[The following is a slightly condensed and amended version of a recent research paper I composed on Chinese, Indian, and American energy policy.]

Because countries are economically linked more intensely than ever before, as energy resources run increasingly scarce, and demand continues to escalate, it is becoming clear to many states that energy diversification through cooperation is the key to survival and economic prosperity in the coming decades. Nowhere, perhaps, is this statement more true than in Asia, where China and India draw sizable attention for what many see as a looming energy crisis fueled by the two nations’ seemingly unstoppable economic growth. Ashley Tellis notes, “during the next twenty years, the demand for energy is projected to expand by more than 50 percent, and Asian demands will account for the bulk of the increase," (2004). It would be naïve to argue that China and India are destined for overt conflict, but likewise would it be premature to assume that the two potential giants have set a course toward major collaboration. As such, examination of India and China’s growing energy needs and limited resources reveals both significant opportunity for cooperation and competition. This dynamic has significant implications for American policymakers. The United States has considerable strategic political interests in Asia and through its own control of energy resources can assert some influence, limited in some instances though it may be, on how growth in China and India proceed in the coming years.

India, like so many other nations around the world, would desperately like to diversify its sources of energy. However, India possesses huge coal reserves, the world’s fourth largest with approximately 92 billion tons, or roughly 200 years worth, available (Wall Street Journal – Eastern Edition 7/11/2005). However, for numerous reasons coal is not the most appealing of energy resources. As one analyst has summarized, “coal has low energy utilization efficiency, low economic benefits, especially in energy intensive industries, and low product competitiveness. It also has serious environmental impacts," (Xu Yi Chong, 2006). Also, current Indian infrastructure is poorly equipped to produce domestic coal. Unfortunately, though, India has paradoxically little chance to wean itself off of coal as its primary energy resource in the near future; it would not be economically viable to do so for likely another 15 to 20 years (Pachauri, 1999).

Though natural gas accounted for only 7% of primary energy consumption in 1997-98, it is estimated to increase to 20% by 2025, thereby becoming a preferred fuel in future Indian power generation (Pandian, 2005). These estimates, however, are contingent on India’s current natural gas pipeline and other import projects coming to fruition. The most significant of all of India’s gas pipeline projects is the now much-publicized Iran – Pakistan – India (IPI) pipeline. As pleased as leaders in the United States might be from increased stability in south Asia brought about by further rapprochement between Pakistan and India, they are certainly not enthusiastic about the prospect of a potentially lucrative deal for Iran, such as the IPI pipeline, that might help further fuel that country’s nuclear ambitions through increased national revenue. Ironically, it is the nuclear ambition of India which sets the balance with the contentious IPI pipeline proposal. One of the most celebrated and scorned, but nonetheless surprising energy developments in recent memory has been the historic nuclear energy agreement between Washington and New Dehli on July 18, 2005. In what C. Raja Mohan calls “the deal of the century,” the second administration of President George W. Bush agreed to help fully develop India’s lagging civilian nuclear program, in exchange for separation of its civilian and military nuclear programs and opening up of its facilities to international safeguards and regulations

In sum, India’s energy needs are enormous and will continue to grow dramatically as the Indian economy itself does. Leaders in India will continue to pursue energy resource diversification, but will be in many ways reined in by the limits of their developing economy and the geopolitical interests that still dictate the acquisition of resources throughout the world. While U.S. congress passed the India civilian nuclear agreement this past December and all indications are that the IPI pipeline is merely a few months away from construction, it seems possible that India may not be able to have its cake and eat it, too. Indian leaders may be forced to decide, at least in the short-term, which energy resource project to invest more stock in, as American leaders continue to put pressure on the international community to censure Iran. This is not the only tough decision that Indian policymakers will face in the coming years regarding energy, either. Although India has great potential for expanding its use of renewable energy sources such as hydropower, biomass, biofuel, and solar power, developing and producing technology for such sources is far beyond India’s current economic capability. In view of these limitations, India’s immediate energy future will continue to be dominated by coal and oil.

