Reconnection to Central Asia for India’s Energy Security

Founded as a permanent intergovernmental organization focusing on anti-terrorism and building of a new security concept, the Shanghai Cooperation Organization (SCO) has evolved into a new historical phase. In June 2017, India and Pakistan became full members of the SCO, making the organization the most promising regional organization, accounting for 43 percent of the world’s population and 24 percent of its GDP, with members from Central, East and South Asia.

The expansion of the SCO means it now includes three major emerging countries: China, Russia and India. In today’s geopolitical context, the SCO demonstrates different thinking and demands for the current global governance mechanism. Clearly, since the U.S. troops withdrew from Afghanistan in 2011, the SCO, as a regional architecture, has played an important role in maintaining regional stability and promoting regional development.

Central Asia and South Asia: So Close Yet So Far

Central Asia is the core of the SCO. For a long time, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan have maintained a complicated connection with Russia in term of history, territory, economy and trade. Since the 1990s, China has been strengthening economic relations and energy cooperation with Central Asian countries.

As a regional organization, the SCO must carefully handle historical, geographical and economic links between Central and South Asian countries. Historically, they were considered to hail from the same cultural origins and geographical plate and even experienced fierce cultural collision and fusion in Afghanistan. In the mid-19th century, Russia conquered the Khanate of Bukhara and the Khanate of Khiva, resulting in the separation of Central Asia and South Asia geographically. Later, Afghanistan and Central Asia served as the bridge linking the core area of the Soviet Union and sub-region of South Asia. After the Soviet Union collapsed, even though they are still influenced by Russia, Central Asian countries chose their political systems according to their own national conditions. Again, Afghanistan has become a cut-off point between Central Asia and South Asia.

In 2015, India applied for membership in the SCO, making it possible for the country to connect Central Asia with South Asia at a strategic level. There is historical base for the connection between India and Central Asia—Afghanistan, Turkey, Greece and Mongolia all once reached the Indian plains. After the partition of India, its geographical link with Central Asia was cut off by Pakistan, leaving India disconnected from Central Asia. Except for cooperation in uranium mining with Kazakhstan, India has little interaction with Central Asian countries. As for security, India is plagued by terrorism in Afghanistan and longs to combat terrorism through international cooperation.

From a wider angle, as an emerging developing country, India has a voracious appetite for energy considering the Modi administration’s “Make in India” and “Reindustrialization” programs. India has already become the fourth largest energy consumer in the world. The Oil Market Report 2018 issued by the International Energy Agency forecast that by 2023, the world’s oil demand would reach 104.7 million barrels per day, 6.9 million barrels more than that in 2017. China and India are expected to contribute nearly 50 percent of the global growth in oil demand, with India’s growth rate increasing slightly. Between 2012 and 2040, India’s oil consumption is predicted to maintain a compound annual growth rate of three percent, the fastest in the world. Today, India still relies on the Middle East and Indonesia for its energy imports through marine transportation via the Persian Gulf and Malacca. If India can access energy in Central Asia via land routes, it could diversify its energy imports to prevent seaborne risk while cutting the cost of energy importing.

As for Pakistan, its entry into the SCO was motivated by the domestic security situation and a “chain reaction” after India’s application. Since 2001, the U.S.-led war in Afghanistan has kept Pakistan at the forefront of the fight against terrorism, which has proved quite costly for the country. Pakistan believes that the situation in Central Asia is closely related to its anti-terrorism campaigns and security, so its admission into the SCO is justifiable. Additionally, with regards to the regional power balance, after over a decade of combating terrorism, Pakistan has lost many of its advantages over India. So it certainly cannot sit by and watch India harvest a greater strategic advantage by joining the regional mechanism.

Actually, the thinking of Central and South Asia as the same strategic unit was not new to 2017 when India and Pakistan became full members of the SCO. Before that, the Obama administration introduced the Afghanistan-Pakistan (AFPAK) Strategy focusing on Central and South Asia. When Hilary Clinton was U.S. Secretary of State, she greatly promoted a U.S.-led “New Silk Road” plan to link Central and South Asia. But all of these initiatives were aborted due to the troublesome Afghan issue. So Afghanistan has always played a critical role in linking Central Asia and South Asia, which are so close geographically but so far in spirit.

Energy Corridor: More than Pipelines

India’s demand for the energy of Central Asia was on its agenda long before its entry into the SCO. In May 2012, after years of negotiation, India, Pakistan and Turkmenistan signed an important agreement on constructing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline. It is generally believed that breakthroughs in the TAPI project can be attributed to the great support from the Asian Development Bank over the past decade. Certainly, the improvement and reinforcement of U.S.-India strategic relations meant the U.S. greatly pushed the progress of TAPI.

