The Peninsula Foundation

Category: International & Transnational Affairs

  • US-China Trade Wars on IPR and what it means for India

    US-China Trade Wars on IPR and what it means for India

    Each incumbent in the White House since the entry of PR China into the WTO in 2001 has agonized over the protections provided by the Communist state to intellectual property rights. As China’s capacities increased and as Chinese enterprises continued to operate in an unrestrained fashion, the US Government along with other European countries raised the pressure on Beijing to change its behaviour. They refused to accept at face value Chinese protestations that these actions were compliant with WTO provisions. US responses covered the entire range of domestic law actions, bilateral pacts and approaching the WTO. A study of these actions, with the benefit of hindsight, shows it was lacking in both scope and determination. US President Donald Trump’s efforts which sparked the trade war has been the most dramatic and effective till date. Both US and China agree that their IPR differences are fundamental in nature and will be addressed in its entirety in the second phase. In this regard, the cat and mouse legal games being witnessed in the case of Huawei and its 5G ambitions  deservec scrutiny. Simultaneously the Trump Administration has doubled down on the WTO and reduced its dispute settlement body into a pale shadow of its original self. India is also a target of US actions on the IPR front, albeit of a lesser degree compared to PR China. WTO case law is instructive and there are lessons to be learned even outside of the US-China trade dispupte framework. In terms of the impact of the US-China IPR differences on India, three broad dimensions can be identified. The first one pertains to the WTO regime and other regional trade arrangements. Second, India needs to brace for further action at the WIPO and on the larger question of what US withdrawal from multilateral bodies means for the rest of the international community. Thirdly, Indian Government and companies need to try and leverage the opportunities that maybe created by China’s reforms in the IPR  fieldincluding the Pilot Free Trade Zone at Shanghai.

    Download Full Research Paper

    This paper is also published in AALCO journal.

  • Deal or No Deal: The Future of Iran’s Nuclear Agreement

    Deal or No Deal: The Future of Iran’s Nuclear Agreement

    Iran’s nuclear program has been at the epicentre of most non-proliferation narratives since the beginning of 21st century. From the initial stages of receiving nuclear assistance from US to being sanctioned for their nuclear activities, Iran has managed to remain at the centre of this discourse. In 2015, Iran signed the nuclear agreement with the five permanent members of the United Nations Security Council (UNSC) – the US, Russia, France, China and U.K as well as Germany and the European Union. However, with the arrival of Trump presidency, this deal was reopened by the US and has remained controversial despite a wide consensus that Iran has largely abided by the clauses of the agreement.

    The Iran Nuclear Deal or the Joint Comprehensive Plan of Action (JCPOA) is unique for a number of reasons. It is an amalgamation of years of negotiation process between countries of widely differing perceptions and interests. It is the coming together of the western powers with Iran in order to sign a deal to curb Iran’s nuclear programme and ensure non-proliferation of nuclear weapons. Over the course of fifty odd years, the series of discourses on Iran’s nuclear programme, since its genesis till the time the deal was signed has evolved significantly. These discourses have impacted and resulted in significant policy changes. Most importantly, it has also led to a process of rapprochement between Iran and the western states making it one of the landmark agreements in recent times. However, the deal also received criticism because the narratives portrayed that Iran got a better deal through lifting of sanctions while its part of the commitment to the non-proliferation requirements was much less.

    Unlike the Obama administration that pushed for the deal, President Donald Trump has been clear about his dislike for the agreement and has been an advocate of how this could possibly be “the worst deal”. Owing to this, Trump unilaterally pulled out of the agreement on May 08, 2018 and stated that he would reimpose sanctions until a better deal could be worked out. While Trump’s decision to undo years of negotiation comes from various factors such as Israeli influence, Iran’s support for Hamas and its role in Syria to name a few, it is also due to the perception of the Republican hardliners that there was not enough pressure put on Iran and that the US managed to get a bad deal out of it, and this remains a large part of Trump’s narrative. The US strategy now is to push for a more hard-line agreement and ensure complete isolation of Iran if it refuse to fall in line. This however, has failed because more than two years later there are still no signs of Iran buckling under US pressure, although the economic impact of sanctions has started to bite.

