Events

Summary

The main aim of this paper is to bring out very clearly the “rationale for constructing transnational pipelines in the South Asian region, why pipeline projects are riddled with problems and finally whether anything can be done to address the issues that would make these projects less troublesome.”

The paper outlines the main constraints and challenges that hinder the growth and development of transnational pipelines, the chief among them being the fact that there is no overarching legal regime that can be used to resolve differences between nations and regulate activities and contracts. Also, the author points out that one needs to make a clear distinction between the oil and gas market because unlike the oil market, the gas market is more disaggregated and there are no benchmarks for gas and prices. For example, there is no talk about a world price for natural gas. This tends to encourage and rather allow host countries to make ad hoc changes in gas pricing, as was the case with the IPI project.

Conflicts and impediments in transcontinental projects are more often the result of politics due to or in the absence of legal and regulatory regimes. This is certainly the case in the Indian sub-continental context. The paper then goes on to illustrate the above claim by saying that in the face of India’s increased energy demands post liberalization, policy makers began looking at importing gas in the form of pipelines and LNG. Policy makers in neighbouring Pakistan too felt that increased demands would lead to an increase in imports despite its existing energy resources. These common demands by both nations led India to propose imports from Iran in the form of the IPI pipeline. But even after two decades of numerous negotiations, India’s participation seems unlikely for the time being. Various issues relating to pricing and the geo-politics of the pipeline in general has posed an impediment for India to sign the deal with Iran and Pakistan. To add to it, there is the American opposition to any deal that is to be signed with Iran and the fact that India is afraid that the gas supplies will be disrupted en route in Pakistan.

In the midst of various problems and issues that plague the development of pipelines in South Asia, the paper also very lucidly talks about the cooperation that can be possibly adopted to further cross-border energy trade in the region. A few suggestions include, the introduction and more importantly the implementation of the rules embedded in multilateral agreements in the 1994 General Agreements on Tariffs and Trade( GATT) under the World Trade Organization(WTO) or the Energy Charter Treaty (ECT), all of which could limit the repercussions of conflicting jurisdictions. However, the legal framework of the WTO has raised certain doubts regarding its export control regulations and whether they can address the members’ energy related concerns.

External Discussants: Dr. Bhupinder Kumar Singh & Mr. A. Karnatak

Dr. Karnatak focused on project monitoring in order to get over most hurdles that nations in the sub-continent encounter with regard to pipeline projects, as about 7 lakh crore pipelines projects are in the process of being materialized. He also said that Bangladesh need not be included in pipeline projects where India is also involved. Answering one of the questions that came from the floor as to why CNG is a preferred resource, he said that it is more feasible to have CNG beyond 3500 kilometres of a pipeline. He said that problems relating to terrain can be overcome but the geo-political situations across nations still pose a major hindrance in pipeline projects.

Dr. Singh was optimistic about the fact that in the long run the IPI pipeline would be a viable option as Pakistan will see the advantages in having Iran take responsibility for its part of the pipeline. Also, the view of having an active involvement of the ECT is a factor that needs to be taken into account and given due importance.

Internal Discussants: Dr. Meena Singh Roy & Dr. Smruti Pattanaik

One of the main points brought out by the internal discussants is that one needs to delve much more deeply into the internal politics of the countries as these are vital and critical in energy policy formulation. There is a need to put out a nation’s energy needs and calculate how much is being addressed and to look at whether trans-national pipelines can have international dimensions. The more recent problem of non-state actors also needs to be addressed in detail and the prospects of bilaterals and quadrilaterals and the level of their past successes and failures studied.

Discussion

The main issue focused upon by those commenting and asking questions from the floor was that of hindrance and interference of non-state actors. What are the remedial measures if and when pipelines are bombed and portions of them destroyed as has been seen in the past. This doubt was answered by the external discussants, who said that remedial measures have already been adopted and that damages can be taken care of in a matter of a few hours.

Prof. Sujit Dutta’s (the Chair) Summary

The chair concluded by saying that organizations like the ECT are very crucial and that one needs to always remember that India’s situation as compared to a power like China is very different when it comes to sheer ability to carry on energy trade agreements with other countries.

Report prepared by Shahana Joshi, Research Assistant, IDSA.

