After Ukraine, the new energy disorder

News: The Ukrainian crisis has radically altered the contours of the global energy landscape. It has created a tangle of relationships and issues for India.

What are the issues involved?

The petroleum market is tight and prices are ratcheting up. For example, Oil prices are close to $120/bbl.

India is now a major purchaser of Russian crude. It is now our largest provider of crude oil surpassing Saudi Arabia and Iraq. India ramped up its imports from Russia because Russia offered price discounts and provided an opportunity as a measure of good economics and energy security.

Russia and China have signed a “no limits” partnership. Therefore, China expanded its purchase of Russian oil and gas. Russia has become the largest supplier of petroleum to China. There are doubts, it can act as a client state instead of being politically autonomous, if India’s relations deteriorate on its border with China.

Our, India’s long-standing “friend” (Russia) is now in the bad books of our other friends (the US and Europe) and in a deepening relationship with our adversary (China).

At present, there is no executive authority responsible for energy in India. There are ministries responsible for components of energy policy. There is no formal mechanism to align their separate approaches.

Way Forward

The Gulf Countries have a lot of importance in the reordered post-Ukraine energy landscape.

– For example, The US and several other European leaders are looking towards the Gulf for a promise of higher production to lower oil prices and to negotiate gas supply deals to offset the shortfall out of Russia.

Therefore, India should also engage with the Gulf producers for supply security.

The Gulf countries should stay outside both orbits, neutral and opportunistic, instead joining the Russia/China group, or moving back into the Western fold.

India should create a mechanism for the development and execution of an integrated energy policy.

The Niti Aayog is well-placed to provide the intellectual basis for designing and developing relevant new institutions. It can play an important role in preparing the road map for developing institutional mechanisms for facilitating a “whole of the system approach” to energy policy.

Source: The post is based on an article “After Ukraine, the new energy disorder” published in the Indian Express on 4^th July 2022.