GRM 2010 GRM 2011

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Title: The India-Gulf Strategic Partnership in a Pan-Asian Cooperative Paradigm China and India in the Gulf: Competition or Cooperation? The Geo-Politics of the New Silk Road: How the Crouching Tiger and the Hidden Dragon is shaping the new contours o
Paper Proposal Text :
China and India in the Gulf: Competition or Cooperation?

The Geo-Politics of the New Silk Road: How the Crouching Tiger and the Hidden Dragon is shaping the new contours of the Arabian Gulf and Middle East



The economic decline of the West and the rise of the East has been a game changer for the Persian Gulf (Arabian Gulf for the Arabs) countries of the Middle East. The recent rise of Asia, particularly the growth-surging emerging economies of China and India, has contributed to structural shifts in the Gulf economies. There is now a decrease in oil and gas demand from the developed North and an increase in such demand from the Asian countries, particularly China and India. In short, the Asian sub-regions are increasingly being integrated with each other through commercial, trade and investment flows. This is bound to bring about a tectonic shift in the strategic contours of the Gulf countries with the rest of the world in the future.

To wit, in 2009, a year after the global recession hit the West, China quietly surpassed the United States as the world’s largest exporter to the Middle East. Again in 2009, China surpassed the US as the largest buyer of Saudi crude oil. Today China’s annual trade with Saudi Arabia totals $ 60 billion, more than the US. Trade between India and the Arab countries is ballooning at $ 114 billion, 18 per cent of which is between Saudi Arabia and India. With a GDP of $ 10.3 trillion at purchasing power parity, China ranks as the second largest economy of the world (the US still remains the largest). With a GDP of $ 4.1 trillion India ranks as the fourth largest economy, right behind Japan. In the past Europe is supposed to have triggered the oil industry boom in the Middle East. Today Europe lags behind the three top Asian economies of China, Japan and India. Such a reversal of fortune partly seems ironic given that China and India emerged out of European colonial domination just over half a century ago.

Consider an example from tiny Qatar which is the largest Liquefied Natural Gas (LNG) exporting country in the world: India has sought to purchase 15 million tonnes of LNG from Qatar in addition to the 7.5 million tonnes that it already imports. China already purchases 5 million tones of LNG from Qatar. It has signed contracts for an additional 2 million tones. Sinopec, a state owned Chinese behemoth is already negotiating LNG purchases with Qatar which might bring the total to 13.5 million tonnes of LNG. Such contracts will make India and China, the two largest consumers of Qatar based LNG in the world surpassing Europe, US, Japan and South Korea.

The United Arab Emirates is India’s number one trade partner. The Gulf Cooperation Council (GCC) is India’s number one trading group partner. The GCC is also second home to the largest Indian diaspora estimated to be over 6 million which sends over 60 percent of the $ 58 billion remittances that overseas Indians send home annually. Since 2007-8 India has become the largest receiver of overseas remittances ( India alone receives 16.5 per cent of the total remittances of the world), even more than China.

China has the highest population of the world, India the second highest. China, as we have noted earlier is today the second largest economy of the world, India the fourth largest. China is the second largest consumer of energy in the world, India the fifth largest. Both of them are the two fastest emerging economies of the world, according to some futurists, the two future superpowers. Both of them share a very long geographical border which contains the highest mountains of the world, the Himalayas. The India-China competition today evident in Africa, Central Asia, the Indian Ocean and South and South East Asia has now spread to the Arabian Gulf region. One is symbolised by the dragon, the other by the Royal Bengal tiger (or the elephant). Celebrated Chinese film maker Ang Lee’s brilliant production Crouching Tiger, Hidden Dragon is perhaps the most apt metaphor for this emerging India-China rivalry. Yet the two have managed to create the new Silk Road in Asia laced by oil and gas instead of spices, silk and muslin of yesteryear.

What are the major corollaries emerging out of this new interdependence among the Asian sub-regions? Where are the principal lines of faults evident in the recent structural shift in the Gulf economies? How have outside powers begun to exploit such lines of conflict within Asia? Will such patterns of competition define the future course of conflict in Asia or is there an alternative route of cooperation and coalition building?

First, among the leading energy consumers, the two Asian giants – India and China -- appear more and more from a realist Western perspective as great rivals and competitors. Second, within the producers, Iran with its nuclear ambitions has begun to appear as the principal threat to the Arab Gulf security. The Arab spring has partially fanned this existing Shia-Sunni and Persian versus Arab divide given Iran’s support to the Syrian regime of Bashar Al Assad and its external support to Shia-led opposition in Bahrain.

China is the largest consumer of Iranian oil. Iran’s most important potential new production is around the three fields of North Azadegan, South Azadegan and Yadavaran. Two Chinese state sector big firms, CNPC and Sinopec, retain majority stakes in the Iranian fields. Iran’s most important gas project, the South Pars field is also beholden to CNPC. Iran’s future is overly dependent on China. However, Beijing, realising the significance of diversifying its sources of hydrocarbons, has recently pragmatically gone about firming up commercial relations with Saudi Arabia. Saudi oil accounts for 20 per cent of Chinese imports. Saudi Aramco holds a 20 per cent stake in a refinery in Fujian in a joint venture between Exxon Mobil and Sinopec. India also purchased 14 per cent of its crude oil from Iran. In the past, India and Iran were negotiating the 2,670 km long pipeline project from Iran to India via Pakistan (TAPI project). However, due to US pressure and other considerations that project has been shelved for now.

Third, the West (United States and European powers) have isolated Iran with the United Nations led sanctions and prospective oil embargo. The US has also signed billion of dollars of defence deals with Saudi Arabia and UAE keeping a belligerent Iran in mind. At another level, by signing a civilian- nuclear deal with India and a strategic partnership, the US has attempted to check the rise of its formidable rival, the emerging superpower China. Domestic commercial needs do undercut political alliances and ideological links. Although there is a China-Iran-Russia troika against a US-Europe-Saudi Arabia-led Gulf states-India alliance, yet there are cross-cutting alliances based on commercial needs.

The paper aims to map out the contemporary tectonic shifts noticeable within Asia. I will examine the emerging interdependence among Asia’s various sub-regions, especially that between the oil and gas producers of the Middle East and the main hydrocarbon consumers, India and China. Second, we will trace the contours of the new conflicts and the new commerce between the Asian powers, both between India and China and that among the Middle East countries, especially the Arabian Gulf players. The declining hegemony of the US in the region and its new alliances in Asia will be discussed. Finally, the paper will examine whether there is an alternative to such competition? Is there a possibility of a long-term cooperation given short-term competition between say India and China and the Arab world versus Iran. Will the US continue to play a pivotal role in the region? Or will strategic partnerships among Asian players being forged today and in the future move towards the idea of a proto-coalition, a future Asian Union? Can the yesteryear slogan of Hindi-Chini bhai-bhai (India-China as brothers) be revived? Can we build a Chindia alliance in the future? Given the long historical and cultural ties between the two Asian civilisations for centuries (with only one exception of a border war in 1962) and given that both China and India have common historical grievance against the West (recently fairly visible on environmental issues), is there some space for multilateral cooperation even against a backdrop of bilateral competition? After all, as recent as 2006 India’s external affairs minister Mani Shankar Aiyyar in Beijing talked of “strategic partnership” between China and India rather than strategic rivalry. Is a strategic partnership between the two future Asian superpowers possible for firming up the new Silk Road with the Arabian Gulf countries and that of the Middle East?