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  • What does lower oil prices mean for India?

    What does lower oil prices mean for India?

    The longer the price of oil remains depressed, India, like other major oil importers, will not only increase its dependence on crude imports, but it will also become more dependent on OPEC.

    January 18, 2016

    Harish Srinivasan asked: Growth of ISIS poses a severe threat to oil supplies from Iraq. What should be India's approach to ensure energy supplies from Iraq?

    Shebonti Ray Dadwal replies: ISIS has lost control over major oil fields in Iraq since mid-2015, and although it still controls some parts of Iraq, the oil trade in eastern Syria is now one of the only means it can make money from oil. The main oil-producing regions of Iraq are still under the control of Baghdad and despite security and financial problems the crude production has grown substantially over the last five years, reaching 4.4 mbd in the third quarter of 2015 as against 2 mbd earlier.

    Need to revive Iran-India energy ties

    Need to revive Iran-India energy ties

    The possible lifting of the sanctions on Iran will lead to a rush for a share of the lucrative Iranian energy pie similar to Myanmar’s opening up last year. India cannot afford to be left behind.

    September 30, 2014

    Iraq crisis: Lessons for India

    Given India’s vulnerability to a rise in global crude oil prices as a result of its 75-80 per cent of its crude import dependency, the Iraq crisis could widen its current account deficit, while putting pressure on exchange rate, impeding government’s fiscal consolidation goal and putting off any nudge on interest rates by the Reserve Bank of India.

    July 16, 2014

    Manoj Kumar Meena asked: As the US is increasingly becoming self reliant in oil and gas, why does it still ally with a theocratic regime in Saudi Arabia?

    Rumel Dahiya replies: It is true that the US is approaching a stage of energy self sufficiency. In fact, it would be in a position to export LNG to its favoured trade partners once the infrastructure is in place. Availability of cheap gas domestically is creating a competitive edge for America's manufacturing sector and an influential section of the American society would like to retain that edge by restricting exports. It is axiomatic, therefore, that in the changed situation the importance of West Asia (or the Middle East) in America's energy security matrix will reduce greatly. Some analysts opine that America's involvement in the geopolitics of the West Asian region as a whole would decline. However, a superpower would always like to retain influence and maintain leverages all across the world. Being a region with the largest exportable surplus of oil and gas, the region as a whole is bound to remain strategically important to the world, even if not to the US.

    With its ability to increase oil production at short notice and financial capacity to reduce production without serious damage to its economy, Saudi Arabia remains a significant and perhaps the most important energy player in the world. Also, being the richest and most influential country in the region, ready to financially help out regimes from Egypt to Pakistan and beyond, it can not be ignored easily. This is so even when it does not shy away from promoting fundamentalist Wahabism across the world. America's liberal democracy and pluralism and Saudi Arabia's hardline sectarian theocracy do not make for easy partnership. However, their relationship has always been interest driven. US has looked at close engagement with Saudi Arabia in terms of maintaining its influence in the region, controlling and securing energy resources for itself and its allies and to serving its geopolitical interests besides furthering its economic interests in terms of trade and commerce. Saudi Arabia, on the other hand, looked at the US as a guarantor of its security, particularly from Iran after the Iranian Revolution, and supporter of its ambitions for regional hegemony.

    The situation is now changing primarily because of two reasons. America's energy independence is perhaps the most important reason. US is also realising that Saudi obsession with Iran is constricting American choices in the region. This issue has gained salience with much reduced American appetite for military interventions abroad for economic and political reasons. Increased focus on East and South East Asia will necessitate a degree of disengagement from elsewhere. West Asia is one such region wherein various players like Saudi Arabia, Egypt, Israel and Turkey continue to place heavy demands on American political capital and security apparatus. By not getting directly involved in Syria and initiating talks with Iran on the nuclear issue, America has signalled change in its approach. This, however, does not mean that America will disengage with the region or affect a break with Saudi Arabia. America may not need West Asian oil and gas but some of its allies do. It would also not like to see its peer competitor(s) to fill the vacuum once it vacates the geopolitical space. It would also be necessary for the US to maintain a degree of influence with all important states in the region so that it remains an indispensable balancer for the region. The US-Saudi relationship is likely to cool down considerably in next decade or so but it is unlikely to turn into hostility. US is likely to follow a more nuanced and balanced policy for the region to create a new regional balance of power wherein it would be able to exercise influence but not be a guarantor.

    The Great Gas Game over Syria

    New energy find in West Asia will set forth new political equations. Syria alone has discovered huge proven gas, oil and shale reserves. Whether the Assad regime survives or a change of regime happens there would determine the global gas system in a large way.

    September 09, 2013

    Iraq: Ten Years after the US-Led Invasion

    The US has spent over a trillion and a half dollars and this huge expenditure has nearly unhinged its domestic economic equilibrium. At the strategic level the results for the US have been even more disconcerting in terms of Iraq's Shiite-led government refusing to let US troops stay on as well as extending support for fellow Shiites in Syria.

    March 20, 2013

    The Iran-Pakistan Pipeline: Pressler 2.0?

    The Pakistanis are playing a high-stakes gamble, one in which they think the odds are stacked in their favour in a way that while they stand to gain a lot even if things don’t quite work in the way they imagine they won’t end up losing too much.

    March 12, 2013

    Peak Oil and Implications for India

    The basic point is that crude oil is a finite resource. Hence, the issue is not ‘if’ crude oil peaks and availability declines, but ‘when’ it peaks and starts its decline. Peak oil is the theoretical point in time at which oil production peaks and begins to fall. Here we refer only to peaking of conventional oil.

    January 2013

    India struggling to cope with sanctions on Iran

    The Indian government is now weighing several options to manoeuvre around the ever-tightening sanctions, including the provision of sovereign guarantees to oil tanker operators.

    June 26, 2012