A five member delegation from Hong Kong led by Professor Victor Sit will be visiting IDSA on Wednesday, 08 December, 2010 at 1600 hrs at the Institute for Defence Studies and Analyses, New Delhi.

Professor Sit will make a presentation on "Second Global Shift and China's Economic Prospects".

Abstract
China’s 30 years’ record of fast economic growth is largely the result of the First Global Shift through which China has become the global factory for labour-intensive, low value-added consumer products. The country is now under economic restructuring. This, together with the changed global economic landscape, lay the foundation for the Second Global Shift. The process will possibly make China a global economic power with international financial influence as well as the largest global production platform for consumer durables.

The other members of the delegation are:

Mr. Lee Yu Leung
Mr. Au Tin Fung
Mr. Chong Hin Wang
Ms. Yuen Yuk Fung Winnie

Professor V. P. Dutt will chair the session.

Venue: Room No. 5, IDSA

Chairperson: Shri Dhirendra Singh
Discussants: Ms. Sushobha Barve & Shri Iftikhar Gilani

Dr. Lora Saalman, a Beijing-based associate in the Nuclear Policy Program at the Carnegie Endowment for International Peace, has focused her research on Chinese nuclear weapon and nonproliferation policies and Sino-Indian strategic relations. Her presentation at the IDSA focused on the convergence and divergence of Chinese and Indian security concerns in land-based, naval, aerospace and nuclear arenas, with findings derived from extensive textual research and interviews with the academic, scientific and military communities in both China and India.

The talk centered mainly on security concerns between India and China, derived from both quantitative and qualitative analysis based on perceptions of India within China, and vice versa, and how they have changed over the period from 1991 to 2009. Dr. Saalman found that over time, the trend line curved upwards on a quantitative scale, peaking in 2001 during President Bill Clinton's visit to India, and the lifting of the 1998 nuclear-test sanctions in 2001, and again in 2005, on the announcement of the US-India nuclear deal. Conclusively, there has been a definite increase in interest in India within China.

In analyzing and comparing content from Chinese and Indian security journals, there has been a strong interest in China within India, whereas in Chinese security journals, the focus has been mainly on two areas - naval concerns within China pertaining to India, and on the air force. These are also the two arenas in which some Chinese specialists feel India can be comparable or even surpass China in the future. Dr. Saalman's research separates out three distinct areas of research and analysts in both countries - the military strategists, the scientists, and the academics.

In terms of divergence, it was observed that military strategists in China and India tended to focus on two areas, namely the navy and the army. Separately, in China, there was much more focus on Indian naval developments, aircraft carriers, and nuclear submarines (that may give India second strike capabilities in the future), whereas in India, attention was centered on land-based systems on the borders. It was noted that on the Indian side, there has also been much focus on Chinese cooperation on missiles and weapons technology, mainly with Pakistan, while Chinese concerns revolve around the ability of Indian forces to gain military training and engage in military and maritime exercises.

In analyzing gathered data, Dr Saalman applied social psychology theory to attempt to supplement her analysis of Indian and Chinese perceptions of each other. The theories and ideas used included:
1. Social Identity - China is an army power from the Indian standpoint, while the Chinese view India as an ocean power (with Chinese threat perceptions being based on Indian Ocean control, and Indo-US joint exercises).

2. Overconfidence Phenomenon and Victim Mentality - China is seen as being on the overconfident side and India in the latter category, with respect to what it faced during the 1962 border conflict with China.

3. Hidden and Expressed Attitudes - China's conspicuous focus on the Indian navy is more of a hidden concern, and not expressed as much in public, while in India, many military and naval officers were found to be dismissive of ideas such as the String of Pearls concept, or future conflict. Also, secondhand bias plays a key role in the interaction between the two countries - research work on both sides has relied to a great extent on US analyses of developments between China and India.

4. Fundamental Attribution Error - Actors tend to externalize their motivations for events, while attributing others’ similar actions to innate causes. In applying this to the case at hand, on acquiring (for example) aircraft carriers or nuclear submarines, though both countries pursue this, each side would attribute the others' action to arrogance and the drive to be a regional hegemon.

5. Relative Deprivation - Both countries’ dependence (up until sanctions on India were lifted) on Russian and Israeli imports resulted in indigenization and reverse engineering.

