Moscow: India’s ticket to the energy riches of the Arctic.

New Delhi should make an attempt to be a vibrant ‘observing voice’ in the Arctic Council and look to push Moscow in giving support the country’s private sector.

It is fair to presume that most Indians till some time back were unaware of the very existence of the region of Crimea, which Russia has now included as part of its own territory after Kiev was left leaderless following months of protests.

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It is no secret that India and Russia share a special relationship. Ties between Moscow and New Delhi are solid, and on back of this relationship, the seemingly aggressive nature of Russia got a meek nod from India in form of a vague statement from National Security Advisor (NSA) Shiv Shankar Menon, who said that there were “legitimate Russian and other interests involved.”

Clearly New Delhi did not want to take any definitive stand on the issue, and it tried to avoid just that by making the above mentioned statement. Even though it was seen as validity to Moscow’s stance on Crimea, many experts questioned whether the NSA’s statement was in support of the Kremlin or not. The answer to this question was confirmed by Moscow, instead of New Delhi.

During the official signing ceremony of Crimea as part of Russia, President Vladimir Putin in midst of his flamboyant and ornate speech (where he took on Western hypocrisy and celebrated the referendum held in Crimea which showed overwhelming support to re-join Russia) went on to thank China and India for their stance on the issue. He said: “We highly appreciate India’s restraint and objectivity,” while also praising Beijing saying the Chinese saw the situation in Crimea “in all its historical and political integrity.”

India’s decision to not go against Russian aggression is understandable. Ties between the two countries are deep. Russia has been for long India’s by definition strategic partner. India, which is the world’s largest importer of military equipment, has historically bought most of its supplies from Russia. Even though for a long time this was mostly due to lack of options, Russian military hardware dominates much of Indian military establishment today.

However, even though military comprises bulk of the Indo – Russian trade, other areas such as energy have not been far behind. In fact, the race for natural resources in the Arctic is going to be one where India is looking to partner with Russia to both invest and tap the huge potential energy reserves known to be now accessible as the ice fast melts away due to global warming.

According to consulting firm Ernst & Young, it is possible that more than 20 percent of undiscovered but recoverable oil and gas resources could be found in this newly thawed region. Moscow, in true Kremlin fashion, in 2007 sent two mini-submarines at the sea-bed of the North Pole and planted the Russian flag; a symbolic gesture to others such as the US, Canada and Scandinavian countries that it has first claim over the region’s expected billions of dollars’ worth of natural resources.

Last year, India, along with others such as China, became a permanent observing member of the Arctic Council. Russia and Sweden played significant role in nominating India’s candidature, as the Swedish Ambassador to the Arctic Council, Andreas von Uexkull, called India’s interest in the council as good for both diplomatic and scientific relations. “It is very important that economies like India and China participate,” he said.

India has already invested heavily in Russia’s energy sector. In 2002, ONGC Videsh (OVL) purchased a 20 percent stake in the Sakhalin-I project. Sakhalin, an island in Russian North Pacific, just above Japan, is home to huge reserves of natural gas. America’s ExxonMobil and Japan’s Sakhalin Oil & Gas Development Co. Ltd (SOGDC) constitute the other two majority stake holders with 30 percent each.

Sakhalin-I, which as of 2007 was producing 250,000 barrels of oil and 140 million cubic feet of natural gas per day, was India’s first energy asset investment abroad.  Following the success of this deal, in 2008, Oil & Natural Gas Corporation (ONGC), India’s biggest exploration and production company, spent $2.58 billion to purchase London based Imperial Energy Plc in a bid to tap into the company’s energy deposits in Siberia. This deal was seen as a victory for India which had been routinely outbid by other major players from the West and China. Continuing its trend to invest in Russia, New Delhi has also looked to invest in the Sakhalin-III project over the past few years.

After the Sakhalin success, Moscow is looking for big discoveries in the Arctic as well. However, unlike Sakhalin, which is a bestowed Russian territory, geo-political dynamics in and around the North Pole are fast changing. Other countries looking to tap into the Arctic riches, such as Canada, have seen Moscow’s planting of the flag and staking first right claims based on its claim that the underwater Lomonosov ridge, where the Arctic seabed lies, is directly connected to its continental shelf, as aggressive moves.

Ottawa’s firm stance against Moscow from 2008 onwards has caused a continuous front in relations within the Arctic Council members. Now with the crisis over Crimea, Canada has been one of the vocal critics of President Vladimir Putin’s government, and advocated Russia’s expulsion from the G8.

The territorial claims over the Arctic basin will continue to cause significant issues amongst the Arctic Council members. The United Nations Convention on the Law of the Sea (UNCLOS) which was formulated in 1982 and gives a vague set of rules on the sovereignty claims over the Arctic sea bed is in need of immediate update. Moscow’s claim over the Arctic sea-bed resources is based on its claim that the Lomonosov ridge is part of the Russian continental shelf. This, according to current practices, does give Russia the onus if geographically and scientifically proven true. Currently, others such as Canada have refuted such claims by Moscow.

However, for India, Russia provides the most convenient door way to the Arctic. New Delhi’s willingness to bid for the Sakhalin-III project also got support from the Kremlin. Moscow and New Delhi have the strategic understanding to develop deeper joint-operations in the technology and exploration and production fields, specifically in the Arctic such as the off-shore West Siberian Basin and the East Barents Basin.

Moscow is planning a largely Russian private sector driven foray into its attempts to tape Arctic’s mineral wealth. More than 26 oil and gas basins have been discovered till now off the Russian shelf in the Arctic region, largely funded by smaller Russian energy companies. Unlike Sakhalin, where global energy players including from the West, Moscow seems to be wary of foreign oil majors foraying into Arctic exploration and production on its territory. In December 2013, Russia’s Gazprom announced that it had begun to pump the first batch of oil from its Arctic off-shore platform Prirazlomnoye field in the Pechora Sea.

The challenges of oil and gas production in the Arctic remain significant. To begin with, the climate itself poses significant challenge.  Setting up off-shore infrastructure in one of the coldest region’s on the planet poses a significant personnel and equipment challenge. Even when extraction fields are set up, transporting the oil and gas will be a highly challenging task as new technology for Large Crude Carriers (LCC) and Very Large Crude Carriers (VLCC) would be required to safely navigate frozen seas.

Out of all this, the sensitive ecology of the Arctic will remain the biggest stumbling block, specifically when exploration and production activities will look to go deeper into the Arctic Ocean. With the call to fight global warming increasing day-by-day, and memory recent oil spill disasters such as the Deepwater Horizon incident in the Gulf of Mexico, environmental laws are becoming stricter to protect a highly sensitive and unique ecological area such as the Arctic from mass mining and drilling.

India has shown its keenness in working with Russia to tap Arctic energy riches, despite the challenges. Last October during Prime Minister Manmohan Singh’s trip to Moscow, a joint statement was also released which said that India’s ONGC and OVL are “interest in participating along with Russian companies in exploration for hydrocarbons in the Arctic region”. New Delhi’s Foreign Affairs establishments now employ specially trained diplomats exclusively dealing with areas such as energy and climate change, in hope to give boost to India’s endeavours in such fields abroad.

Moscow is the easiest way for India to look and secure energy supplies from this new frontier of fossil fuel deposits. India’s historic ties with Russia give it an edge over much of the rest of the world looking to tap into Russia’s energy riches. New Delhi should make an attempt to be a vibrant ‘observing voice’ in the Arctic Council and look to push Moscow in giving support to not just ONGC and OVL but even the country’s private sector such as Reliance Industries, Essar Oil and so on to jointly invest in the Arctic.

Picture: Tatinax