EURASIA BLOG: India still a poor third in Central Asia

By bne IntelliNews July 10, 2015

Naubet Bisenov in Almaty -


Indian Prime Minister Narendra Modi is currently touring Central Asia to boost trade and co-operation with the resource-rich region, but his country looks likely to remain far behind China and Russia in terms of geostrategic influence there for the foreseeable future. Moreover, its lack of direct access to the region to tap into its resources will present a serious challenge to Modi’s ambitions.

India’s relations with Central Asian countries present both an opportunity and challenge, and high stakes are placed on Modi’s first visit to the region. “There is a lot of hype surrounding Modi’s visit, which is a major development in Central Asia’s recent international relations,” believes Luca Anceschi, lecturer in Central Asian Studies at the University of Glasgow.

Although India’s influence in the region is inferior to that of Russia and China, that might conversely allow it to carve out some space, as it does not force countries to choose between the regional powers. “Compared to other great powers, India does not have an established relationship with Central Asia: this is why, I think, Modi’s visit can be seen as a benchmark in the progressive integration - political as well as economic - between South and Central Asia,” Anceschi tells bne IntelliNews.

At the same time, it doesn’t mean that India cannot develop relations with Central Asian nations to catch up with its rivals. “I would not compare India’s influence in the region with other powers – especially China and Russia – as the Central Asian states do not seem to regard them as mutually exclusive: India, in this sense, can begin to build a more significant presence in the region.”

India has not been active in terms of placing investment in the region but with the low price of oil and a slowdown in the economies of Central Asia’s main trading partners, Indian investment and experience in developing the non-extractive industries will help diversify the regional economies.

In Kazakhstan, which is believed to account for 75% of India’s trade with the region, Indian investment worth $200mn in 2005-2014 is dwarfed by China’s nearly $23bn. India’s ONGC Videsh (OVL) lost to China’s CNPC in bids to acquire PetroKazakhstan oil company in 2005 and an 8.4% stake in the Kashagan project in 2013, but is now involved in developing the 1.8bn-barrel Satpayev block in the Caspian Sea in which it holds a 25% stake (the first exploratory drilling on the block took place during Modi’s visit to Kazakhstan).

The Indian media has hyped Modi’s tour of Central Asia. “The upcoming visit, being described by some as a ‘game changer’, comes amid the growing realisation among India’s foreign policy mandarins that the government needs to engage more closely and deeply with these nations located in our extended neighbourhood,” Parul Chandra writes on the Indian blogging platform “A significant reason for India's move to engage more closely with the Central Asian region is geostrategic. The need to boost India's energy security in the backdrop of abundance of natural resources like hydrocarbons and uranium in the region.”

Pipeline politics

Modi’s visit aims to increase India’s economic clout in Central Asia and the inclusion of the region’s resources into India’s energy security strategy is perhaps the most significant of these goals: in this context, Modi’s relations with Kazakhstan and Turkmenistan are crucially important, Anceschi believes.

With the launch of production at the giant offshore Kashagan field, Kazakhstan will become a major oil supplier in the region, while Turkmenistan sits on the world’s fourth largest reserves of natural gas and is actively engaged in building routes to export its hydrocarbons.

India will simultaneously push for two gas pipelines originating from Central Asia, one from Kazakhstan and the other from Turkmenistan, during Modi’s visit, The Telegraph, a Kolkata-based newspaper, suggests. Energy-thirsty India is trying to persuade Turkmenistan to begin the construction of a pipeline that will carry Turkmen gas to India through Afghanistan and Pakistan, almost 20 years after the TAPI (Turkmenistan-Afghanistan-Pakistan-India) project was conceived, the newspaper said.

The construction of the TAPI pipeline has been delayed due to the ongoing instability in Afghanistan, while China has successfully built a gas pipeline to pump Central Asian gas eastwards: the three branches of the Central Asia-China gas pipeline from Turkmenistan to China via Uzbekistan and Kazakhstan have an annual capacity of 55bn cubic metres (cm) of gas, while the fourth line – Line D – being built via Uzbekistan, Tajikistan and Kyrgyzstan – will have a capacity of 30bn cm of natural gas a year. According to The Telegraph, India is also trying to persuade Kazakhstan to build a gas pipeline to the Persian Gulf through Iran.

“TAPI is the one project that Modi would perhaps like to see advancing more than anything else, as the purchase of Turkmen natural gas might prove a decisive step towards the establishment of a different energy mix in India,” Anceschi says. “The project is however at a crossroad, as security concerns have to date halted its progress. I believe that Modi would have to inject new momentum into TAPI, to avoid its progressive marginalisation in the geopolitics of Eurasian gas. In this sense, Modi’s visit could be the decisive moment for TAPI operationalisation.”

Modi is expected in Turkmenistan on July 11 after a break in his tour to attend a Brics summit in Russia.

Uranium supplies

Modi started his Central Asian tour with Uzbekistan on July 6 where he and Uzbek President Islam Karimov discussed supplies of Uzbek uranium to India and prospects for Uzbekistan’s joining the North-South transport corridors. In August 2014 Uzbekistan’s Navoi Mining and Metallurgical Combine and India’s Uranium Corporation of India Ltd (Ucil) signed a contract on supplying up to 500 tonnes of Uzbek uranium to India annually in 2014-2018.

Like Uzbekistan, Kazakhstan, the world’s largest producer of uranium, also supplies fuel to Indian nuclear reactors and during Modi’s visit to Astana the two countries signed a new agreement to supply 5,000 tonnes of Kazakh uranium to India in 2015-2019. Under a 2009 agreement, Kazakhstan had already supplied 2,100 tonnes of uranium to India in 2010-2014. However, Modi criticised the Uzbek deal and called for “early implementation” of the bilateral contract for uranium supply from Uzbekistan. In contrast, he praised India’s civil nuclear cooperation with Kazakhstan: “We are pleased to have a much larger second contract now,” he said of the extension of the initial contract for another five years.

Uzbekistan is also losing to Kazakhstan in terms of trade with India. Despite doubling in the past four years, bilateral trade between Uzbekistan and India remains relatively small in absolute terms: it grew by 21.2% year on year to $316mn in 2014. This unfavourably compares to Kazakhstan’s trade with India, which nearly doubled to $1.34bn in 2014. This prompted the Mumbai-based Economic Times to declare: “Uzbekistan undoubtedly is the key to Central Asia’s dynamics, but there are strong reasons for India to pick out the oil-rich state Kazakhstan.”

While Uzbekistan and Kazakhstan may well jostle for regional leadership in Central Asia and vow for India’s attention, it is Turkmenistan that will play the role of a kingmaker. Without its gas riches, TAPI or any other pipeline southwards makes no sense; however, if and when built an India-bound gas pipeline, it will help Ashgabat diversify its export routes and move away from reliance on China as a major consumer of its gas.

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