6. Realistic Group Conflict theory – This applies well to the Indian Ocean situation; with limited resources, the chances for future conflict grow.

In linking these perceptions to practice, Dr Saalman proposed recommendations that recognize there is less asymmetry at sea than at the border, particularly given the challenges of distance, shipping and the U.S. role that China faces. As such, stronger cooperation between the two countries in the naval realm may be possible. She suggested this could take many forms, including establishing a regularized forum for security cooperation, energy shipments, and tsunami relief, or greater engagement in a sea-based version of “Hand-in-Hand” military exercises to confront mutual concerns on piracy.

Similarities between the two countries converge on the areas of aviation and aerospace. Some Chinese technical journals for instance were found to contain miscellaneous references to developments in Indian systems. Dr Saalman also pointed out the use of slogans by China, such as "Great Power Dream" when referring to India - the idea that India in making pursuits towards the future in terms of military modernization is aiming towards becoming a great power.

In terms of perception, China has in the past evaluated India's actions at the border from a very instrumental view. But increasingly, India's role at the border is being seen as tending towards heightened militarization, drawing hostile rhetoric from China on what India's future intentions are. Dr Saalman also emphasized that though it is not admitted, both sides have regularly engaged in behaviour that has escalatory potential. But it is important to note that, on the technical side there has been cooperation between China and India, as seen in 2002 and 2006 in the space arena.

However, most of this cooperation has been in the form of MOUs, and have lacked any concrete measures. She noted that there are many other areas of potential cooperation between the two countries. Keeping in mind the sensitivities in this relationship, Dr Saalman recommended joint studies and discussions on air power, space power, space policy dialogue, space navigation, and non-interference rules for satellites, some of which occur between the United States and China on a regular basis.

On the role of academic analysts in both countries, Dr Saalman's study inferred that both sides predominantly focus on nuclear issues. There is most symmetry in the overarching attention paid to nuclear issues in the two academic communities. On the Chinese side, the US-India strategic relationship is given recurring attention. On the Indian side, the issue of nuclear status stood out - the idea that China had conferred upon it early on that it is a nuclear power, a status that had been denied to India, tying into the concept of relative deprivation mentioned earlier.

Dr Saalman also stressed the importance of interaction on definitions of technical terms relating especially to nuclear arsenals, nuclear energy or nuclear security. She recommended the possibility of adoption of a joint glossary by China and India, much like the one established for use by Chinese and US scientists and experts. In drawing an analogy with the US-Soviet relationship, she pointed out that the most engagement between the two countries took place at times of increasing hostilities. Peaking tensions are fertile ground for confidence building and arms control measures to be adopted.

The speaker hoped that the takeaway from the talk was that "perceptions can often trump reality". The Chinese side has for too long being dismissive of Indian threat assessments, whereas India has had a tendency to be too dismissive of China's legitimate interests. Also, there is an academic, science and military imbalance. In engaging with each other, there tends to be a schism caused by the varied backgrounds that participants in dialogue come from, with the Indian side usually consisting of more people from military backgrounds, while the Chinese side is composed mainly of academics. The recommendation here is to initiate more military to military, scientists to scientists, and academic to academic meetings, to facilitate better understanding.

With respect to dialogue on the Track 1, Track 1.5 and Track 2 levels, Dr Saalman pointed out that although there is a significant amount of Track 1 negotiations between China and India, in agreement with general perception, the bilateral relationship can gain much more from engagements on the Track 1.5 and Track 2 levels as well (possibly in the form of multilevel, multilateral forums and negotiation simulations, as has been done with the Council for Security Cooperation in the Asia Pacific (CSCAP)). This can contribute largely to reducing second hand bias, and more importantly, initiate practice and engagement between China and India.

Mr. Sisodia concluded Dr. Saalman’s extremely insightful presentation by observing that the study is an apt example of academic research being able to deliver policy implications as well – an encouraging reminder to the IDSA research community. He noted that there is significant practical value in this study in terms of managing India’s relationship with China, and potential future discussions could also touch upon the impact of the strengthening Indo-US partnership on Indo-Chinese relations.

Report prepared by Princy Marin George, Research Assistant, Institute for Defence Studies and Analyses, New Delhi