If TAPI can move forward, the direct beneficiary should be Afghanistan. Just income from energy transit will produce a great deal of revenue, let alone infrastructure related to the pipeline and other measures that will spark local economic growth. Alongside its economic growth, Afghanistan is expected to restore stability. India will win strategically by connecting to Central Asia through TAPI, a move which not only guarantees India’s energy supply but also introduces it to Central Asia, making it an important player in the region. Certainly, considering the relations between India and Pakistan, the former can declare that the progress of TAPI could even alleviate old grudges between the two countries. And in Central Asia, Turkmenistan may be the biggest beneficiary because it will earn a fortune by adding another big buyer, India, following China, to diversify its exports and prevent the strategic risk of becoming too dependent on the Chinese market.

However, the development of TAPI does not look optimistic. In March 2013, the launch ceremony of the Iran-Pakistan natural gas pipeline was held at the border of Iran and Pakistan. After the ceremony, the two countries signed agreements to establish trading ports in their border cities of Gabd and Pishin and build an Iranian petroleum refinery in Pakistan’s Gwadar City. Objectively, the advancement of Iran-Pakistan relations does not help TAPI’s prospects. Running from north to south, TAPI is expected to transfer energy from Central Asia to South Asia and intersect with the east-west Iran-Pakistan pipeline. The two pipelines involve the direct interests of Iran, India and Pakistan, so the U.S. and Russia and even some Central Asian countries have interest. And in 2014, the substantial withdrawal of NATO from Afghanistan resulted in changes of the country’s situation. All these factors make the prospects of the two pipelines more complicated.

Against this backdrop, in 2017, with the strong support of Russia, India became a full member of the SCO, which enables it to access Central Asian resources with an institutional guarantee. At present, Iran and Afghanistan are observers of the SCO. After its entry into the SCO, India obtains the legal right to step into Central Asia and a green light to turn to Central Asia and Russia for energy security. Of course, as one of the founders of the organization, China welcomes India’s admission and has shown sincerity and determination to eliminate the trust deficit and strategic gap between the two countries.

Connectivity: Exploring New Possibilities of the SCO

With the addition of India and Pakistan into the SCO, Central Asia, the core region of the organization, has been closely connected to South Asia via China’s western border areas and Afghanistan. And the vastness of Russia, along with China’s large market, has made the SCO the most intact and promising regional architecture in Eurasia.

Connectivity between Central and South Asia has some basic infrastructure in place now. Since China proposed the Belt and Road Initiative, the eight full members of the SCO as well as many observers and dialogue partners have aligned with China’s development strategy at various levels. For example, Kazakhstan proposed its “Bright Path” and “New Economy Policy” to align with China’s Silk Road Economic Belt. Uzbekistan and Kyrgyzstan also have signed agreements on cooperation with China under the framework of the Silk Road Economic Belt. Additionally, China and Russia have enhanced strategic and practical cooperation in the realms of energy, high-speed trains, aerospace, infrastructure construction and the development of the Far East region.

Meanwhile, the China-Pakistan Economic Corridor (CPEC) has harvested early fruits, evidenced by the construction of the Gwadar port and progress in infrastructure like energy and roads. The projects of CPEC are scattered across Pakistan, involving 60,000 local workers in their construction. In the next five to seven years, CPEC is expected to create 500,000 jobs in the country, whose economic growth and stability will bring positive impact to its neighboring country Afghanistan.

However, connectivity within the SCO still has some real problems. Despite becoming a member of the SCO, India still maintains a negative attitude towards the Belt and Road Initiative solely because CPEC passes through the controversial Kashmir region. In 2017, the Dong Lang standoff dragged relations between China and India to the lowest point in history, greatly raising the deficit of strategic mutual trust. In this context, in April 2018, the informal meeting between two countries’ leaders can be seen as a resumption of bilateral relations.  

In the new era, as major emerging countries in Asia and SCO member countries, China and India need to surpass traditional geopolitical logic marked by competition and represented by the “Asia-Pacific rebalancing strategy,” fabricated “string of pearls” or “Indo-Pacific.” The two Asian neighbors need to focus on their major strategic interests, cultivate new fuel for regional economic growth and explore new models for future interaction between them. At some specific points, the two countries may have to consider exchanging some interests in order to contribute to the SCO’s innovative cooperation. 

The author is executive researcher of the National Institute of International Strategy under the Chinese Academy of Social Sciences.