As is customary during visits of foreign leaders, Delhi went into an emotional overdrive during Chinese Premier Wen Jiabao's visit and talked of a new chapter in Sino-India relations, focussing on trade issues and cooperation in energy projects.
Indeed, even now, Petroleum Minister Mani Shankar Aiyar appears keen on the two countries cooperating to secure their future energy needs. Given the historical rivalry between the two nations, however, it is not immediately clear as to why China should cooperate with India in this field.
As far as the zero-duty trading corridor between the two countries is concerned, something that Premier Jiabao wanted to discuss, reports from the Federation of Indian Chambers of Commerce and Industry and other industry bodies indicate that Indian industry will suffer and Chinese exports will multiply. The reason is obvious: Chinese makers are much more efficient and productive compared to India.
For instance, China has a worldwide market share of 50 per cent in cameras, 30 per cent in air conditioners and televisions, 25 per cent in washing machines and 20 per cent in refrigerators. Wal-Mart buys products worth $18 billion from China when India's total exports of manufactured products are only about $50 billion.
No wonder China, always a realist, showed great interest in establishing trade links with India. It is guided solely by self-interest and it is important that we approach trade ties with caution. China has cultivated relations when it mattered, but otherwise practiced a policy of containment towards India, says G Parthasarathy, a former high commissioner to Pakistan, in an article.
Just on the eve of Jiabao's visit to Pakistan, China agreed to supply Pakistan four modern frigates and it is deepening the Gwadar Port, which Pakistan announced would be available for use by the Chinese navy in the event of a security threat.
Moreover, Pakistan and China signed a "Friendship Treaty" during Jiabao's visit, which according to diplomats includes provisions for China to defend Pakistan's sovereignty in case of war.
But while the Indian government doesn't appear too keen to push forward on the trade corridor, what of the possible cooperation in the energy sector? So far, it appears the Chinese are not really responding to petroleum minister Aiyar's overtures.
Indeed, one of the reasons for the Chinese not really endorsing India's demand for a Security Council permanent seat could be to blunt India's edge while scouting for oil overseas.
Energy, it is obvious, will fire economic growth in both India and China. Both economies will stutter without supplies of adequate oil and gas to run trucks, factories and power plants. So it would be a fallacy to think that China would cooperate with India in the energy sector when state oil companies from both countries are fiercely competing for the same oil fields.
Beijing, with its financial muscle and political clout -- courtesy partly because of its permanent seat on the UN Security Council -- looks to have won the early rounds, helping Chinese state oil companies prevail over their Indian counterparts.
Over the past few years, both countries have clashed over assets in Russia, Indonesia, Sudan and Angola. China has taken large equity stakes and operatorship in some cases in Africa, Russia and Asia.
Right now, Indian acquisitions are few and far between -- 25 per cent of the Greater Nile Petroleum Operating Co. in Sudan, 20 per cent of Sakhalin-1, and other exploration blocks in Africa. China has a head start. "The Chinese have a lot of cash and are robustly tying up long-term crude arrangements," says an Indian foreign ministry official.
In 2002, the rivalry centred on Indonesian assets held by US Devon Energy and Spain's Repsol YPF, but China was "willing to pay much more than us," says a former senior official of ONGC Videsh, the overseas arm of state Oil and Natural Gas Corporation.
China National Offshore Oil Corp bought most of Repsol's assets for $ 585 million while PetroChina picked up Devon's oil fields, establishing their hold on the Indonesian oil sector.
The focus was then on Africa, Angola in particular. In October 2003, Sonangol said it would sell 50 per cent of offshore Block 18 to a Chinese firm, invoking contractual pre-emption rights, after Royal Dutch/Shell had agreed to sell its half-share in the block to ONGC for $600 million.
The Chinese sweetener was a $2 billion aid package, nearly 10 times the amount on offer from India. Beijing is an important donor and potential trading partner for Angola, which has built up hefty hard currency debts.
Indian officials also claim that China tried to stop ONGC buying Talisman Energy's 25 per cent stake in Sudan's Greater Nile Petroleum Operating Co. in 2003, but was foiled when the Sudanese government backed ONGC. Now Beijing is trying to usurp New Delhi as a key partner in gas developments in Myanmar (Burma).
India has a stake in Block A-1, which is estimated to hold 6 trillion cubic feet of gas, as well as Block A-3. Recently, a consortium led by China National Offshore Oil Corporation signed two production sharing contracts with state-owned Myanmar Oil and Gas Enterprise for exploration in offshore blocks A-4 and M-10.
Even India's staunch ally Russia and the Caspian countries are turning more to China because of its vast economic clout. Rosneft borrowed money from China to take over Yuganskneftegas, the key Yukos subsidiary sold at a controversial auction in return for crude supplies to China.
ONGC Videsh is still trying to gain a foothold in Yukos. Also, on the basis of a gas-purchase commitment, Iran offered China operatorship of Yadavaran field and a large stake. India, which has signed up to buy 7.5 million tonnes of LNG from Iran, was left with a minority equity stake.
Given such intense competition and Chinese demand of close to six million barrels a day, making it the world's second largest oil consumer, it is unlikely that Chinese state oil companies will give room to ONGC or Indian Oil Corporation. Scarce resources will intensify competition not cooperation.
The only reason why China might join hands with India would be to contain west Asian oil producers. But that could be a slender hope.
