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Hitting out at the “extra-territorial nature of certain unilateral sanctions” resulting in restrictions on investment by third countries in Iran’s energy sector, India on Monday said it can have a direct and adverse impact on India’s energy security.
Reiterating the country’s position that it supports the right of all states to undertake peaceful uses of nuclear energy consistent with their international obligations, Foreign Secretary Nirupama Rao said India has always supported dialogue and avoidance of confrontation.
Indian Oil Minister Murli Deora traveled to Nigeria, Angola, Uganda, Sudan, Saudi Arabia and Venezuela this year, leading a record number of delegations to gain oil for the world’s third-fastest-growing major economy.
The flurry of visits is part of a new drive to find oil for India’s 1.2 billion people after losing out to China in at least $12.5 billion of contracts in the past year. India proposed a sovereign wealth fund to bid for reserves, told state-controlled Oil & Natural Gas Corp. and Oil India Ltd. to make a major acquisition each this year, and raised the amount they can spend without government approval to 50 billion rupees ($1.1 billion).
“There is a new push,” said N.M. Borah, chairman of state-owned exploration company Oil India. “Going abroad is part of the government’s policy -- diplomatic support is very, very crucial as we search for assets overseas.”
India’s energy use may more than double by 2030 to the equivalent of 833 million metric tons of oil from 2007, while China’s demand may rise 87 percent to 2.4 billion tons, the Paris-based International Energy Agency said.
India faces an uneven contest to close the gap with China, which is dipping into $2.4 trillion of foreign currency reserves to buy stakes in oil and natural gas fields from Iraq to Uganda, compared with India’s $250 billion in foreign exchange reserves. State-run Chinese companies spent a record $32 billion last year acquiring energy and resources assets overseas versus India’s single $2.1 billion investment by ONGC. China’s June 19 decision to allow the yuan to appreciate will further strengthen the hand of Chinese companies buying overseas.
India’s oil import bill climbed six-fold in the past decade to $85.47 billion for the year ended March, equivalent to about 7 percent of gross domestic product.
“India’s search for energy has to become a more intense political game, rather than one based entirely on economics,” said Abheek Barua, an economist at the Mumbai-based HDFC Bank Ltd. “China has virtually already taken over Africa.”
China has promised billions of dollars in aid, investment and loans to Africa, producer of one-eighth of the world’s crude oil, in exchange for energy supplies.
“We buy assets based on commercial decisions even though there is a mandate for securing energy for the country,” R.S. Sharma, chairman and managing director of ONGC said in April. “The Chinese are different with their big cash. We can’t invest just for the sake of it.”
A US-Iran showdown loomed closer early Friday, July 2, when president Barack Obama signed into law a series of energy sanctions, the toughest yet, for arresting Iran's nuclear weapons program. Iran's defense minister Gen. Ahmad Vahidi warned that searches of its ships or planes would have "dire consequences" for world security and the Middle East in particular.