Prof. ST Hsieh
Director, US-China Energy Industry Forum
May 9, 2022
The following article is making the case against US based mainly on crude oil trade focusing on India’s actions defying US pressure. But it should be stressed that the current down fall of US global outreach is a sign of the failure of Biden’s foreign policy. Surely, US foreign policy not only has weakness as well as unforced errors under former US President Trump. Biden is the person of concern because he was elected because of his long career in US Senator and eight years as Obama’s VP. Yet, he has not accomplished much but inherited much of Trump’s foreign police doctrines. His foreign policy team, although has incredible academic credentials, is naïve and arrogant. As the following report covered on US approach toward India is a good case study.
For example, “the U.S.’s vision of the role India was to play in its world order, and in its new oil markets order.” Instead of “vision” it is self-inflicted “delusion!” Biden’s foreign policy team seems to be completely ignorant about the recent history of Russia-India relationship. After the Ukraine war started and Biden decided to show his global leadership of publicly “defeat” Putin, Biden thought he has the perfect case, and every other nation should follow his marching order. So, is the old strategy: either you are with me (Biden) or you are against me!
India has zero national interest in Ukraine but depends on Russian energy and military equipment. Biden does not provide any real incentive for India to follow his marching order to ban Russian energy but focused on abstract “right” and “wrong!” Of course India, like any other nation, will take care of his/her national energy security first. What else?
Now, EU nations are paying about US$1 billion per month for Russian energy as the Ukraine war rages. EU’s most aggressive plan for banning Russian oil will have to start at the December of 2022. It does not have the support of every EU nation so some exemptions will have to be made. EU’s Russian natural gas ban will have to wait till 2025 at least. In the meantime, if Putin were to cutoff Russian natural gas supply to EU today, how Germany’s economy will survive? How much Biden can help?
So, it is absurd that US is urging and threatening China and India to “boycott” Russia energy! Washington lost her global influence on the world stage for one simply reason: US lost her touch of reality! Yes, US can regain influence on the world stage but US has to realize that it has to play by the rule!
Can Washington Regain Influence On The World Stage?
Mon, May 9, 2022, 2:00 PM
It is a matter of profound irritation to the U.S. that countries around the world will not play the roles that Washington has designated for them in its game of global geopolitical chess, but it only has itself to blame. For much of the time since the end of the Second World War, the U.S.’s principal opponent in the game was Russia, and both sides took an uncompromising view on how to deal with countries that were not aligned with them. Over the past 20 years or so the game has changed for two key reasons. First, the hard-power approach of Russia has been superseded by the more sugary checkbook diplomacy of China, which makes bitter pills easier to swallow. Second, the U.S. has dithered over how it wishes to project itself into all corners of the world, if at all, as evidenced by its equivocation over Russia’s invasion of Georgia in 2008, and Crimea in 2014, and its withdrawal from Iraq and Afghanistan in 2021, among others. The great Asian power of India is now a case in point, highlighted by its burgeoning oil business with Russia, despite strong U.S. protests in the wake of Moscow’s ongoing invasion of Ukraine.
According to several local and international reports, in the two month period from 25 February (a day after Russia moved into Ukraine) to 25 April, India bought over 40 million barrels of Russian, which is around twice as much as it had done in the two month period leading up to the outbreak of the war. According to industry data, this most recent two-month total is also more than twice the amount of crude oil that India bought from Russia during the whole of 2021. Of course, India can – and has – argue that it is a free country that needs to protect its own energy security and, to this effect, should avail itself of the opportunity to buy deeply-discounted barrels of oil from any country, including Russia, if it so chooses. Indeed, India’s Finance Minister, Nirmala Sitharaman, said at the beginning of April that: “If there is, first of all, fuel available at a discount [Russian Urals grade has been trading at a discount of around US$30 per barrel to the Dated Brent benchmark], why shouldn’t I buy it? I need it for my people so we have already started purchasing.” From Washington’s perspective, and correctly so, there are greater considerations in this equation than just the price of a barrel of oil, and India knows it too, whatever its ministers may say in public.
