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Mainstream, Vol XLVII, No 38, September 5, 2009

India-Kazakhstan Relations: Challenges and Prospects

Wednesday 9 September 2009, by Vijay Kumar Bhatia

Introduction

India, traditionally known to Kazakhstan as Hindustan, had close and strong economic and trade links with Kazakhstan. After India got independence Jawaharlal Nehru, the first Prime Minister of India, considered Kazakhstan (then part of the Soviet Union) to be of great significance for India. He welcomed the former Soviet Central Asian delegation at the first Asian Relations Conference held in New Delhi in 1947 and also visited Kazakhstan during his trip to the Soviet Union in 1955.1

After the disintegration of the Soviet Union and the re-emergence of Kazakhstan, India-Kazakhstan relations have been re-established on the new geopolitical situation. Indian policy-makers believe that the region is important because of its strategic location. India recognised the independence of Kazakhstan and established diplomatic relations. In order to strengthen these diplomatic ties several high level visits between India and Kazakhstan have been exchanged on a regular basis.2

India’s Geostrategic and Energy Interests in Kazakhstan

In the globalised world energy is a specific guarantee of dynamic development of the modern economy. Today energy resources are amongst the main aspects of geopolitical importance of any country or region. The necessity of stable oil and gas supplies is heightened by the continuously growing need of expanding economies like that of India. According to some estimates, in the nearest 15 to 30 years the global consumption of oil will annually grow at the level of 2- 2.5 million barrels a day. This can be estimated from the fact that in 2002 the demand was 78 million barrels a day, and in 2015 it may reach up to 103 million barrels and in 2025 – 119 million barrels a day.3 The demand for natural gas will also grow steadily at the level of 2.5 per cent a year till 2025. It is expected that in 2025 the global consumption will constitute 5.2 trillion cubic metres; compared to today’s 3 trillion cubic metres it will show a 28 per cent growth of today’s global consumption.4

In Central Asia, Kazakhstan occupies a leading position in the energy sector.5 Its emergence has added a new strategic dimension to the geopolitics of the whole of world and more so for Asian countries, particularly India and China.6 This region is thought to contain key global hydrocarbon reserves. The predicted extractable resources of oil are estimated to be 7.8 billion tonnes, and those of natural gas 100 trillion cubic feet. About 70 per cent of these reserves are massed in the western oblasts/regions of Kazakhstan. The predicted resources of the Kazakhstan sector of the Caspian shelf are estimated to be around 13 billion tonnes of standard fuel; however, the successful development of the Caspian fields requires a significant volume of financial investments and skilled manpower resources.

Kazakhstan has all the potential and opportunities to become a major supplier of big volumes of petro-chemicals for leading economies of the world, which need constant supply for maintaining their growth trends. Major world powers as well as some regional powers are currently engaged in a new Great Game for enhancing their influence in this particular region. They also seek to influence the location of oil and gas pipelines routes to their own advantage. Like other countries India too has sought to expand economic cooperation and improve access to energy resources.

India is the sixth largest importer of energy resources in the world and its needs are growing. Its stable economic growth and consequently its national security depend on its hydrocarbon supplies. According to experts, India’s energy demands are expected to reach nearly 3.5 million barrels per day (mbd) by 2010 from the present 1.9 mbd.7 Gas consumption in India is also growing. Amounting to only 0.63 trillion cubic feet in 1995, in 2003 gas consumption in India had already risen to 0.96 trillion cubic feet and it is expected that by 2010 it will rise to 1.4 trillion cubic feet and to 1.8 trillion cubic feet by 2015.8 Currently, India imports 70 per cent of its crude oil and gas from the Persian Gulf states.9 Since most of the country’s crude oil imports are sourced from the Gulf region, India is following in the footsteps of other major oil exporting countries.10 Additionally, the increased price of crude oil also forced the Indian Government to search for alternative sustainable sources of raw materials and Kazakhstan is seen as a likely place. India is looking towards Kazakhstan as a reliable source of hydrocarbons.

India’s Economic Interests

India has from the beginning emphasised on the development of economic relations with Kazakhstan. In the economic sphere Kazakhstan has a two-fold significance for India. Firstly, the region represents a sizeable consumer market. Secondly, it also has vast deposits of natural resources such as abundant water for electricity generation, gold, silver, chromium and uranium besides hydrocarbons that need to be tapped, exploited and converted into value added products.11

Since the establishment of diplomatic relations between India and Kazakhstan, trade and economic relations between the two states are growing at a steady pace. To give impetus to bilateral trade, economic cooperation, an inter-governmental Joint Commission has been set up with Kazakhstan. A number of high level visits have also taken place. The President of Kazakhstan, Nursultan Nazarbayev, has visited India four times (February 1992, December 1996, February 2002 and in January 2009). During his recent visit in January 2009, President Nazarbayev was also the chief guest of the Republic Day celebrations at New Delhi on January 26. Similarly the Vice-President of India, K.R. Narayanan, visited Kazakhstan in September 1996 and Indian Prime Minister Narasimha Rao visited Kazakhstan in May 1993 followed by Atal Behari Vajpayee in June 2002. The Vice President of India, Hamid Ansari, visited Kazakhstan on April 6-10, 2008. He held bilateral meetings with President Nazarbayev, the Prime Minister and other important Ministers.

