December 17, 2010


[A disputed stretch of border between India and China is just one point of tension. India is increasingly irked by China's military and economic relationship with Pakistan, India's arch-enemy, which Wen is expected to visit Friday. There is also tension over water supplies near their shared border and over China's seemingly pro-Pakistan position on the disputed region of Kashmir, which is claimed by both India and Pakistan.]

By Emily Wax

Indian Prime Minister Manmohan Singh, right, and Chinese Premier Wen Jiabao at the closing ceremony of the Festival of China in New Delhi, India. (Manish Swarup - AP)

NEW DELHI - During Chinese Premier Wen Jiabao's visit to the Indian capital this week, he won over high school students with a declaration rendered in his perfect Chinese calligraphy: "India and China are friends."

That seems to be the theme of his three-day trip here, which many Indians see as a charm offensive by China to promote what Wen called "cooperation, not competition," between Asia's two fast-rising giants.

The Chinese leader's visit follows similar forays to India in recent months by President Obama, British Prime Minister David Cameron and French President Nicolas Sarkozy, all of whom were trying to gain unfettered access to the country's booming markets to help pull their economies out of a global slowdown.

Yet despite this week's feel-good slogans and ambitious agreements to boost bilateral trade, the wary friendship between India and China is under growing strain as the two energy-starved nations compete for oil markets in Africa, Southeast Asia, Russia and Latin America.

Although their own infrastructure remains relatively inadequate, both are rushing to build roads, schools and community centers throughout countries such as Sudan and Nigeria, hoping to sweeten deals for guaranteed oil supplies.

China has built a massive "friendship center" in Sudan's desert capital, Khartoum, one of the city's largest and most modern facilities. In Nigeria, India has agreed to spend as much as $6 billion on roads, railway lines and power plants in exchange for oil deals.

Competition between India and China as they seek bigger shares of the world's dwindling supply of oil is likely to accelerate the rise in oil prices, economists say. It also has the potential to ignite lingering tension between the two countries going back to China's 1962 invasion of India and exacerbated by hundreds of border incursions since then.

A disputed stretch of border between India and China is just one point of tension. India is increasingly irked by China's military and economic relationship with Pakistan, India's arch-enemy, which Wen is expected to visit Friday. There is also tension over water supplies near their shared border and over China's seemingly pro-Pakistan position on the disputed region of Kashmir, which is claimed by both India and Pakistan.

Few issues, however, are more potentially long-lasting and divisive than oil, experts said.
"There's going to be huge energy consumption in India and China and only so much oil on Earth as these massive economies grow. Competition between them for oil will become more of an irritant in their relationship," said Zorawar Daulet Singh, co-author of "Chasing the Dragon: Will India Catch up with China?"
Together, China and India make up more than 40 percent of the world's population. In both countries, hundreds of millions of people are being lifted out of poverty and into the middle classes, where they require more and more energy to power their computers and air conditioners and fuel their cars.

India imports 75 percent of its oil while China imports a little more than half of its requirements, according to a U.S. Energy Department report. By 2025, China's oil demand will double to about 14.2 million barrels a day, the department estimates. By contrast, India imports only about 1.4 million barrels a day, but imports are expected to rise to 5 million barrels a day in the next decade.

Around the globe, India and China are both trying to hammer out deals in war-scarred oil fields in Iraq, southern Sudan, Nigeria and Angola. They are also seeking oil contracts closer to home, in Burma and Russia.

With its huge reserves of cash, China appears to hold a bargaining advantage, experts say.
"China has much deeper pockets when competing for the same resources. India tends to lose out," said Vikram Sood, a China expert and former head of the Research Analysis Wing, India's foreign intelligence agency. "This will, long-term, be a real source of tension."

In Angola, for instance, China beat out India's oil corporation last year in bidding for a patch of land for oil exploration that was being sold by Shell.

Both New Delhi and Beijing negotiated with Moscow in late December last year, but China ended up lending the Russian government $6 billion in return for a guaranteed supply of oil.

One of the few areas of cooperation between India and China is coal, which is plentiful and cheap in both countries. It accounts for nearly 40 percent of India's total energy consumption.

