China, India stoke energy bond
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To ensure their rapid economic development and rise in international status, both China and India have paid great attention to energy security in recent years.
As two major developing countries in the world, China and India are working to cooperate in the energy sector in line with common benefits. This relationship helps to avoid bitter competition between the two, reduce unnecessary use of diplomatic and economic resources and dilute impacts from the global financial recession. Ultimately, this bond could ensure their economic recovery and growth in the post-crisis era.
Heading into this year, the global recession - triggered by the United States financial meltdown - seems to be nearing its end. In the new year, new emerging economies such as China and India will lead the recovery, becoming the engine of global growth. The energy cooperation between China and India is going to attract more eyes again.
India, however, has very poor energy resources. In 2007, Indian Petroleum Minister Mani Shankar Aiyar announced that the nation had 16.6 billion tons of oil reserves. Even so, with its 1.1 billion population, the per-capita reserves in India are only 1.5 tons, less than 1/42 of the world average.
India's current dependency on foreign oil exceeds more than 75 percent. Increase in imports, with the surge in oil prices, has cost India a great deal of foreign exchange assets and has burdened its foreign trade balance. According to estimates by India, if oil prices rise for every $5, India's economic growth rate will drop 0.5 percent, and its inflation rate would increase by 1.4 percent. Oil has become a key factor for India to sustain its economic development. As India's Prime Minister Manmohan Singh said: "Energy security has become a serious problem, second only to food security".
China, on the other hand, has only 5 billion tons in oil resources, less than 7 percent of the global average. Since China became a net importer of oil in 1993, its purchases of foreign oil have increased annually. In 2008, China's crude oil imports reached 17,800 tons, while refined oil imports were 39 million tons, a rise of 9.6 percent due to the foreign dependency rate of 48.5 percent. In 2009, China imported nearly 200 million tons of crude oil, and the foreign dependency rate was estimated at more than 50 percent.
This last figure is most convincing. The International Energy Agency predicted that China and India's foreign oil dependency will be 61 percent and 85 percent respectively by 2010. At present, China is the world's second largest consumer of oil. India is the world's fifth largest consumer but soon to become the fourth largest. By 2030, India will likely pass Japan and Russia to become the world's third largest energy consumer.
This is why the two governments of China and India have begun a dialogue and cooperation on energy. In April 2005, during Premier Wen Jiabao's visit to India, the two governments issued a joint declaration. Article 9 of the declaration states that the two countries have agreed to cooperate in energy security and energy savings. It also encourages a collaboration to explore and exploit oil and natural gas resources in the third country.
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