The implementation of India’s energy interests through the INSTC project

UDC 327.8
Publication date: 20.02.2025
International Journal of Professional Science №2(1)-25

The implementation of India’s energy interests through the INSTC project

Mikhailov Gleb M.


Student of the Faculty of the World Politics
Lomonosov Moscow State University
(Department of International Organizations and World Political Processes)
Abstract: India as developing power is seeking cheap and diversified energy resources. Indian government led by N. Modi addresses to different political formats to build cooperation with several regional actors possessing rich energy resources reserves. In that case the INSTC project is the unique logistical route which let India to implement its energy interests successfully.
Keywords: INSTC, Indian foreign policy, energy security


Introduction

Today India conquering more and more influence in the modern world. The country is trying to participate in changing world order processes. The economy is the crucial tool for successful achievement of foreign objectives. The neoliberal paradigm at least insists on this principal. However, the Indian government has economic development as its primary goal which is existentially important for country’s rivalry with its regional opponents. The energy security is the foundation of economic and industrial development here. India’s government search for different opportunities to get diversified and stable energy flow. Among these opportunities can be emphasized the project of the International North-South Transport Corridor (INSTC). The aim of the research is to analyze Indian political efforts and its regional policies implemented through the INSTC project towards the provision of the country’s energy interests.

Diversification of India’s energy supply.

India has entered in new millennium as a new rising power with a number of competitive advantages. The large population with low cost of labour attracts foreign producers to localise its production in India’s jurisdiction. The emergence in recent times of new domestic industries such as pharmaceutical and informational technologies making India new industrial powerhouse. It is possible to expect now that India will continue the growth of its share in the world industry in terms of the development of India’s governmental ambitious “Make in India” program [15; 21].

The government of India understand its strategic importance for support of industrial development especially in case of confrontation with China. The stable energy flow is the crucial part for the success in this process. According to the International Energy Agency (IEA), India’s consumption of oil products is estimated at 31.5%, coal at 16.7%, and natural gas at 6.2%. [4]. Today India is the third largest consumer of oil and the its consumption increases annually by 5% [2;1482].

For the long period of time Saudi Arabia and Iraq have been continuing to stay India’s largest suppliers of oil [5; 24]. The direct dependance of India from such volatile region as Middle East poses the threat for India’s energy security. The government of India understands it quite well and provide several policies to diversify the energy flow for more sustainable industrial growth. The Modi’s government searching opportunities to widen cooperation with oil and gas producing countries and regions.

The brief look at India’s foreign policies revels that New Delhi set its energy interests primarily at the top of the corner in relations with its counterparts. In the framework of Connect Central Asia Policy (CCAP) India deepen its ties with Central Asian republics especially in the sphere of energy supply [3; 602]. At the same time the India-Russia Strategic Partnership (IRSP) fosters relations between two countries in the field of energy cooperation [14; 3], whereas the Look West Policy (LWP) helps New Delhi to decrease it dependance from Saudi Arabia and Iraq by strengthening its ties with Iran [5; 31].

These efforts of Modi’s government in these directions are aimed on diversification of India’s energy flow. According to Indian political scientist C. Raja Mohan the country sees its final destination as the accepted great power [11; 18]. The Indian political elite understand that economic stability is the basis of India’s future position in the world order. The prosperity of India’s industrial sector and country itself depends on stable energy flow. There is the direct connection between GDP growth and energy consumption [2; 7]. In these case Indian government strategically interested in country’s energy security.

The diversification process starts from the search of the new counterparts by export. As it was pointed previously India in recent times deepened ties with Central Asian countries, Iran and Russia. These actors are reach by natural recourses and their economies are mostly oriented on the export of natural resources. Hence for Russia, Central Asia and Iran India is another one perspective market. For Russia and Iran period of western sanctions is a cause to find alternative supply directions. India as the rising economy with its attempt to take neutral position in international affairs pretends to be a natural partner for Russia and Iran. Central Asian countries consider the Indo-Chinese controversies as an opportunity to reap the benefits from export sales in these two countries.

The process of search of the new importer we can describe as a kind of quantitative diversification, whereas the development of alternative energy sources and renewables can be considered as qualitive form of the diversification. The IEA reports that on 2022 the share of biofuels in the Indian energy mix was 27.5% [4]. India now officially aimed on net-zero strategy. For today India is third largest producer of renewable energy [1; 230]. However, the country does not decrease its dependance on import supplies. If biomass and biofuels can be produced by India domestically, silicon and lithium-ion batteries require rare-earth metals for its production. The closest partners there are Central Asia, Russia and Iran again. Also, atomic energy plays special role in net-zero policy of India where Iran and mostly Russia can provide and have provided all necessary facilities.

The situation seems rather paradoxical. While the country consumes a significant amount of non-renewable energy sources, it also produces a substantial amount of renewable energy.  Moreover, there are not any obstacles for Indian government to find importers for the national energy mix. Iran, Russia and Central Asian countries can help India to achieve every energy objective in sphere of diversification both quantitative and qualitive character.

In this case the infrastructure of the International North-South Transport Corridor provides unique conditions for transportation of energy resources. The eastern branch of the project potentially can connect Russia, Central Asian countries and Iran with India. Indian government see the huge potential in this project for protection of national energy system and fostering India’s industrial development.

There three main India’s national goals can be revealed. Firstly, Indian private petroleum companies can get access to reserves of natural resources in Central Asia including rare-earth metals. Secondly, India can increase its presence in Iran and Arabian sea basin through development of logistical system and regional transport connectivity. Thirdly, the INSTC project let India to balance its regional opponents such as Pakistan and China with their transport projects of CPEC and BRI. All these national interest field can potentially provide for India reliable energy flow. These fields will be covered in next part of the research.

 

 

India’s expansion to the new energy markets.

