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Geopolitics of energy needs foreign
policy re-calibration

M. Shahidul Islam

The mad rush for energy resources has turned economic interests of nations synonymous with energy interests. Per capita energy consumption being one of the main indicators of the socio-economic progression of any nation, drive to secure safe energy resources serve as the main rationale behind foreign policy pursuance.
   Despite Bangladesh being at the centre of such energy-centric new geopolitical games, our policy makers seem utterly confused by the spectrum of choices they face, and the dilemma posed by each of the choices. That confusion must be shunned sooner to make policy making compatible with the rapid changes sweeping the global and regional geopolitics.
   Iran and the US may not look eye ball to eye ball, but Iran has turned into a leading player in the Mid-East geopolitics, thanks to the US invasion of Iraq in 2003, based on the lies of Iraq possessing WMD. Coinciding with recent US's withdrawal of combat troops from Iraq, Tehran is accelerating its outward projections by forging alliances with regional countries. In the process, the Iranian leadership has recognized the pivotal role Bangladesh can play as the strategic lynchpin between China and India.
   That has prompted Tehran to express serious interest in aiding Bangladesh to overcome its energy crisis, proposing last week that Dhaka should join the Iran-Pakistan-India gas pipeline from which Islamabad will receive 750,000 cubic feet of gas per day under a 25 year deal, and, Dhaka should look for similar dividends from the project.
   
   Pipeline and refinery
   The offer is too enticing to bypass. And, it may prove a real boon for India too. Slated to be commissioned by 2015, the pipeline would be the first of its kind in Central Asia, to have connected South Asia. If Dhaka consents favourably, the project will be renamed as Iran-Pakistan-India-Bangladesh pipeline. Using domestic engineers, Tehran had already started construction of the pipeline within its own territory.
   Tehran also expressed willingness to bankroll the cash-starved, state-owned, Eastern Refinery Limited (ERL) for upgrading its crude oil refinery capacity three folds; by investing a staggering $1 billion. "The Iranian government has sought some documents, like feasibility study, technical and market evaluation reports, for evaluating commercial viability of the project," said an ERD source.
   This offer too is a crucial one, leaving no room to squander. Not only a lasting friendship with an oil rich nation can boost our growth and prosperity faster, the ageing ERL has a capacity to refine only 1.5 million tons of fuel oil, far less than the current need, which is over 3.8 million tons per year. By 2015, internal consumption of oil is expected to reach 6.6 million tons per year; another major reason to have an oil rich nation on our side.
   The Iranian offer also follows Dhaka's prolonged outcry for fund to upgrade the ERL and the completion of a feasibility study, conducted by a Pakistani firm, which has estimated an investment of at least $940 million to renovate the ERL to a level whence it can meet the whopping refining demands. Besides, the upgraded ERL will be able to refine medium and heavy crude, which is $3-$4 cheaper in international market, than per barrel light crude.
   
   No gas for India
   The AL-led government is most vulnerable in the domestic arena due to its inability to cope with surging demand for power supply. The crisis needs judicious handling and prompt decision making. The existing electricity shortage stems mainly from the shortage of gas, which constitutes over 60 per cent of the input used for electricity production, as well as due to lack of production from other inputs, like coal or nuclear power.
   Whatever the causes are, the constraint and the necessity do not coincide favourably to offer policy makers any alibi or absolution. Blaming past regimes will also not help much. Studies show, each 1 percent GDP growth requires 2-2.5 percent rise in power supply, a ratio typical of developing nations' early stage of industrialization. Thus, a GDP growth of 8 percent a year increases demand for power generation by 16-20 percent. Besides electricity production, nearly 40 percent gas goes into producing fertilizer and meeting other demands.
   That is what had prompted Dhaka in June 2003 to inform Delhi, officially, that Bangladesh had no gas for India. Dhaka's stand at that time was strongly supported by a Noble laureate scholar of economics, Joseph E. Stiglitz, who had warned: "Gas reserve is your security against any volatility of energy prices on the international market." Stiglitz also advised Dhaka to use gas as a sort of 'trump card of energy security' to face a global market full of competing bidders.
   
