile-wide channels for inbound and outbound tanker within the Omani side of the strait and a two-mile-wide buffer zone. … The Department of Energy (DOE) reference case indicates that exports through the strait must be more than double by 2020, reaching around 42 mb/d. This implies that up to three times more tankers will transit the strait in 2020 transits than today. Closure of the strait of Hormuz would require use of longer alternate routes at increased transportation costs and these routes cannot meet anything approaching current export levels, much less the much higher production levels forecast by DOE. The routes include the 4.8 mb/d capacity Petroline, the 2.2 mb/d IPSA 1 and 2 lines, and the Abqaiq-Yanbu natural gas liquids line across Saudi Arabia to the Red Sea.’51 The sensitivity of the issue needs to be appreciated in view of the emerging markets in South and East Asia with China and India as the leading destinations. Fesharki argues that sharp increased tanker traffic, in particular the number of ships passing, raises the question of providing security for the increased volume of trade and securing the requisite number of ships not to mention the prospects of oil spills and ship accidents. ‘These spheres of activity will, thus, have implications for the security of shipping routes and the ability of these routes to handle the increased volumes of shipments that are expected in the near future.’52 The growing insecurity in sea lanes particularly the piracy has added new concern in the security debate. It is estimated that ‘pirate attacks worldwide surged 40 per cent in 1999, according to a report released earlier in 2000 by the International Maritime Bureau (IMB), with the bulk of that increase occurring in South-east Asia. Of the estimated 285 attacks throughout the world that year, 158 took place in South-east Asian waters—up from 70 in 1994.’53

 

Table 1.2 Global Oil Trade (In Thousand Barrels Per Day)

Source: BP Statistical Review of World Energy 2004.

 

Among the issues, further widening the scope of energy security includes the globalizing tendencies in the oil sector suggesting dissolution of traditional boundaries between the competing companies. The spate of mergers have given the companies a new margin to participate in the market, which is no more controlled by the traditional parameters. For instance, it is observed that ‘access to technology is not as important a competitive differentiator as it used to be, largely because it is widely available through service companies. Effective management and application of technology, not its basic development, will be the key corporate skill.’54 Similarly, mergers, as IEA points out, will limit oil supply flows. The powerful majors are maintaining such a tight leash on spending that concerns are rising for the impact on world oil supplies. IEA says that oil company supply expansion programme has been halved to 2–3 per cent per annum with some firms claiming no volume target at all. The newly enlarged companies are focusing more sharply on cost cutting than the others as they work to demonstrate new economies of scale to their shareholders.

Moreover, with oil discovery and production becoming increasingly cheaper, the competitive environment too has been witnessing change. ‘Technology has changed the competitive environment by changing the relative attractiveness of various opportunities requiring different levels of technical sophistication. By the same token, the opening up of new region will alter the relative commercial merits of different technologies. For example, if the Middle East opens up their upstream to foreign companies, then the focus of technology will shift to emphasize on-shore exploration and production than the current thrust to deep-water technology.’55 Following the changes in the global hydrocarbon market, though at one level there are adequate oil and gas reserves to meet the growing world demand but at the other the existing capacity is just at a precarious level, making the market highly susceptible and volatile to any marginal episode. The Energy Outlook 2000 by IEA confirms ‘the physical world oil-resource base as adequate to meet demand over the projection period. Although oil industries in some countries and regions are maturing, the resource base of the world as a whole is not a constraining factor. One needs to expect no global ‘supply crunch’. ‘This means that the world oil production capacities will have to be increased, including expansion in the Persian Gulf region. The expansion of production capacity is critically influenced by the price factor. The market needs to be stabilized in a range to ensure profits from the region where the cost may not be as low as in the Persian Gulf region. It seems the recent effort by OPEC to define a price range reflects the recognition of the market reality. A volatile market is detrimental for both the producers and consumers. It is rightly pointed out that in the changing context, enough oil supply need not necessarily provide stable prices as a number of factors intervene in the market play like the speculation in futures market. It is estimated that 1.5 mb/d twice the world’s daily crude demand is traded in this market. ‘This occurred last year from April, when supplies exceeded demand by 1.5 mb/d. In spite of this price for WTI passed the $30 per barrel mark.’56 Other factors include infrastructure like refining and transport and the high sea transportation, and finally high taxation.

