By Faisal Ahmed, M Absar Alam
The region’s natural gas reserves apart, it can boost India’s trans-continental trade
India’s foreign trade policy puts utmost attention to exploring new markets for exportable products and offshore investments. At a time when India’s look-East policy is exploring new modules of engagement in East and Southeast Asia, and its look-West policy has already been emphasising on broad-based engagements with the Persian Gulf region, it is high time to look at the geography in the Northwest as well. Amidst such efforts of engagements, the missing link is the Central Asian region, which has immense strategic importance.
The emerging markets of the Central Asian republics (CARs) of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, constituents of the former Soviet Union, are left out by the Indian private sector even when this natural gas-endowed region has the potential to reshape the geopolitical calculus of global energy security. The importance of Central Asia is significant for its neighbouring nations, like India, China, Pakistan and others, owing to their huge energy needs, indispensable for economic growth.
Even though Central Asia has an immense market potential, capable of helping enhance India’s export prospects, India’s export to this region remains dismal. India’s exports to CARs accounted for $272 million in 2010, occupying only 0.49% of India’s export basket. Their main sources of imports, however, are the European Union and other countries of the commonwealth of independent states (CIS). Also, the lack of transit facilities impedes India’s export to the region. It may be noted that Central Asia has been historically known for transcontinental transit, especially for the Silk Route. India’s urge to revive land routes reaching Eastern Europe or Eurasia can well be realised by better trade facilitation measures with these countries. Therefore, it is important that India’s engagements with CARs be seen in terms of a scenario of two major opportunities embedded with consequent challenges therein.
First and foremost is India’s interest in natural gas reserves, which is a major determinant of its relations with Central Asia. The four major gas-abundant countries of the region account for 7.62% of global gas reserves. This is excluding Russia, which has 24.94% of the world’s gas reserves. India’s increasing energy need is evident from the fact that the consumption of natural gas was approximately 2.3 trillion cubic feet in 2010 as compared to an estimated 1.9 trillion cubic feet in 2009, which is almost a 21% increase.
The $7.6 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline is a significant factor in determining India’s energy security needs, and especially at a time when Pakistan in-principle agrees to accept a transit fees for the pipeline as is settled between India and Afghanistan. However, since the TAPI gas pipeline would have to go through the major conflict areas of Afghanistan and Pakistan, the security associated with this would be a major challenge. In addition, inconsistency in Indo-Pak bilateral relations also poses a threat to its functioning, post-implementation.
Secondly, with the objective to expand its trade potential, it is noteworthy that India’s engagement with Central Asia could facilitate options for transcontinental transit to Eurasia. Russia, Iran and India are already in agreement to further develop the North-South Transport Corridor. This corridor moves freight from South Asia via Central Asia and Russia to reach Europe by using a feasible mix of sea, road and rail routes. A meeting of experts from major stakeholders of the region is scheduled in Delhi on March 29 to give the final touches to the negotiations on this corridor. However, the step would need a more specific policy framework emphasising the 14 major stakeholder countries for CARs and CIS.
In addition, the recent intergovernmental conference convened by the United Nations on March 12, 2012 for the implementation of trans-Asian highways and railways is also a significant development. The trans-Asian railways is also likely to transform the pattern of trade after its implementation, as it is deemed to pass through most of the Central Asian countries.
The revival of such routes, combining land and sea, has the potential to reduce transport costs and travel time substantially, meaning Central Asia could renew its historic role of transit facilitation for South Asia in general, and India, in particular.
Strategically, the slow pace of India’s economic engagement with CIS and CARs reveals that a huge market is left out on both sides of the Caspian Sea. Russia is India’s largest trading partner in the CIS and Kazakhstan is India’s largest trading partner among CARs. With Russia joining the World Trade Organisation, and Kazakhstan playing a crucial role in the integration efforts of the newly formed Customs Union of Belarus, Kazakhstan and Russia, the scope for seeking strategic and economic depth by partnering both at bilateral as well as on a regional level has opened up substantially for India.
Most importantly, the economic and strategic scenario in Afghanistan and Central Asia will continue to influence India’s presence in CARs. Any broad-based engagement would necessarily need private participation, which cannot be facilitated in unfavourable conditions, despite the fact that India’s efforts in Afghan reconstruction continues. Also, India needs inter-country an transit facility from Iran and Afghanistan to reach CARs, which can well be addressed by the proposed North-South Transport Corridor and the Trans-Asian Railways.
Also, amidst the evolving geopolitical gravity of the region, it is imperative that India’s engagement with CARs should not be seen in isolation. The six-member Shanghai Cooperation Organisation (SCO), which includes Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan, and more importantly China, is exerting its much hyped “China factor” on India’s engagements with CARs.
Faisal Ahmed is associate director at CUTS International, Jaipur and M Absar Alam is research fellow at Asian Institute of Transport Development, New Delhi. Views are personal.