What is happening with India, and several other countries that were designated one role or another in the Oval Office security briefings over the past few years – including, from the oil markets’ perspective, much of the Middle East – is a confused foreign policy doctrine and even more confused implementation out of Washington that allows New Delhi to play both sides of the superpower game with much more impunity than ever before. So lacking in concern is India about any meaningful ramifications from the U.S. about its indulging the overtures of Russia, and by extension even its arch regional rival China, that just before Christmas it signed range wide-ranging set of deals with Moscow, following a personal visit from Russian President, Vladimir Putin, to Indian Prime Minister, Narendra Modi. As analyzed in-depth by OilPrice.com at the time, among the 28 investment deals signed between Russia and India were even contracts for India to produce at least 600,000 Kalashnikov assault rifles and, even more disturbing for the U.S., was Indian Foreign Secretary Harsh Vardhan Shringla’s adjunct comment that the 2018 contract for Russia’s S-400 air defense missile systems was now being implemented. The breadth and depth of the deals took the U.S. and the E.U. by surprise, according to several highly-placed sources in Washington and Brussels exclusively spoken to by Oilprice.com at the time.
Since then, not only has India’s oil business with Russia increased enormously but it is expected, according to the deals signed in December, to see trade and investment between the two countries boom, according to Modi: “We have set a target of US$30 billion in trade and US$50 billion in investment by 2025.” There are further opportunities for bleed-through military elements to appear in the oil and gas projects as well, with Rosneft’s oil deliveries to be shipped through the Russian Black Sea port of Novorossiisk, with off-loading facilities in India to be built out if and when required, with Russian security personnel deployed at the sites, also as and when required. This newly re-energized relationship between India and Russia has found practical political resonance as well in the fact that India has abstained from all procedural votes at the various multilateral security bodies, including the U.N., that condemn Russia’s invasion of Ukraine.
This is all a long way from the U.S.’s vision of the role India was to play in its world order, and in its new oil markets order. As analyzed in-depth in my new book on the global oil markets, Washington had earmarked India to become over time the global backstop bid for oil, replacing China in this role that it has held for the past 25 years or so. From the U.S. perspective, there appeared to be a new willingness on India’s part to stand up to its dominant and domineering neighbor, China, with a clash on 15 June 2020 between the two great Asian powers in the Galwan Valley being instructive in this respect. It marked a new pushback strategy from India against China’s policy of seeking to increase its economic and military alliances from Asia through the Middle East and into Southern Europe, in line with its multi-layered multi-generational ‘One Belt, One Road’ (OBOR) power-grab project. At the same time, coinciding closely with the signing of the first Israel-Arab state relationship normalization deal (that with the UAE), India began to shift from its previous policy of trying to contain China to advancing its own ‘Neighborhood First’ policy alternative to China’s ‘OBOR’ initiative. A further basis for U.S. optimism in this regard is that India was one of the founding members in 2007 of the ‘Quadrilateral Security Dialogue’ that discusses and to some degree coordinates security issues and strategy between the U.S., Australia, Japan, and India, particularly when it comes to dealing with China’s ongoing expansionist policies in Asia-Pacific.
Economically as well – and with direct positive implications for Middle Eastern oil producers looking for a global backstop bid for their hydrocarbon products – India appeared well-positioned to take over that mantle from China. According to data released in the first quarter of 2021 by the International Energy Agency (IEA), India will make up the biggest share of energy demand growth at 25 percent over the next two decades, as it overtakes the European Union as the world’s third-biggest energy consumer by 2030. More specifically, India’s energy consumption is expected to nearly double as the nation’s GDP expands to an estimated US$8.6 trillion by 2040 under its current national policy scenario. This will be underpinned by a rate of GDP growth that adds the equivalent of another Japan to the world economy by 2040, according to the IEA. The agency added that the country’s growing energy needs will make it more reliant on fossil fuel imports.
All, though, is not necessarily lost, for the U.S.’s intentions for India, as domestic corporate lobbying in new Delhi about the longer-term effects of U.S.-led global sanctions on Russia might deter a fully-fledged allegiance between India and Russia, exacerbated by a broader sense of mistrust at tangentially cozying up to Russia’s geopolitical partner, China. Notable in this context is the resistance from some leading Indian companies. According to various reports, the Indian government has asked state-run energy companies to consider buying the 19.75 percent stake in Russian oil giant Rosneft that international super-major BP wants to off-load in light of Russia’s invasion of Ukraine. According to the same reports, the Indian government has also asked India’s OVL (the overseas investment arm of Oil and Natural Gas Corp) to consider buying the 30 percent stake held by Exxon Mobil Corp in Russia’s Sakhalin 1 project, also as a consequence of the invasion of Ukraine. Senior oil and gas security sources in the E.U. spoken exclusively to by Oilprice.com last week highlight that although there are several synergies for India in such deals – OVL already holds a stake in Sakhalin 1 and in Vankorneft (as does a consortium of Oil India, IOC, and BPRL), most notably – concerns over possible U.S. retaliation on India over further stepping up its de facto support for Russia remains a stumbling block to the deals going ahead, at least for now.
By Simon Watkins for Oilprice.com