Very much like its up-and-coming neighbor to the south, India, China has and will continue to have well into the future, a dominant dependence on coal. China is now the world’s largest coal producer and consumer, possesses almost 12 percent of the world’s total reserves and used coal for 69 percent of its primary energy consumption in 2005 and 75 percent of total electricity generation (Yanli, 2007). However, due to increasingly onerous environmental concerns and rising automobile use in China, Chinese demand for oil and gas will continue to rise faster than for coal, although coal use will still continue to increase commensurate with the country's continuing economic growth . The switch from coal toward other resources is part of a newly emerging strategic energy policy calculus on the part of Chinese leaders. China has been for some time been without a national government agency to direct energy resource policy, but creating an energy strategy became a government priority in the new millennium and a national energy working group was formed in May 2005.

While it is clear that the new direction of Chinese energy policy is toward securing a diversity of resources from multiple locations in order to accommodate economic growth and avoid constraints imposed by increased urbanization, it is also clear that China has also placed a certain amount of strategic and diplomatic weight to the processes involved in energy resource acquisition. This is especially evident in China’s agreements and projects to obtain access to foreign oil. China became a net importer of oil in 1993, and with the continuing escalation of automobile ownership and use in China, Chinese leaders have come to see oil acquisition as increasingly linked to national security and tied to its competitive and cooperative arrangements in the international community (Ziegler, 2006). Because Middle East oil is so heavily linked to the protection of the U.S. Navy, central Asian energy has become much more attractive to China, and thus Beijing has become involved in numerous energy projects closer to home, such as building pipelines from Kazakhstan to Shangai (Blank, 2006). Even though China lacks influence in central Asia, as compared with other major actors such as Russia and the United States, its projects in the area have given the country more of a strategic position in the region and add at least in some degree to the overarching strategy in Beijing of energy variegation.

To summarize, China has an intense need to diversify its energy sources, which are currently and into the near future dominated by coal consumption. Access to foreign oil and natural gas, however, is gaining importance to China and leaders have strategically pursued deals to obtain these resources with continued doggedness in a variety of regions, most notably and perhaps promisingly in central Asia. While central Asian holdings and projects represent a relatively insubstantial contribution to China’s overall energy requirements, they do represent a strategic maneuver on the part of the CCP to avoid becoming too entirely entangled in the U.S.-dominated and frequently volatile Middle East. Chinese leaders, in general, are also quite aware of the need to both curtail the heavy environmental costs of its energy consumption caused by rapid industrial growth, and of the need to make energy usage more efficient. Recent measures to toughen penalties for energy waste reflect leaders’ goal to cut Chinese GDP by 4 percent in 2006 and by 20 percent by the end of 2010 (Hydrocarbon Processing, 2006). This is a tall order, given that Chinese energy consumption in 2006 outpaced economic growth. Still, such strategic goals, however legitimate or realistic they might be, emphasize the weight energy policy and resource usage now carries with leaders in China.

Although it may be far too simplistic to weigh all of China’s moves in the region as one or another attempt to balance power against the U.S., this calculus is certainly relevant to the discussion of energy resource acquisition in Asia. China has expressed a definite desire to expand its sources of energy to states considered unappealing or antagonistic to the United States and has sought to utilize its more dominant role in Asia by coopting other states in bilateral energy agreements. Particular to the discussion outlined here, India has proved recently to be no exception to this rule. Man Shankar Aiyar, India’s minister of oil and natural gas, has repeatedly said that India needs to cooperate with China on energy, not compete with it. One might reasonably argue that such similarity of interests and goals might lead to contention or even conflict. Tellis surmises that if India and China continue to seek “privileged access” to different markets, their strategies would inevitably collide and escalate tension, as the countries would feel compelled to increase defense mechanisms to protect their interests.

However, such analysis ignores several perhaps noteworthy factors. For one, Sino-Indian rapprochement has excelled in recent years, as China has continued to build multilateral and cooperative relations throughout Asia. Furthermore, both India and China’s economic interdependence with each other and with other states throughout the region have made the costs of outright conflict and intense competition much more costly than before. As a corollary, there is sizable evidence that parallels in India and China’s energy needs are in fact spurring cooperation. To that effect, in April 2005, the Indian and Chinese premiers announced a Sino-India Joint Declaration to launch cooperation in the fields of energy safety and energy conservation. An example of such collaboration is evident in the 25% share purchased by India Petroleum and Natural Gas Corp. in Sudan’s Nile oil field, in cooperation with China’s CNGC, which operates the field.