    Given the situation, there are four possible outcomes that can be observed – First, Iran is likely to play a victim card and protest to the Europeans for compensations against the unilateral sanctions that affect its economy despite Iran abiding to all the terms and conditions of the JCPOA. In another context, this could also push Iran to retaliate by threatening to pursue uranium enrichment and continue operations in its nuclear facilities while preventing the International Atomic Energy Agency (IAEA) from inspections. Recent announcements by the Iranian government regarding its nuclear enrichment is a clear indication that they are choosing the latter option. Secondly, while the European countries are disappointed with USA’s withdrawal, there are high chances of the deal falling apart purely based on the fact that the European members of P5+1 are strategically and intimately tied to the US through much larger scope of mutual interests. However, the European countries will aim to renegotiate the deal because of the serious security concerns that might come into play if Iran is pushed towards becoming a nuclear power. Thirdly, lack of commitment from the P5+1 countries might force Iran to second guess about its decision to renegotiate a new deal. If Iran decides to abandon the agreement, there exists a high risk of nuclear proliferation in the region. However, this would only lead to further sanctions from the other European countries as well. Therefore, any decision taken by Iran will have to be done taking all these factors into consideration. Finally, Iran’s strategy going forward will largely depend on USA’s strategy and the increasing economic pressure as a result. While Trump has chosen to withdraw from the deal, he has also stated that he is open to further negotiations to ensure a better deal. It is unclear as to what a better deal entails and therefore, Iran will have to play its cards right yet again to not only stop itself from being isolated and ridden with sanctions but to also prevent its own population from revolting against its decisions.

    Another aspect that comes into play with respect to the deal is the role of China and Russia as counter-weights to dealing with US pressure. Along with the European allies, both the countries are against Trump’s decision to leave the nuclear agreement, reintroduce sanctions and renegotiate the deal. Earlier, China and Russia’s involvement remained minimal in the JCPOA. This time around, both the countries won’t allow Iran to be isolated. China and Russia have had historical ties with Iran and therefore, have been reluctant participants in the sanctions regime. However, both the countries will now actively look to counter USA’s unilateral decisions regarding the deal and will support Iran weighing out the consequences.

    Iran is currently amidst domestic protests due to hike in fuel prices and bad economic conditions. Despite being an oil rich country, it is unable to reap the benefits of it through exports, due to sanctions. The Iranian government is exactly in the same situation it was in 2015 (politically and economically) when it signed the JCPOA. Therefore, strategically, this could be the right time for the US to give a window of opportunity to Iran to renegotiate. However, given the circumstances, renegotiating this deal is not at the top of the priority list for any of the countries and therefore, the future of the deal still remains uncertain.

    Looking ahead at the future possibilities

    If the countries come together again at the negotiating table, there are a few things that has to be done differently this time around to ensure that a deal is signed and is followed through. Firstly, a fool-proof clause has to be added in order to ensure that there are no easy exit strategies for any country from the deal. Once the deal is signed, every signatory has to abide by the deal unless there are any violations made by a member country. Secondly, with respect to Iran, the deal should be such that, the benefits of staying in the deal should be far more important than threatening to quit. Thirdly, the P5+1 countries have to ensure that they all have the same goal and approach to the deal rather if they want this deal to succeed. Fourthly, opportunity to improve the nuclear facilities in Iran must be provided but the agreement should be designed to detect and prevent clandestine programs. Finally, any further delay in signing a new deal will only increase Iran’s breakout capabilities which is counter-productive given that it was the need for the deal in the first place. Therefore, the imperative of saving or renegotiating the JCPOA as acceptable to all is never more urgent, particularly in the context of the emerging humanitarian crisis in Iran as a result of back-breaking sanctions.

    Swathi Kallur is a Research Intern with TPF. She holds a master’s in international relations from Symbiosis University, Pune. Views expressed are author’s own.

