Washington: Experts have warned the United States that Washington cannot ignore the interests of countries like India and China if it wants to adequately address issues of security and energy stability.
With India and China moving aggressively to “lock-up” oil supplies in a manner that will increasingly put them in competition with developed economies, former CIA director John Deutsch said this could strain their relations with the US and other import-dependent countries.
Another expert, Daniel Yergin, the head of Cambridge Energy Associates, said it would be “wiser” to engage India and China in the global oil network of trade and investment rather than see them tilt toward a mercantilist, state-to-state approach.
Oil demand from large, rapidly growing, emerging economies are projected to grow dramatically, Deutsch, currently with Massachussetts Institute of Technology, told the House Foreign Affairs Committee.
A major shift in control of reserves and production is underway in international oil markets from international oil companies to national oil companies (NOCs) of the major resource holders, he said.
The NOCs have both commercial and political objectives. Countries such as Iran, Russia and Venezuela make clear their intent to use their petroleum resources to advance their political interests, he added.
A consequence of these two elements is a growth in state-to-state agreements between producers and the new consumer countries. These agreements involve elements beyond commercial terms, such as economic or military assistance and trade concessions, Deutsch said.
The purpose of the concessions is to establish a political relationship that will secure advantageous access to resources, he said making the point that India and China are “eagerly pursuing” such state-to-state agreements.
Deutsch argued that there were many things that the US should take to reduce the adverse consequences of oil import dependence.
The large emerging developing economies, notably China and India, should be included in the International Energy Agency (currently restricted to OECD member countries) because of their importance as importing countries.
The IEA mechanism is a way to strengthen the common interest of importers in encouraging open and transparent world oil markets and in planning for supply disruptions, through the establishment of national petroleum reserves and other mechanisms, he said.
Yergin said both India and China need to be encouraged to see that their interests can be protected in global markets and that they will not be disadvantaged compared to other consumers.
Both India and China have already moved from self- sufficiency to integration into the world economy, which means they will grow increasingly dependent on global markets even as they are under tremendous pressure to deliver economic growth for their huge populations, which cope with energy shortages and blackouts on a daily basis, he said.