In light of these commonalities and trends in India and China’s drives to obtain multifaceted and increasing shares of the global energy resource market, it would be easy to conclude that much stands in opposition to many of the United States’ interests and strategies in the region. As a cooperative regional leader, China offers for India what so many other nations in the region have found appealing in Chinese proposals for trade and development over the past decade: common regional interests, a lack of ideological judgmentalism, and reverence for the principle of non-interference. It is clear, particularly after the fallout from the U.S. incursion into Iraq, speculated by many to be fueled by energy resource interests, that these aspects of U.S. preeminence in the international system have only encouraged states to seek an alternative powerful partner. However, one should note that in spite of their statements of anti-hegemony and pro-multilateralism, even Chinese leaders have repeatedly emphasized the importance of cooperation with the US.

The United States, with its influence on Gulf oil, and unparalleled economic and military dominance, is most certainly an undeniable partner for most of the world. The surprisingly swift and powerfully sweeping change that the United States can bring to any issue is most apparent, specifically with regard to India and China’s quest for more reliable, independent, and diverse sources of energy, in the emerging U.S. – India civilian nuclear deal. Though Washington has largely claimed to have based the renaissance in India – U.S. relations on shared values such as democracy and common global interests, there should be little doubt that members of the Bush administration saw great strategic political and regional security significance in supporting India’s growth ambitions. Knowing that China’s multilateralism and expanding sphere of influence was not poorly received by many states throughout Asia, leaders in the U.S. realized that providing India with such a game-changing source of energy would do much toward leveling the economic playing field in Asia and to bring a potential great power further under the American wing.

Still, American leaders would do well be cautious about creating a regional posture that pegs policy toward one country (India) to its larger strategy toward a third (China). The perils of such a strategy are manifest in the exceptionalism through which the U.S. had to forge the India civilian nuclear deal; U.S. leaders essentially had to assent to break American law and the provisions of the Nonproliferation Treaty (NPT) to offer the kind of support that India called for in their agreement. Not only does such an exceptional policy further strain future efforts by American leaders to invoke international norms and standards, which they are often inclined to do, but it also subtracts legitimacy from censure of economic interaction with rogue or pariah states. As noted in a recent Washington Report on Middle East affairs, “It is rather difficult for the White House to signal criticism of China’s involvement…and ignore the parallel Indian role.” This is not to suggest, however, that the United States shouldn’t see through its promise to help develop India’s civilian nuclear program. Safely increasing India’s use of nuclear power will help maintain growth in India and throughout in the region, while simultaneously helping to curb use of inefficient greenhouse gas emission-heavy fuels such as coal. The primary assertion here is rather that if primary goals such as these also happen to be in line with the interests of the United States, as it often claims, then American leaders should work harder to promote them without bias throughout Asia. Furthermore, the evidence examined here suggests that increased energy cooperation between China and India is likely due to common strategies for a common problem.

Propping up India as a major Asian power in denial of areas where convergent thinking between India and China exist will make increasing regional security by balancing India against China a difficult task. Although many factors add to U.S. attitudes with regard to China, by forging a policy which helps develop such energy related projects as cleaner coal use technologies, gas pipelines, and transport infrastructure related to both India and China, the United States can play a vital role in supporting growth that is sustainable and contributes to long-term stability in Asia. It is clear that the United States can have dramatic effect on how countries set and exact their energy policy, and that American leaders are unafraid of involving energy strategies in an effort to achieve foreign policy and international security goals. Helping both of the world’s two largest up-and-coming economies, those of India and China, to diversify their resources and find cleaner, more efficient ways to power their growth, will help bring down the price of oil and in the end do much more to foster regional stability than will lopsided a policy which only encourages the dangerous battle over petrochemicals from unstable places (Friedman, 2006).