2006 is the year: Sri Lanka, LTTE and the oil alliance

In this year, the IV Eelam War broke out. After the attempt of the Peace Talks from 2001 to 2005, both parties strove to resume hostilities. Many reasons have been added for the failure of the peace process. For the LTTE and especially its leader, Prabhakaran, the agreement was to far away from full independence. Of course that target was impossible to reach through negotiations, therefore only the military way was open for that purpose. On the other side the Sri Lankan government had promised even too much in the eyes of its more nationalistic constituency. Therefore in 2006 everybody was keen to start again the war.

Erik Solheim and Velupillai Prabhakaran
Photo nation.lk

The biggest loser was Norway. The Nordic country in fact dedicated a lot of efforts to find a deal. If you consider that from 2001 TGS-Nopec, a company specialized in seismic survey for oil exploration, was showing enthusiastic reports about the possibility to find petroleum reserves, you may guess that the government in Oslo had some undisclosed interests. If you add that the special envoy, Mr Erik Solheim, just on the brink of the Peace Talks ending was nominated Minister for International Development¹, with specific interest in the oil sector, for the Norwegian initiative “Oil for development”,Norad², (see Solheim’s activity in Ghana³, Sudan⁴, Angola⁵).

 But Norway is not the only country in the world searching for opportunities in the oil sector. China and India in the same period were involved in a tough race to secure contracts for natural resources

Union Petroleum Minister Mani Shankar Aiyar with the President of China National Petroleum Corporation, Chen Geng in Beijing on January 13.

around the world. The competition was so strong, that their bidding war was driving prices up everywhere. Thus the two Asian giants decided to form an alliance. “The agreement aimed at preventing the two nations competition for oil assets pushing up prices, symbolises their increasingly assertive role in global energy politics” (source: Financial Time).⁶

 One of the first country to test this alliance, was precisely Sri Lanka. President Rajapaksa, soon after he received information about the possible presence of oil in the Mannar Basin, decided to get rid of Norway and offered India and China one block each ⁷⁸.

We are far from saying that the Peace Talks were interrupted for the oil discovery; we are also not affirming that the IV Eelam War was oil-driven and that the India and China support of Sri Lanka was motivated purely by the natural resource deal.

We can see a series of coincidences and we argue that oil played a role in Sri Lanka, maybe only a secondary one, but not completely marginal. Norway is our first indicator; the Nordic country didn’t though it could provide more transparency on its conduct, but had clearly a vested interest in the peace process in relation to the oil reserve. China and India had additional reasons to back

Anti-lankan protest led by politician and activist Vaiko in Tamil Nadu.
Photo onlanka.com

Colombo, but it was a clever and opportune gift from Rajapaksa to offer natural resources in exchange of their help. In particular it could have represent the convincing point for New Delhi, to intervene without hesitation. India has oil operations on its side of the Strait, and the idea of leaving oil reserve in the hands of the LTTE or China alone could have been the decisive argument to make move. The energy sector is more vital and strategic for India that any other alliance of convenience between China and Sri Lanka.

If you think that oil doesn’t play any role in conflicts around the globe, then you can ignore our thesis. On the other hand, if you assume that natural resources are too important in contemporary geopolitical scenarios, and so are always involved, maybe to different extent, you may be tempted to spend more time on this hypothesis.

 

 

1http://www.regjeringen.no/en/the-government/previous-governments/the-structure-of-the-registry/governments/modern-times/governments-since-1945/jens-stoltenbergs-second-government.html?id=449424

2 http://www.norad.no/en/about-norad

3http://www.dailyguideghana.com/?p=14300

4http://www.norway-sudan.org/News_and_events/Development-Cooperation/Minister-Erik-Solheim-leaves-office-/

5http://www.chathamhouse.org/media/comment/view/179785

6http://www.ft.com/intl/cms/s/0/25b30866-83a4-11da-9017-0000779e2340.html#axzz2GKs3EEjO