    Image Credit: Commons.wikimedia.org

  • International River Basin, Regional Cooperation and the aspect of Transboundary Water Conflict

    International River Basin, Regional Cooperation and the aspect of Transboundary Water Conflict

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  • Winds of Climate Change Blow across South Asia

    Winds of Climate Change Blow across South Asia

    The India-Pakistan enmity is possibly the world’s most intractable and obdurate, with a mutual misreading of history made extremely volatile with the brandishing of nuclear weapons. Despite having two giant militaries at each others’ throats, the more immediate existential challenges that India and Pakistan face are related to how climate change and misuse of common natural resources have combined to confront both together. It is not the militaries which will determine our fates, but the degree of cooperation the two nations can summon. Our problems are common and perhaps India and Pakistan will find the good sense to act together?

    Looking at the climate change challenges Pakistan and India face together, collective action — as unlikely as it seems — may just be what is needed to secure the lives and livelihoods of future generations.

    According to climate researchers at Germanwatch, Pakistan ranks eighth on the Global Climate Risk Index, with over 145 catastrophic events — heat waves, droughts and floods — reported in the past 20 years. On the other hand, India ranks among the top 20 vulnerable countries in terms of climate risk. Pakistan is home to around 47 per cent of the Indus Basin, and India to around 39 per cent. The Indus Waters Treaty has been in effect since 1960. The recent political bickering aside, the Indus Waters Treaty has managed to survive the test of time, yet fails to comprehensively address climate change. Then again, at the time it was enacted, many of the stark realities we know today were not understood.

    According to the Pakistan Council of Research in Water Resources, Pakistan officially crossed the water scarcity line in 2005. The United Nations Development Programme and the Pakistan Council of Research in Water Resources have issued warnings about the upcoming scarcity of groundwater in just six years.

    According to some estimates, Pakistan is the fourth-largest user of its groundwater and over 70 per cent of drinking requirements and 50 per cent of irrigation needs are met through groundwater extraction. Due to excessive pumping, it is estimated that water tables could fall by as much as 20 per cent by 2025.

    South Asia is drained by the Indus, Ganga and Brahmaputra river basins, which collectively form the Indo-Gangetic Basin (IGB) and include some of the highest-yielding aquifers of the world. The aquifers associated with these river basins cross the international borders of the contiguous South Asian countries, forming numerous trans-boundary aquifers, including the Indus basin aquifers (between India and Pakistan), Ganga and Brahmaputra basin aquifers (between Bangladesh and India), the aquifers of the tributaries to the Ganga (between Nepal and India), the aquifers of the tributaries to the Brahmaputra (between Bhutan and India, and between India and Bangladesh).

    At the beginning of every hydrologic year, 4,000 billion cubic meters (bcm) water enters the South Asian hydrological systems, of which almost half is lost by poorly understood and un-quantified processes (such as overland flow, surface discharge through rivers to the oceans, submarine groundwater discharge and evaporation). The annual groundwater withdrawals in the region are estimated to exceed 340 bcm, and represent the most voluminous use of groundwater in the world. South Asia faces an acute shortage of drinking water and other usable waters in many areas, as it is seeing a rapid rise in water demand and change in societal water use pattern because of accelerated urbanisation and changes in lifestyle. In many urban and rural areas of the region, surface waters have been historically used as receptacles of sewage and industrial waste, rendering them unfit for domestic use, prompting a switch to groundwater and rainwater sources to meet drinking and agricultural water needs. At present, about 60–80 per cen
    t of the domestic water supplies across South Asia are met by groundwater.

    Irrigation accounts for 85 per cent of groundwater withdrawals and is considered to be the main contributor to groundwater depletion with the maximum possible groundwater footprint seen in the Gangetic aquifers.

    Among the main contributors to water stress in India and Pakistan are poor water resource management and poor water service delivery, including irrigation and drainage services. Moreover, the lack of reliable water data, subsequent analysis and consequent poor planning and allocation is leading to environmentally unviable methods of water withdrawal, causing an alarming reduction in groundwater.

    In both countries, water stress is attributed first and foremost to the massive population growth. Another cause is the lack of sufficient urban water treatment facilities, which prevent the usability of river water for drinking and irrigation.

    Air pollution contributes substantially to premature mortality and disease burden globally, with a greater impact in low-income and middle-income countries than in high-income countries. The northern plains of South Asia has one of the highest exposure levels to air pollution globally.