As it was mentioned previously India successfully develop its ties with Eurasian actors through political formats of the CCAP, the LWP, the IRSP. The energy cooperation takes serious place here. Indian diplomacy here acts in a way that better represents India’s energy interests in such subregions of Eurasia as Central Asia, Siberia and Iran.

The CCAP format provided for Indian oil company ONGC Ltd. an ability to participate in oil exploration of Kazakhstan’s part of Caspian shelf [8; 50]. The ONGC Ltd. has been working in this region since 1997 and it seems that the company will continue its activity here in Kazakhstan. The company has investment projects in Turkmenistan [8; ibid.]. The rich reserves of natural gas and rare-earth metals in Turkmenistan have led to numerous attempts by Indian companies to enter this market. The failure of the TAPI pipeline apparently encouraged India to build bilateral cooperation with Turkmenistan without brokers. Turkmenistan is expected to be involved in the CCAP for more open access of Indian private and state oil companies to Turkmenistan’s reserves.

Another one target country of the CCAP is Uzbekistan with its uranium reserves [12; 54]. The following so called “nuclear renaissance” and India’s net-zero policy increases demand of this recourse. Uzbekistan obviously represents the interest for Indian industrial and civic energy systems. Through the CCAP India can minister to organize sable delivery of Uzbekistan’s uranium for India’s nuclear power plants.

The LWP formant started in 2014 was primarily addressed to Arabic Middle East and Israel. However, the beginning of negotiations on Iranian nuclear program (JCPOA) reopen Iran for India. In 2017 and 2018, India had become the second-largest buyer of Iranian natural resources [5; 34]. In 2019, India purchased approximately 1.5 million barrels of crude oil per day on average [10; 48]. The LWP made India one of the most important Iran’s trade partner. To foster its success here India renewed the joint cooperation of Iran and India in Chabahar port project. Through the LWP Indian Exim Bank and Iranian Ports and Maritime Organisation provided a credit line in $150 million for Chabahar port modernisation [5; 32]. Also, Indian transport company participate in project of Chabahar-Zahedan railway [5; ibid.]. This project can provide the logistic access to Afghanistan for India and increase the level of transport connectivity for the eastern branch of the INSTC.

The development of the eastern branch of the INSTC creates the seamless link between Central Asia, Iran and by Arabian sea with India. The route of the eastern branch of the INSTC let India to get access to diversified supply of energy recourses from different suppliers with different king of resources essential for various sectors of Indian energy system. Moreover, the INSTC and its eastern branch connects India with Siberia. This region of Russia possesses not only crude oil and gas reserves, but also coal reserves. According to various estimates, despite the net-zero policy by 2030, India will continue to import approximately 66-75% of coal [9; 53], which still represents a significant portion of India’s energy mix.

Russia here gains the strategic position for Indian energy security. Potentially, Russia can meet demand of India in crude oil, gas and coal. The Russian supply of crude oil, against the backdrop of Western sanctions, increased dramatically in 2022, taking up 22% of India’s crude oil imports and becoming the largest supplier of oil to India’s trade balance [14; 6]. During three years the trade turnover between India and Russia had been increasing. In this period of time the natural resources had primary position in bilateral trade. The IRSP here is the crucial format of India-Russia interaction, which is the ground of durable and prosperous bilateral cooperation especially in the energy sphere.

Russia now actively promotes the expansion of free trade area between Eurasian Economic Union, Iran and India [13; 121]. In 2019 was started provisional FTA agreement between the EAEU and Iran and it is expected that the full-fledged FTA will be adopted in 2025 [7]. The same expectations take place in relation to India. The negotiations on the FTA between India and the EAEU have been continuing now [9; 217]. The success of the EAEU expansion of the FTA can provide for the INSTC opportunity to build the integrated logistical system covering countries of Central Asia, Russia, Iran and India. In this situation the INSTC can become the channel of energy supply with multilateral amount of energy exporting actors.

For India this potential development of the INSTC through ease of trade and transit thanks to the FTA agreements will skyrocket the energy turnover between country’s new trade partners. The Indian producing companies will get more convenient conditions for doing business. The costs of transit will reduce significantly and final cost on energy will be cheaper. The reduction of costs can be considered as another one aspect of Indian energy security. The cheap energy is the guarantee for stable growth of industrial production. This advantage of the INSTC attracts more and more attention from Indian government to deepen India’s ties with the INSTC participating countries.

Besides obvious economic benefits in sphere of energy security the INSTC can offer India assistance in its competition with China and Pakistan. The CPEC project is the direct attempt of China to isolate India from Central Asian markets and support India’s regional opponent – Pakistan. [6; 304]. Also, China fosters its ties with Central Asian countries in sphere of transit and energy cooperation. China is another one big consumer of energy resources in the world. China can potentially offer these countries more attractive conditions in trade especially in cooperation with BRI initiative. In this case India can lose this rich market of Central Asia and get stronger Pakistan possessing close ties with China.

The INSTC is the decision of the problem with hostile projects of the CPEC and the BRI. The INSTC is a tool for India to increase its presence in Central Asia and strengthen relations with Iran and Russia – India’s strategic allies. The INSTC is the mean to save these energy markets opened for India what is quite important for the energy diversification process.

Conclusion

The INSTC is the unique project possessing various benefits for Indian energy interests. The project provides the access for Indian companies to new markets. The national government under rule of the Prime Minister Modi understand all possible benefits of the participation in project. The wide foreign policy formats prove the presence of India’s interests in the project. However, there is a number of obstacles for successful implementation of India’s energy interest in the project. This situation can pose the threat but the existence of CCAP, LWP and IRSP formats shows that India is ready to search variants for maintenance of its energy interest implementation through the project and it can be expected to await the further participation of India in the project of the INSTC.

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