   Wishful commitment
   That the Nobel Laureate scholar did not speak of our shortage of gas does not change that fact. He perhaps did not want to get into what is purely a matter of reliable estimation. Over the years, however, the scenario relating to our gas reserve and extraction-ability has turned further bleak. In August 2009, total gas production was recorded at 1,932 million cubic feet per day (mcfd), which, by August 2010, has risen only by a negligible notch of 54 mcfd, to 1,986. That is what lies at the centre of all the troubles, the transmission bottlenecks aside. The crisis has resulted in stymied growth; existing industries and businesses, let alone households, not getting required power supply while new ventures are dissuaded.
   Despite that, the AL-led regime has committed to allow India gas for the power plant being constructed across the Tripura border. Since early May, Indian Oil and Natural Gas Corporation Ltd. (ONGC) has been transporting heavy equipments, including turbines, by using Ashugonj river port to construct the 726-megawatt power plant at Palatana of Udaypur, bordering Bangladesh. The Palatana project is the biggest of its kind in Northeast India, costing approximately Rs. 9,000 crore, and it is slated to go for production in December 2011 with gas provided by Bangladesh.
   In return, Delhi has agreed, only in principle, to export electricity to Bangladesh from the plant. That is hardly a favour. If the main source of production, gas, comes from Bangladesh, how can Delhi say no? That is not, however, what makes the deal an unrealistic one and seriously hurts our national interest. Fact is: there is no gas to meet our own needs, let alone spare for India.
   Besides, it will be reckless to believe Delhi will spare electricity for Bangladesh without first meeting the demands of the consumers in Tripura and the other neighbouring states; the non-existence of transmission infrastructure to convey power to Bangladesh notwithstanding.
   
   Nuclear option
   These are reasons why the nuclear option has been chosen to meet our internal energy needs and Beijing had offered to help Bangladesh in 2000, signing an agreement to that effect in 2005, to install a 300 megawatt nuclear plant for power generation. Amidst the prevarication displayed by the AL regime since coming to power in early 2009, that option remains somewhat alive, though not dead yet. Sources say the government has stopped pursuing the Beijing option for nuclear energy long ago, and tuned instead to Moscow.
   There is nothing wrong in the decision to turn to Moscow; perhaps being goaded by a desire to impress upon the Indo-US allies that it was not distinctively pro-Peking. The signing on May 13 a memorandum of understanding on nuclear cooperation, between Bangladeshi officials and the Russian state nuclear corporation, Rosatom, was the first substantive step to that direction.
   Yet, there is no reason to view that development as an isolated matter. Global geopolitics of energy is being shaped by the China-Russia led Shanghai Cooperation Organization (SCO) on one hand, and the NATO block on the other. The offers from Tehran have certainly emanated from that consideration and they also seem to have much to do with Moscow's embedded cooperation with Tehran in peaceful nuclear power generation, as well as the Chinese tacit approval attached to the Russian moves in such matters. Besides, there is no reason to believe Moscow is happy with Delhi's strategic alliance with NATO.
   Be that whatever, the construction of the country's first nuclear power plant at Rooppur-which will cost $1.5-2 billion-seems like a reality now.
   One reliable diplomatic source confirmed that President Putin has already consented to extending such cooperation to Bangladesh during a recent meeting with Sergei Kiriyenko, head of Rosatom, prior to another recent visit to Moscow by a Bangladeshi delegation. It seems certain that Moscow will help build two nuclear reactors, with a capacity of 1,000 megawatts each, by 2017.
   As Beijing also remains equally eager to help build a third nuclear plant, a little change of heart in our foreign office may reap a bumper harvest for the nation in terms of energy collaborations.

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