Additionally, Indian businessmen are exploring the possibilities that lie in Kazakhstan by virtue of increased interaction with that country. The Confederation of Indian Industries (CII) has over the years been organising “Enterprise India” shows in order to serve as a platform for Indian Small and Medium Enterprises (SMEs) in Kazakhstan

In order to further strengthen economic relations with Kazakhstan, a Focus CIS Programme was launched by the Commerce and Industry Ministry, Government of India in 2003 at the time of announcement of the Exim Policy on March 31, 2003.12 Under this Programme, the Government of India extends assistance to exporters, business chambers etc. to visit Kazakhstan, organise trade fairs, invite delegates from Kazakhstan to visit India and undertake various other market promotional activities. The initiatives taken under this programme have received an encouraging response from the Indian trading community and are likely to further boost bilateral trade in the forthcoming years.

The potential for cooperation between India and Kazakhstan is huge and can encompass such areas as tourism, biotechnology, automobile, education, mining, telecommunication, textiles, and defence and electricity generation. For India access to wheat, cotton and hydrocarbons constitutes strategic priorities. Though presently self- sufficient in wheat India does at times need to import the grain to meet its domestic requirements. Wheat as well as other agricultural products can be obtained from these republics of Central Asia at favourable rates.

A fresh impetus to bilateral trade and commercial relations has been given as a result of the visit of President Nazarbayev to India in January 2009. During his visit an agreement between the ONGC Videsh Limited and KazMunaiGaz on the Satpayev oil block and an MoU between NPCIL and Kazatomprom envisaging cooperation, including supply of uranium to India among others, were signed. Further, a memorandum of understanding for cooperation in the field of space, and an extradition treaty between both countries, and the protocol on the accession of Kazakhstan to the WTO were also signed. In the Joint Declaration issued during the visit both sides agreed that the trade volume between the two countries is far below the potential and urged that the governments and business enterprises of the two countries should address these issues.

Conclusion

In this age of globalisation economic ties hold the key to any bilateral, trilateral and multilateral cooperation. Both India and Kazakhstan share common perceptions about the need to have friendship and mutually advantageous economic relations. However, there are several bottlenecks that need to be addressed before any meaningful commercial relations with each other can be established. One of the main impediments is the non-availability of hard currency and lack of conversion facilities. Additionally, the language barrier along with inadequate marketing through main newspapers by the respective governments also restricts the development of tourism and business between the two countries. Therefore, economic diplomacy should remain India’s basic policy thrust towards the region. There is an urgent need to pay attention to this region in our trade and economic dealings. We must formulate suitable strategies and policies to tackle these important issues for strengthening the ties between these two countries for achieving targeted growth rates in the near future.

References

1. Movlonov, Ibrokhim R., “Central Asia and South Asia: Potential of India’s Mullateral Economic Diplomacy in Inter-Regional Cooperation”, Strategic Analysis; Vol.30, no.2, April-June 2006, p. 426.

2. International Energy Outlook 2005, World Oil Markets, Energy Information Administration, USA.

3. International Energy Outlook 2005, Natural Gas Energy Information Administration, USA.

4. Kazakhstan: Conquering Space for World Peace, Progress and Prosperity Technology to the Fore, Embassy of Kazakhstan, New Delhi, India.

5. Tripathi, Sudhanshu, “Changing Geo-Politics of Central Asia and Implications for India”, India Quaterly, Vol. LK11, no. 3, July-September 2006, p. 112.

6. Movlonov, Ibrokhim R., “Central Asia and South Asia: Potential of India’s Mullateral Economic Diplomacy in Inter-Regional Cooperation”, Strategic Analysis, Vol. 30, no. 2, April-June 2006, p. 431.

7. Yazmuradov, Atajan, “The US’ Greater South Asia Project: Interest of the Central Asian Countries and of the Key Non-Regional Actors”, Central Asia and the Caucasus, Vol. 5, no. 41, 2006, p. 88.

8. Planning Commission; Government of India, Tenth Five-Year Plan (2002-2007).

9. Dadwal, Shebonti Ray, “India’s Energy Security Challenges”, Dialogue, Vol. 8, no. 2, October-December 2006, p. 130.

10. Mavlonov, Ibrokhim R., “India’s Economic Diplomacy Trends with Central Asia: The Potential and Prosperities”, Contemporary Central Asia, Vol. VIII, nos. 1 and 2, April-August 2004; p. 17.

11. Mavlonov, Ibrokhim R., “India’s Economic Diplomacy Trends with Central Asia: The Potentials and Priorities”, Contemporary Central Asia, Vol. VIII, nos. 1 and 2, April-August 2004, p. 5.

The author is a Ph.D Research Scholar, Centre for Russian and Central Asien Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.

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