Days before Wen's visit here, China announced an $8.3 billion sale of coal-fired power generators to India, a major milestone in Beijing's quest to boost bilateral trade to $100 billion in the next five years. Already, China is India's largest trading partner.

Indian and Chinese officials say that with increased trade come warming relations.
Speaking at the India-China Business Cooperation Summit in New Delhi on Wednesday, Wen said, "There is enough space in the world for the development of both countries."

Experts here are asking whether there's enough oil

The UN climate conference achieved some results, albeit modest ones

WATCHING a man being rolled over by a bulldozer, reflected a negotiator at the Cancún climate conference in the small hours of the morning, is unpleasant. The man in question was Pablo Solon, the head of Bolivia’s delegation to the UN talks. The bulldozer was the other 193 countries’ determination to get a deal, even if only a modest one.
In a rancorous all-night debate in 2009 Bolivia and a handful of others had kept the “Copenhagen accord” put together by heads of government from being fully adopted as part of the UN’s climate negotiations. But at the final session of the 2010 conference, standing alone, Mr Solon was unable to repeat that feat. The principle of consensus on which the conference runs does not give one country the right to veto the will of all the others, ruled Patricia Espinosa, Mexico’s foreign secretary and the conference’s chair. Delegates stood and cheered. The bulldozer rolled.
The deal that passed over Mr Solon’s flattened dissent found a significant amount of common ground between the rich and the developing worlds. At its heart were some elements co-opted from Copenhagen’s accord. One was a pledge of $100 billion a year from north to south to help pay for emissions cuts and climate adaptation by 2020. Developing countries like that. The deal describes the money as being “mobilised”, however, which suggests a role for private-sector money. That pleases rich countries. A similar balance came with the establishment of a new fund for some of the money to flow through. Poor countries like that. But in a nod to the rich world, the fund gained some independence from the climate conference itself.
Another bit of the deal was an agreement on REDD+, a system to reward countries for lowering (or not raising, depending on their history) rates of deforestation. This includes safeguards meant to ensure the fair treatment of indigenous people. A new adaptation framework makes dealing with the effects of climate change a bigger part of the UN process. A final element was a deal on technology transfer.
All of these now need to be turned from paper agreements into practical ones. That is something that parties to the talks have shown little flair for in the past. In particular the clean development mechanism, which moves money from rich-world carbon markets to developing countries, is in dire need of reform.
The Cancún agreement missed out some topics. Moves towards a deal on shipping and aircraft fuels, unpopular with oil producers, fell out of the text. They took with them—quite unfairly—worthy proposals in nearby paragraphs for new work on agriculture, a greenhouse-gas emitter on a par with deforestation.
The big countries got the specific things that they were after. China wanted not to be blamed for a failure, as it was after Copenhagen. America wanted pledges made in that summit’s accord to be recognised, plus progress on verification.
Keeping the sushi chilled
Most controversially, Japan wanted to be clear that it would not make a new commitment to emissions cuts under the Kyoto protocol after 2012, when its current promise runs out. Developing countries, which like the Kyoto protocol a lot (it demands nothing concrete of them), said this was an outrage. But the subtly constructed final text in essence gave Japan its way.
The all but universal buy-in to the agreements, though, was not just a testimony to Mexican diplomacy (much admired here), balanced outcomes, great-power satisfaction and textual finesse. It was also an act of desperation. The UN talks were in bad shape. Failing to meet the very modest expectations of Cancún would have been fatal. Nobody wanted that: hence the bulldozing.
It was not done without some pangs of regret. The Cancún meeting has given the UN process a new wind and the chance of real progress on forests, on footing the bill (if rich countries stump up) and on adaptation. But, as Mr Solon argued, the pledges made in the Copenhagen accord, and now annexed to the UN process, are nowhere near strong enough to limit climate change to an increase of two degrees, which is what the Cancún texts require. Bolivia may have been an irritant and an obstruction but the other negotiators knew it was right about this.
Many negotiators still say they will fight on for legally binding targets for all major economies that go well beyond their Copenhagen pledges. Evidence such as Japan’s success at Cancún suggests strongly that such targets will never be applied while specific countries resist, as some—America, China and others—always will. And treating hard targets as a make or break issue would surely lead to another, perhaps final, breakage. The UN climate process did quite well out of Cancún. The climate, not so well.