    The major components of air pollution are ambient particulate matter pollution, household air pollution, and to a smaller extent ozone in the troposphere, the lowest layer of atmosphere. The major sources of ambient particulate matter pollution are coal burning for thermal power production, industry emissions, construction activity and brick kilns, transport vehicles, road dust, residential and commercial biomass burning, waste burning, agricultural stubble burning, and diesel generators.

    In India and Pakistan, farm residues are burnt after harvesting in October to November, which affects the air quality of the region. In Pakistan, most of the rice cultivation takes place in Punjab, and the same is true for India’s Punjab due to suitable climatic conditions for the crop. In both countries, stubble burning is the key cause of smog. According to India’s new and renewable energy sources ministry, India’s Punjab contributes 44-51 million tonnes of residue annually. According to the estimates, paddy areas burnt every year in Indian Punjab and Haryana are 12.68 million hectares and 2.08 million hectares respectively. According to a study, farmers burn 30-90 per cent of residue, which contributes to the smog formation, not just in the immediate region, but the entire Indo-Gangetic plain. With air pollution levels lurking in the “extremely poor” band for almost half the year, the northern regions of South Asia may not be able to host healthy populations for very long.

    The number of deaths attributable to ambient particulate matter pollution in India in 2017 was 0·67 million and the number attributable to household air pollution was 0·48 million. The number of deaths due to ambient particulate matter pollution in Pakistan in 2017 was 60,000.

    Climate change over 3,000 years ago destroyed the Indus Valley Civilisation and it went into oblivion, leaving behind traces of what befell the people here before. The next few decades are extremely critical. Can we summon some good sense to survive or go the way of the Meluhans? The verses of Allama Iqbal, albeit in another context, still hold true: Watan ki fiqr kar nadaan museebat aane wali hai/ Teri barbadiyon ke mashware hain aasmanon mein…/ Na samjhoge tou mit jaoge Hindustan walon/ Tumari daastan tak bhi na hoge daastanon mein. (Think of the homeland, O ignorant one! Hard times are coming./Conspiracies for your destruction are afoot in the heavens./You will be finished if you do not care to understand, O ye people of India!/Even the mention of your being will disappear from the world’s chronicles).

    The author is a prolific commentator on economic, security, and China issues. He is a Trustee/Governing Council member of TPF.

    This article was published earlier in Deccan Chronicle.

    Image source: www.pri.org

  • India and Nepal: Energy Cooperation

    India and Nepal: Energy Cooperation

    Introduction

    Sustained availability of energy at affordable cost is an essential prerequisite for the growth of a country. Currently the energy consumption per capita in case of Nepal is134 KWH per capita per year, as against world average of 2674 KWH per capita per year.

    GDP Per Capita in $ (PPP)

    Country Energy Consumption in kWh per capita per year GDP Per Capita in $ (PPP) GDP Per Capita in $ (Nominal)
    World Average 2674 11673 11673
    Bhutan 2779 3392 3392
    India 1122 1980 1980
    Maldives 1122 9802 9802
    Pakistan 471 539 539
    Sri Lanka 414 4135 4135
    Bangladesh 351 1564 1564
    Myanmar 193 1256 1256
    Afghanistan 141 538 538
    Nepal 134 900 900

    Table-1: Energy Consumption Vs Gross Domestic Product
    Source:  1.GDP figures for 2017 vide https://www.worldometers.info/gdp/gdp-per-capita
         2.World Fact Book: Power consumption for various countries of the World.

    Although correlation between energy consumption and the prosperity depends on a number of factors like population but a fact which clearly overshadows others is that as energy consumption increases the prosperity increases. This relationship is equally valid for reverse relationship, i.e. as prosperity increases the necessity for additional energy becomes obligatory. Another interesting observation can be made based on the content of this table. Bhutan is a land locked country which has hardly any major industry in that country, yet their GDP per capita is more than India’s. An examination suggests that Bhutan has adequate hydro resources and hydroelectricity generated exploiting her indigenous resources is far more than her requirement. This surplus generation is sold by Bhutan to India. Revenue thus earned has transformed the country from a poor developing country to a prosperous country quite distinct from other South Asian countries. For the record Bhutan’s revenue from hydro power is 27% of the entire govt revenue and is 14% of Bhutan’s GDP. This also flags an approach which can also help other South Asian countries to improve their economic strength by exploiting their indigenous resources. Another country of South Asia; Nepal can benefit from the model which Bhutan is currently following for sharing its energy resources with India in a ‘win-win’ situation.

