India's quest for energy security has received a boost, with neighboring Burma signaling its willingness to sell it natural gas. But even as the modalities of the deal are being worked out, their common neighbor Bangladesh is upset over having been dropped from a pipeline proposal to bring the gas to energy-hungry Indian markets.
Burma has agreed to sell India gas from the A-1 block in the Shwe field off the coast of Arakan state. The Shwe field comprises several blocks of gas of unconfirmed size. Of these, A-1 block is estimated to be the largest, containing 2.88 trillion to 3.56 trillion cubic feet of gas.
South Korean giant Daewoo International is the largest stakeholder (60%). The remaining 40% is divided between the
state-owned Korean Gas Corp (10%) and India's state-owned ONGC Videsh Ltd (20%) and the Gas Authority of India Ltd (10%). (ONGC Videsh Ltd is the overseas arm of the Oil and Natural Gas Corp, and GAIL is India's largest gas transmission and marketing company.)
Until early this year, it was assumed that gas from the A-1 block would go to India exclusively. India, Bangladesh and Burma had been deliberating and had even reached agreement in principle regarding an overland pipeline that would run through Burma's Arakan and Chin states, then through Bangladesh into India.
But even as deliberations over that pipeline ran aground, India's desire to slake its thirst for gas through sourcing Burma's gas fields received a blow when in December Burma signed a memorandum with PetroChina, an oil and gas company based in Beijing, for the sale of gas from the A-1 block.
"That agreement with China was perceived as a serious setback to our quest for energy security," an official in the Indian Ministry for Petroleum told Asia Times Online, recalling that it wasn't the first time that India's failure to be proactive had resulted in the country losing out on other blocks in the Shwe field. This apparently prompted Delhi to pursue its goals more aggressively in recent months.
That approach has borne fruit. Burma is now willing to supply gas to India as well as China. Allaying Indian apprehensions that the sale of gas to China would affect its availability to India, Burma's ambassador in New Delhi, U Kyi Thein, said his country had enough gas supplies to meet the demands of both countries.
India's efforts at accessing Burma's gas have paid off, but they come at a high price. To offer Myanmar a better deal than the Chinese, India has agreed to buy gas on a "take or pay" basis. Under this arrangement, India will give Burma guaranteed earnings for its gas every year even if it is not able to access the gas.
Indian officials might be patting themselves on the back for their success with the gas deal, but it is Burma that has once again displayed shrewdness in its diplomacy with its two giant neighbors India and China. This is not the first time that Burma has come out the winner in the Sino-Indian battle for influence in the country.
For decades, India and China have kept a wary eye on each other's influence in Burma. Their battle for influence in Burma heated up significantly over the past decade, with India too beginning to court the generals who rule the country after scorning them for years. China, in contrast, was always happy doing business with them.
When the international community condemned Burma's junta for its ruthless suppression of student protests in 1988 - India was among the most vocal of the junta's critics - China stood by the generals. Burma's generals returned the favor a year later when China was in the doghouse for the massacres of students at Beijing's Tiananmen Square. Sino-Burma relations grew from strength to strength thereafter.
For India, the costs of spurning the generals became apparent, prompting a rethink of its Burma policy. This resulted in a switch from overtly backing the pro-democracy movement to toning down that support and engaging the generals. The threat to India's security that the Sino-Burma military and economic cooperation posed - there is concern that China's "listening post" on the Coco Islands is aimed at monitoring Indian naval activity and its missile program - was perhaps the main factor that spurred the Indian rethink.
But there were other reasons, too. India realized that it needed the cooperation of the junta if it was to be able to tackle insurgency in its northeastern states. There were also economic considerations - India sees Burma as its land-bridge to Southeast Asia. India needed Burma to boost its "Look East" policy.
The generals were quick to sense opportunity in India's anxieties. While they are keen to be seen shaking hands with India, which gives the junta the stamp of approval of the world's largest democracy, they also recognize that India, anxious to keep the Chinese away from its doorstep, will go the extra mile to keep the generals happy.
Burma is aware that China too will accommodate the generals to ensure that they continue to provide Beijing access to the Bay of Bengal. The generals have not been averse to playing on the anxieties and ambitions of their two giant neighbors. The junta has bargained skillfully. From China they get military supplies, including lethal equipment. From India, they get help in developing infrastructure.
It is in this context that the recent deals with China and India should be seen. Burma decided to sell gas to China, as it was not keen to set aside the gas exclusively for India and to wait forever for the India-Bangladesh tangle over the pipeline to get resolved. It wasn't looking to shut out India, though. It was aiming for a better price by stepping up the competition. This resulted in China's entry into the picture.
And Burma is not done with the hard bargaining yet. "Talks are on with both the countries. We are still in the negotiation stage and have not finalized with either India or China," Burma's envoy to India said.
The Bangladeshi route
India, meanwhile, is still exploring options to bring in the gas. The pipeline through Bangladeshi territory has now been dumped. Although Dhaka stood to gain significantly from transit fees, it was not satisfied with those alone. It had demanded major trade and transit concessions from India for allowing the pipeline to be laid through its territory. The demands were unacceptable to India, prompting it to shelve the proposal.
But a miffed Bangladesh is now raising objections to a direct Burma-India pipeline. It has also accused the two countries of encroaching into Bangladeshi territorial waters - the maritime boundary is not demarcated yet - to explore hydrocarbon deposits.
But a pipeline from Bangladesh through the sea to India is just one of the options on the table. In a recent presentation to its A-1 and A-3 block partners, India put forward eight alternative routes - three via land and three undersea, besides bringing the gas as liquefied natural gas and compressed natural gas by tanker.
At that meeting, India indicated its preference for a land route via its northeastern states. The proposed route runs along Burma's west coast into the Indian state of Mizoram, through Assam and into West Bengal. Gas from India's fields in Tripura will also flow into this pipeline. The proposed pipeline through India's northeastern states is 500 kilometers longer than the pipeline that would have run through Bangladesh's territory. This could hike costs by about US$300 million.
But a pipeline through Indian territory is well worth the additional investment, reason officials, as it would transform the economies of the states it passes through. Since the gas from Myanmar is expected to flow over a period of 15-20 years or even longer, the additional expenses of laying the pipeline are well worth it, the officials say. India is hoping that the gas pipeline and the consequent economic transformation could help quell the insurgencies in this strife-torn region.
The Burmese junta and energy-hungry India and China are looking to gas from the Shwe fields with heightened expectations. The junta could earn as much as $3 billion annually. This is expected to strengthen its grip on power.
Pro-democracy activists are critical of the gas deal and are calling on India to call it off. They are reminding India of its commitment to democracy in Burma, but they may be whistling in the wind.
Sudha Ramachandran is an independent journalist/researcher based in Bangalore.