7http://articles.timesofindia.indiatimes.com/2007-12-21/international-business/27952014_1_exploration-blocks-oil-and-gas-cauvery-basin

8http://www.sundaytimes.lk/090920/FinancialTimes/ft08.html

Oil Global Quest: The Asian Race for Natural Resources

It is talking for stake in Mozambique’s Rovuma-1 gas field, is gazing 1 million barrels of crude oil in Ghana, has sent its special envoy in Sudan, has planned to boost investment in oil sector in Venezuela. Who is it? A little help: it is an Asian country with more than 1 billion people. And no, it is not China.

Surprise?

India’s growth is probably less spectacular and iconic than China’s, yet the magnitude is similar. And so it is its thirst for natural resources. China is scary, instead India has the reassuring smile of a Santa Klaus Mohamon Singh, it’s the biggest democracy, no Bollywood villain can seriously be taken as a menace.

India’s Prime Minister Mr. Manmohan Singh.
Photo Reuters

India has a friendly face. The worst it can happen with India is that they will start to dance and to sing in falsetto. Yet, New Delhi needs natural resources, desperately. In particular, oil. Loads of oil. India in 2011 consumed a third of the oil of China, but China produced also a third¹. China imports almost half of its need, India almost all². And the future could be even more unbalanced for New Delhi. It is fair to say that India is looking as ravenously as China for new oil sources.

As we mentioned in the introduction India was in talks over the stake in Mozambique’s Rovuma-1 gas field³, with Ghana about equity participation and industrial collaboration⁴ and also for a contract of more than 1 million barrels⁵, has sent a special envoy in Sudan⁶ with the clear mandate of lobbying for India in the competition with China over the Sudanese oil; finally, it is investing in Venezuela more than $ 2 billions⁷.

Union Petroleum Minister Mani Shankar Aiyar with the President of China National Petroleum Corporation, Chen Geng in Beijing on January 13.

This competition with China is not new. In 2006 they signed an agreement to stop such a bidding war that was driving up prices worldwide⁸. In 2012 in a very unnoticed press release, they “agreed to “work together to maintain peace and stability of the Asia-Pacific region”. The “consensus” was reached during the recent visit of the Chinese defence minister General Liang Guanglie to India, the first such visit since 1976.”⁹ Few months earlier their race for the assets in the Western Hemisphere attracted some attention by the analyst¹⁰.

India and China will maintain internal stability only with massive growth, which in turns will be possible only through a constant, reliable access to natural resources. The human cost for this race will be enormous. In India the group Vedanta launched a para-military campaing with the support of the New Delhi (“operation Green Hunt”) to evict the Adivasi¹¹ people from the mining site.

India is looking everywhere for new possibilities. So it was very welcomed news when they discovered fields at home in Gujarat¹², the Andhra Pradesh¹³ and the Cauvery Basin¹⁴. Since 1981 presence of oil on the Indian side of the Basin were confirmed¹⁵.

Cairn India was awarded the contract for oil exploration in block No.2 of the Mannar Basin and has signed a petroleum resources agreement with the government of Sri Lanka.

So it was only a matter of time before they found oil on the Sri Lankan one. Indeed. In 2011 Cairn launched a press release where they announced the oil discovery¹⁶.

If you consider that the Sri Lankan government in 2006 assigned one block each to China and India for further exploration, then you’ll have a more complete framework of the Chinese and Indian interests in Sri Lanka¹⁷.

When it comes to natural resources and their appropriation in countries with conflict issues and violations of human rights, you may easily accuse the role of China, as it is the case in Sudan. Well, we suggest that India, with a much lower profile, has very similar interests and very similar doing. China didn’t export wars, as the US did. We would like to broad the debate about conflict and natural resources also to India.

Stay tuned.

Map of Sri Lanka.
In Blue the areas interested by oil exploration.
In Black areas previously under the control of LTTE.