Of late, the SPR has become an integral part of security policy of major oil-importing countries. It is even argued, ‘were a major supply disruption to occur, most likely as a result of a catastrophic terror attack on a major oil facility in the Persian Gulf, there would be nothing but the SPR to stop the price of oil from going through the ceiling.’57 The idea was moved by IEA making obligatory to its members to have a stock of emergency reserve equivalent to 90 days of consumption. These reserves as per IEA are ‘not intended to be deployed as a means to change the commercial terms in a market.’ However, there are instances where these stocks were used to reduce the prices, for instance, 15 million barrels were released during the rule of President Clinton to ease the price pressure.58 During Operation Desert Storm, energy reserves were used for the first time in 1991.59 After September 11, the pressure to enhance the SPR capacity and to create new capacity has come up very loudly. American government has been asked for expanding the SPR capacity from 700 million barrels to 1 billion, and China and India are advised to build up their own capacities. Unlike Europe, there is no pooling of Spa’s in Asia. It is, therefore, suggested that in view of the growing import dependence of energy, an Asian Strategic Petroleum Reserve be created. For creating 30 days of regional demand, excluding Japan and South Korea, at 12.5 mb/d, ‘would need a reserve of 375 million barrels to start. At $25 a barrel, this would require financing of $9,375 million. Compared to the investment made in defense and homeland security, this would be a relatively modest investment.’60 IEA is promoting the idea, and India and China are going for SPR storage facilities shortly. The Indian government has decided to have SPR facilities for 5 mt or 37.5 million barrels of crude oil. This will meet India’s crude oil needs for two weeks. The capacity could later be raised to cover 45 days demand.61 In case of China, IEA is suggesting for three times the size of proposed volume of 8 million cubic meters, or 6 mt, by 2005.62 In fact, it is engaging ten South-east Asian countries in this endeavour. According to IEA’s Deputy Executive Director William C. Ramsay, ‘Now ASEAN is not one voice on this: 10 countries, 10 perspectives but a country like Thailand is quite serious about strategic stocks. It could be taking early action. Philippines had proposed that strategic storage facilities be built in Subic Bay.’63 The idea of Global Strategic Petroleum Reserves (GSPR) has also been mooted to stabilize the world oil prices. It is envisaged as a joint project of the United States, Europe and Russia with oil supplies from Russia and Caspian. The proposal suggests that though financed by G-8 and supervised by IEA to function under its guidelines, ‘GSPR could be located in several places in the region—in unused salt domes, demobilized military facilities, and, if necessary, new tankage that could be created at strategic locations.’64 It is expected to provide five strategic benefits:65

  • First, the existence of a substantial reserve, in tandem with America’s SPR and the IEA system, will put an implicit check on OPEC’s ability to raise oil prices. A new reserve could also send a signal to exporting countries that there is an off-quota source of demand for their oil. This is especially relevant for countries like Russia, Mexico, and Venezuela, which are voluntarily restraining their production to the detriment of their economies and ours.
  • Second, in the event of a supply interruption, real supplies of crude oil would be closed and available to Asian markets.
  • Third, the consuming nations of the world would have a new and powerful tool to prevent a market failure by vastly increasing the ability of governments to provide supply liquidity in the event of a panic. New mechanisms for communication among these governments would facilitate transparency and build confidence during a crisis.
  • Fourth, a reserve could mitigate OPEC’s long-term dominance over Asia. Western protection of Asian economic security would bind that region closer to the West. Russian commitment to provide the oil for the reserve would give Asia an assured diversity of supply, greatly reducing OPEC’s ability to exercise coercive power over China or other countries.
  • Fifth, granting Russia and Central Asian nations preferred status as suppliers to a GSPR will allow them to fulfil a public role as partners in energy security, and give real substance to rhetorical commitments of renewed energy security partnerships between the United States, Europe and Russia.

