Clare Nuttall in Bucharest -

India's friendly diplomatic relations with Central Asia have not paid off in practical terms, with trade and investment still at low levels. Now that China and other rivals are firmly entrenched in the region, it may be too late for New Delhi to recover lost ground.

India's lack of clout in the resource-rich region was starkly illustrated in 2013, when the Kazakh government blocked an attempt by OVL, the overseas arm of Indian state oil company ONGC, to buy into the Kashagan oilfield. Instead, the 8.4% stake in the giant offshore field that used to belong to ConocoPhillips was sold to China's CNPC.

Given its growing need for energy, India has not given up on the region. India is expected to become "increasingly import-dependent", according to the BP Energy Outlook 2030, published in 2013. Along with China and the Middle East, India is expected to account for nearly all of the global increase in oil demand in the next two and half decades.

However, India has so far failed to make much headway in accessing oil and other raw materials from Central Asia. The primary reason is geopolitical. Less than 500 kilometres separate the Indian sector of Kashmir in the far north of the country from south Tajikistan, but the direct land route is blocked by two of the world's most volatile and unstable territories. Establishing a direct land connection would hinge on peace taking hold in both Afghanistan and Kashmir, an unlikely event anytime soon.

The future of Afghanistan following the withdrawal of international troops in 2014 is unclear, with the governments in both India and the Central Asian republics fearing a return to violence and instability. Meanwhile, India's traditional route to Central Asia via Kashmir and Tibet has been blocked for more than half a century. Despite the signing of a ceasefire agreement in 2003, Kashmir is divided by the Line of Contact between Indian and Pakistani forces, with the northern part of the territory under Pakistani control.

"The main obstacle to developing relations with the region is the lack of land connectivity, which hampers both trade and access to energy resources," says Neelam Deo, director of the think-tank Gateway House. "India has banked too much on historical linkages and needs to be much more proactive in responding to outreach from these governments and in coming up with its own projects and plans."

To create an alternative to air transport, India is developing the Chabahar port in Iran, which would open up a land-and-sea route to Afghanistan then on to Central Asia.

China, on the other hand, borders three of the Central Asian republics, and Beijing has taken full advantage of its geographic proximity, supporting the entry of CNPC and other major companies to Central Asian markets, issuing soft loans to Central Asian governments and flooding the market with its manufactured goods. Most importantly, Beijing has rapidly invested tens of billions of dollars into pipeline infrastructure to carry Central Asian oil and gas to China; an expanded Central Asia-China gas pipeline network spanning all five of the Central Asian republics is due to be completed within a few years.

Silk ties

India, like China, has built upon its historic connection with the region dating back to before the Silk Road era. However, this has not been accompanied by any great headway economically. Indian investment into Central Asia has been modest, although there have been a smattering of deals including in the oil and gas sector: OVL acquired a 25% stake in Kazakhstan's Satpaev field in 2011, and struck a $1bn agreement to buy into Azerbaijan's Azeri-Chirag-Guneishi oilfields and the Baku-Tbilisi-Ceyhan pipeline the following year. The Indian company has also agreed to work with Uzbekistan's Uzbekneftegaz on upstream projects.

As India seeks to develop its nuclear power sector, India's Nuclear Power Corporation has secured access to uranium from both Kazakhstan and Uzbekistan. A handful of deals have been signed in other sectors such as Punjab National Bank's acquisition of Kazakhstan's Dana Bank and the reconstruction of Tajikistan's Varzob hydropower plant by India's BHEL.

India is also pushing for the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, which would allow both India and Pakistan to import gas from Turkmenistan. Agreements on pricing have already been signed and Turkmenistan is pushing for a 2015 start date, though with the project hinging on a stable Afghanistan it is still not clear when - or if - construction of the 1,680km pipeline will begin.

Despite these projects, overall the level of trade is "abysmal" given the friendly relations between India and the Central Asian governments, which have not translated into "pragmatic and practical progress", Professor Mushtaq Kaw, of the Centre of Central Asian Studies at Kashmir Univeristy, tells bne.

Missed opportunities

While the lack of a land connection is the primary factor, New Delhi has also been less active than its competitors in the region especially during the years immediately after the breakup of the Soviet Union. India was in a relatively strong position at this time, thanks to the strong strategic partnership between India and the Soviet Union since the 1950s, and was quick to recognise the newly independent states.

However, in the new "Great Game" that followed independence of these various states, other players such as China, Turkey and the US gained ground. Kaw points out that as a relative latecomer to the region, India allowed major companies, especially those from China, to reach out first. "By the time India had woken from its sleep, others were already there," he says.

Growing awareness of the importance of Central Asia to India is reflected in the adoption of the new Connect Central Asia strategy, intended to boost cooperation in both the economic and the security spheres, in 2012.

Deo argues the Indian government still needs to rethink its strategy towards the region. "India cannot compete with Russia and China because it has no land connectivity. However, India can add substance to the existing relationship by building on the cultural links and the goodwill it enjoys in the Central Asian republics. The nature of this relationship has to be different from what China enjoys due to geographical proximity and Russia has due to political linkages," Deo tells bne. "India's prospects in the region could be considerably improved if it worked together with Russia, which is not a competitor for access to energy resources in the region." India and Russia already plan to set up a free trade agreement between India and the Customs Union of Russia, Belarus and Kazakhstan.

Ironically, Central Asia and India may gravitate closer together at least diplomatically, as they face the common threat of a potential increase in regional instability after 2014. Countries to the north and south of Afghanistan fear a rise in militancy and a possible return of the Taliban after the withdrawal of international forces this year. India has already indicated closer security links with Central Asia, including through growing interest in entry to the Shanghai Cooperation Organisation which currently comprises Russia, China and the Central Asian republics.