1http://en.wikipedia.org/wiki/Petroleum#Consumption_statistics

2http://www.indexmundi.com/g/r.aspx?t=0&v=93&l=en

3http://articles.economictimes.indiatimes.com/2012-10-26/news/34750048_1_rovuma-1-gas-field-mozambique

4http://www.ghanabusinessnews.com/2011/12/12/india-eyes-ghana-oil-stake-2/

5http://www.ghanabusinessnews.com/2012/10/09/india-buys-one-million-barrels-of-crude-from-ghana-report/

6http://articles.timesofindia.indiatimes.com/2012-04-02/india/31274931_1_south-sudan-juba-khartoum

7http://www.reuters.com/article/2012/07/11/india-venezuela-energy-idUSL3E8IB2XN20120711

8http://www.ft.com/cms/s/0/25b30866-83a4-11da-9017-0000779e2340.html

9http://articles.timesofindia.indiatimes.com/2012-09-07/india/33676192_1_india-and-japan-general-liang-guanglie-strategic-backyard

10http://oilprice.com/Energy/Energy-General/China-and-India-Eye-Western-Hemisphere-Energy-Assets.html

11The Adivasi are the Indian aborigenes, Estimated in 80 millions.

12http://articles.economictimes.indiatimes.com/2010-05-28/news/27569850_1_exploration-block-seismic-surveys-hydrocarbon

13http://articles.economictimes.indiatimes.com/2006-06-27/news/27421056_1_discoveries-water-gas-development-projects-k-g-basin

14http://articles.timesofindia.indiatimes.com/2007-10-10/india-business/27972041_1_cauvery-basin-krishna-basin-reserves

15http://www.hindu.com/thehindu/thscrip/print.pl?file=20080314250511200.htm&date=fl2505/&prd=fline&

16http://www.financialexpress.com/news/cairn-india-strikes-gas-at-sri-lankan-offshore-well/854867

17http://www.psg.deloitte.com/NewsLicensingRounds_LK_0806.asp

An inevitable attraction of opposites: the China-India alliance on natural resources

Union Petroleum Minister Mani Shankar Aiyar with the President of China National Petroleum Corporation, Chen Geng in Beijing on January 13.

In 2006 the India’s Petroleum Minister Mani Shankar Aiyar and the Head of the National Reform and Development Commission Ma Kai, (the chief economic for planning and energy minister),signed an agreement “aimed at preventing the two nations’ competition for oil assets pushing up prices.[…]Co-operation between China and India could benefit international energy companies by reducing the ferocity of the bidding.[…]Under their agreement, Chinese and Indian oil companies will establish a formal procedure to exchange information about a possible bid target, before agreeing to co-operate formally”(source: Financial Times)(read also: China Daily; Asian Times.

In the 18th century China and India accounted for half of world economy (source: The Economist). Then they’ve been surprised by the Western economic and scietific model and fell in disgrace. What’s happening today is just the re-equilibrium of forces. The combined population, industrial output and economic growth will make the two defining axis of the future.
And they are already trying to understand each other, because the confrontation will be though and every move will count towards vital interests. They are too big, too close. They cannot fight each other directly,but they cannot simply coexist. They are too big, too close to peacefully play the boy-scouts. Any rise in one’s prestige, influence and power is inversely affecting the other. They will benefit each other, but they can’t just mind their own business.

courtesy AP

Recently they showed a series of reciprocal disturbances, with China even sending patrols inside the Indian borders of the Himalaya. At the moment they are playing the game of mutual encirclement. India is warming its relationships with Japan and Korea via USA, its also courting Vietnam for cooperation in the South China Sea, with much disappointement by Beijing. On the other front, China is cementing a military and industrial partnership with Pakistan. It became also an essential partner for Sri Lanka. Not only economically, president Rajapakse owns everything to Beijing.

Maybe it will be only competition rather than confrontation, but China and India are rising the stake on each other.