As an initiative towards a global energy security policy, GSPR could be a significant step, yet it cannot be taken as a measure to an enduring energy security regime. At best, as the concept suggests, it remains a means to address the emergency situations.

From Exclusive to Collective Responsibility: The New Doctrine of Energy Security

The global energy security concerns are unfolding in such dimensions and magnitude that it requires to revise the earlier premise of looking at a relationship between producers and consumers in adversarial framework. The approach to control hydrocarbon by coercive methods can no more be sustained. The discourse has to be rescued from hegemonic mode. Even if oil has been the motive behind the invasion of Iraq, its sustainable supply cannot be assured just by changing the regime. The new context demands defining of the relationship in the collective framework of mutual dependence and in the format of partnership. The partnership needs to envisage the sharing of oil prosperity with the larger community and society as well. The growing concern about the need to have consumer-producer dialogue underlines the emerging realities of the time. The concerns have been institutionalized by coming up of associational groups like the IEF at Riyadh. The forum provides a space for political dialogue among the producer and the consumer. It is a place to exchange ideas and build understanding not only for ministers of the IEA and OPEC countries but also for ministers of important countries outside these two organizations like Russia, China, India, Brazil and South Africa which have substantial impact on the global energy. Participation on an equal footing makes the forums a dynamic platform on energy dialogue. Certainly, this makes the global energy dialogue a forward- looking force towards a common energy future where supply and demand are balanced to promote, and not jeopardize, the goal of sustainable global economic, social and environmental development.66 This is the challenge that must be addressed by dialogue not only between nations at the political level but also between governments and industry.

The environmental and social sustainability are the two leading concerns that cannot be ignored in defining the energy security regime. While the former has lately gained recognition, the latter has yet to get due cognizance, despite the fact that in many countries oil companies and governments have been facing resistance from the local communities or from workers affecting the oil supplies. The point made here is that the security and stability in energy supplies require that policy choices are made beyond the preferred political regime stability. The long-term perspective calls for addressing the threat emanating from structural deficits which include sharing of resources with all the stake holders. Human rights organizations have brought out the details of violation of rules by the oil companies and the suppressive role played by the state in different countries, and have called for a transparent and accountable regime. Even the American think tanks like CSIS have recognized the need for transparency and accountability in the interest of corporate sector itself. ‘The task force concluded that a key to promoting political, economic and social reforms is transparency in public finance. If leaders tell their citizens how much revenue the government takes in and where it is spent, the resulting transparency will engender more realistic public expectations, more plausible national development programmes, and better means to combat corruption and promote democracy, respect for human rights and the rule of law. Transparency will benefit US companies as well. Respect for the rule of law, codified regulatory practices, and transparent bidding and award practices deter corruption and encourage a level-playing field for US companies.’67 Greater stability and predictability in energy developments are increasingly seen as a shared goal that can facilitate long-term economic planning and have a positive influence on political developments as well. ‘Similarly, regional dialogues between economies with common or complementary interests such as within APEC, ASEAN or North Asia should be encouraged to achieve improved energy security and economic outcomes.’68 In January 2005, India was host to an Asian energy conference bringing together Asian producers and consumers focusing on larger issues of energy security towards stability and sustainability of the oil market in the region, through cooperation. ‘The idea of an Asian petroleum market, with trading exchanges, was also floated during the New Delhi forum. The objective was basically to serve the region’s fast growing economies and soften price volatility. Oil producers have indicated they were ready to look at the proposal closely. A deep sense of fraternity was definitely evident in New Delhi.’69 Another similar initiative proposed by New Delhi was to host a meeting among the four major Eurasian energy producers Russia, Kazakhstan, Azerbaijan and Turkmenistan, and the four major Asian energy importers China, Japan, South Korea and India.70