    Topography of Nepal

    topography-of-nepal

    Map1: Nepal and its Rivers and Physical features
    Source: https://en.wikipedia.org/wiki/Geography_of_Nepal 

    A report of International Hydropower Association, “Bhutan” uploaded on https://www.hydropower.org/country-profile/bhutanography_of_Nepal 

    • Lie of the country is such that all the rivers flow from Nepal to India.
    • High Himalayas separate Nepal from Tibet, whereas southern side of the country is having  a terrain which is plain and that separates Nepal from India therefore while Northern Areas of Nepal act as a barrier between Nepal and Tibet, plains in southern side of the country lends itself for cooperation between India and Nepal. Recent operationalization of an oil pipeline from Motihari in Bihar to Amlekhganj in Nepal is a manifestation of such a cooperation (Little more about it a little later.)
    • Nepal has a huge hydropower potential. In fact, the perennial nature of Nepali rivers and the steep gradient of the country’s topography provide ideal conditions for the development of some of the world’s largest hydroelectric projects in Nepal. Current estimates are that Nepal has approximately 43,000 MW of economically feasible hydropower potential. However, the present situation is that Nepal has developed only approximately 753 MW of hydropower. Therefore, bulk of the economically feasible generation has not been realized yet. Besides, the multi-purpose secondary and tertiary benefits have not been realised from the development of its rivers. Nepal is utilising only 2% of it (i.e., 98% remains unutilised). It may be noted that an optimum exploitation of the hydro resources will contribute substantially to the financial well-being of Nepal. However, it is also a fact that Nepal neither has the financial muscle nor technical knowhow to harness its hydro resources. Therefore, support from friendly foreign countries becomes essential. China has been trying to make inroads into Nepal but whether it can be cost-effective or not is something that needs to be examined in carefully. India, on the contrary, has everything in her favour to support hydro power exploitation by Nepal. In fact power generated in Nepal can also be shared with Bangladesh using Indian grid system, which will be an excellent example of Nepal-India-Bangladesh cooperation, and still better as a BBIN (Bhutan-Bangladesh- India-Nepal) initiative and will be a ‘Win Win’ situation for all three countries.  India will have to use all its traditional heft with Nepal, its diplomatic skills, financial support to beat China who is trying hard to gain a foothold in Nepal’s Hydro energy exploitation domain as they are desperately wanting power.

    Map-3: River Systems of Nepal
    Source: Firoz Alam et al, “A review of hydropower projects in Nepal1st International Conference on Energy and Power”, presented during ICEP2016 at RMIT University, Melbourne, Australia, 14-16 December 2016 and Available online at www.sciencedirect.com ScienceDirect Energy Procedia 110 (2017) 581 – 585

    • While planning hydro power plants in Nepal, some extra care would be required to be undertaken. Nepal’s topography is unstable due to seismic activities. Hence, all hydropower plants with dam must be well planned and designed to mitigate the environmental impact. Also most Himalayan Rivers contain huge quantities of sediment with hard abrasive particles. The region’s climate and tectonic conditions as well as human activities are highly conducive for erosion and sedimentation. Therefore, sediment management is paramount for the safety, reliability and longer life of infrastructures (hydropower dam, equipment, roads, bridges, irrigation systems and drinking water).

    As close neighbours, India and Nepal share unique ties of friendship and cooperation characterised by an open border and deep-rooted people-to-people contacts of kinship and culture. There has been a long tradition of free movement of people across the border. Nepal shares a border of over 1850 km with five Indian states – Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand. The India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal. Nepalese citizens avail facilities and opportunities at par with Indian citizens in accordance with the provisions of the Treaty. Nearly 6 million Nepalese citizens live and work in India. However Nepal is still not well developed and as has been explained earlier suffer from lack adequate energy to fuel its development. India has been a major partner in exploiting its indigenous energy resources and also making up the shortfall on this account.

