Increasing gap. Back to bad ole’ days. Image credits & sources embedded
India’s has three strategic problems. All three are known problems. This post looks at how the three could mesh and create a ‘perfect’ storm.
Oil’s not well
One is clearly oil. India imports 70%-80% of its oil consumption. Too much of our exports are used for oil imports. This makes India prone to economic pressures.
We would do well to remember Bombay High (1973). Only after Bombay High could India detonate the atom bomb (1974), throw out IBM and Coke (1977). Bombay High also saw India’s break away from our colonial ‘heritage’ of hunger, poverty, shortages, disease, social ossification.
Where India gets its oil from?
After recent discoveries at Krishna-Godavari basin, by Cairn oil, GSPC production, will possibly account for 30% of Indian demand. The 70% imports-dependence mark won’t be broken. But import-dependence is unlikely to come down much.
The answer to reliable oil imports are countries with low domestic-demand, low exploration-profile and low current-production. That means Africa, coastal and island nations in Pacific, Atlantic and Indian oceans, countries in Central Asia. With populations of 20-50 million these countries, fit the profile. ONGC’s global expansion remains hostage to short-term actions.
For want of a nail
The second major issue remains defense prepared-ness. With aircraft, aircraft-carriers, howitzers – all imported, many from Western sources (including Israel). India will be seen seeking spares parts within 15 days of any conflict. India is not prepared for a ‘peak’ fighting situation beyond 15 days.
Increasing amount of Indian exports going towards oil imports. Image and data sources & credit embedded.
India’s defence purchases of US$50 billion in the last 10 years gets us toothless, stuffed tigers – which can at best intimidate a small warlord.
It’s the economy, stupid
The third issue is closely related to the first – oil. India’s current account deficit (imports-exports=current acount deficit) is currently gap-filled by FDI+FII+expat inflows. Combine the current account deficit with above two factors, and we find India in a poker-game with a bad hand of cards. Though the less-than-US$40-billion current account deficit is small beer for now, things could change. Especially in case of a prolonged war.
These structural issues became apparent within 10-12 years after Bombay High – by 1985. These three issues have remained unaddressed, by India, now for the last 25 years.
Energy concerns: An ONGC offshore platform. India is seeking to reduce dependence on imports as production from domestic fields declines. Bloomberg
India’s position in the 1971 Bangladesh War was superior, as our defence and oil supplies, were in the hands of a reliable ally – Soviet Russia. This time we have no such comfort.
In WW2, Hitler could not make the final assault on Moscow, as his armies were split to capture Romanian oil fields, which finally did not happen. Stranded in the Russian winter, without oil, at the gates of Moscow, the oil shortages defeated the Germans. In Africa, Rommel’s tanks were sitting ducks without oil.
Instead of fighting the Americans in the Pacific, the Japanese Imperial Navy was busy escorting oil in sea-lanes across Pacific and Indian oceans.
The Allies, on the other hand, had Middle East oil – in addition to the huge American domestic production.
This time it is war
Any conflict will see an immediate withdrawal of FII, triggering GOI caps and restrictions, leading to stoppage of FDI/FII inflows. Rupee devaluation of 40%, meaning Rs.70 to US$ is the probable outcome. Export production will be affected due to oil shortages, further widening current account deficit.
Blowing in the wind
Till such time that India cannot fight a war for 10 years, India will remain a ‘soft state’.
Even a simple increase in indigenous oil production may be of very little help. A few missile attacks on Bombay High and Jamnagar will see India in the Stone Age – our meaningless treaties notwithstanding.
This also is a powerful argument against the Ultra-Mega-Power-Project (UMPP) strategy of the GOI. Instead of the UMPPs, what India needs is small, micro oil-wells, refineries and power plants – combined with indigenous oil production from small, distributed oil wells, refineries and power plants. Thousands of them. A smart indigenization program of defence industry will do the rest.
Sabsa bada rupaiya
This will attract the usual argument of cost.
Having made no efforts in this direction, also means that we will have no cost-estimates, solutions or technology. Having opted and continued with the practice of importing ‘mega’ technologies from the West, a la Middle-East oil potentates, cannot be the answer. Not after 60 years of the Indian Republic. For proof, witness the pride behind Jamnagar complex. Concerted actions on these three parameters will mean some real security.
For the aam aadmi !