    Potential and Scope of Hydro Power Cooperation

    Certain studies have been done to ascertain scope for the Indo-Nepal Cooperation in the domain of energy. It has been concluded that in the high build scenario, Nepal’s hydropower capacity is estimated to be 4551 MW. The generation cost in an arrangement of Indo-Nepal combined system would fall by approximately US $106 billion per year. This enhanced capacity will help Nepal to increase her power export to India by 60%. However Nepal’s high build out hydro resources would be fully utilised if operations between Nepal and India are further coordinated and an economic union strategy adopted by the two countries. Effectively, this would mean that trade with Nepal is institutionally is same as trade is between Indian States. Such enhanced power generation will help Nepal to become net exporter of power during dry as well as wet season, with reduced generation cost. On the contrary India ranks 81st in overall energy self-sufficiency at 66% in 2014 . Primary energy consumption in India grew by 7.9% in 2018 and it happens to be the third biggest consumer after China and USA, with 5.8% global share.

    Details of Completed Projects for Energy Cooperation between India and Nepal

    Motihari-Amlekhgunj Oil Pipeline: On 10th September 2019, the Prime Ministers of Nepal and India jointly inaugurated a cross-border oil pipeline through video conferencing. This line will transport fuel to the landlocked country. The aim of this pipe line is to cement India-Nepal ties in the face of major inroads made by China into the Himalayan nation, and seeks to repair the trust deficit between the two countries due to an economic blockade allegedly imposed by India in 2015 to persuade Nepal to change some provisions in its new constitution. Basically the protests at that time were done by people of Madhesh (region bordering India) as they felt that there were certain provisions of the constitution of Nepal which were discriminatory against them. India said at that time that the trucks laden with fuel and medicines, besides other essentials, were stopped by sections of Nepalese population (Madheshis) unhappy with some provisions of their constitution, which they felt were practically disenfranchising them. Nepal, however, viewed it as if India was blocking the supplies to compel Kathmandu to amend the provisions of the constitution that was seen as disenfranchising almost half of the Nepalese population. Therefore, the current initiative seeks to rebuild the confidence between the two countries and will help to bind Nepal closer to New Delhi, economically and strategically. The development comes against the backdrop of recent plans for a rail link between Nepal and China cutting through the Himalayas. There were also plans to link Nepal and China through an energy pipeline running through the Himalayas. Both were seen as means by Nepal to find an alternative to its dependency on India. The 69 km pipeline will transport fuel from the Barauni refinery in Bihar to Amlekhgunj in south-east Nepal and is the first cross-border petroleum products pipeline in South Asia. The Motihari-Amlekhgunj oil pipeline project was first proposed in 1996. The project was put back on the agenda during Prime Minister Narendra Modi’s visit to Kathmandu in 2014. The two governments had signed an agreement to execute the project in August 2015. Construction had begun in April 2018. Construction of the pipeline was undertaken by the Indian Oil Corp. Ltd (IOCL), India’s largest refiner, with an investment of over ₹324 crore, in collaboration with Nepal Oil Corp. Ltd (NOCL). The two sides are also working on building additional storage facility at the Amlekhgunj Depot, wherein NOCL has committed an estimated ₹75 crore. The pipeline can carry up to 2 million metric tonnes of petroleum products each year. Currently, petroleum products are carried from India to Nepal using oil tankers as part of an arrangement which has been in place since 1973. The NOCL not only hopes to save ₹200 crore annually with the new pipeline but will also ensure the transportation is no longer vulnerable to any kind of blockade.

    Power Supply from India to Nepal: India and Nepal have a Power Exchange Agreement since 1971 for meeting the power requirements in the border areas of the two countries, taking advantage of each other’s transmission infrastructure. There are more than twenty 132 kV, 33 kV and 11 kV transmission interconnections which are used both for power exchange in the border areas and for power trade. For enhanced transmission of electricity, the first high-capacity Muzaffarpur (India) – Dhalkebar (Nepal) cross-border power transmission line (initially charged at 132 kV), with GoI Letter of credit (LoC) funding of US$ 13.2 million, was completed in 2016. Two additional 132 kV cross-border transmission lines between Kataiya (India) – Kusaha (Nepal) and Raxaul (India) – Parwanipur (Nepal), built with GoI grant assistance, were completed in 2017. India is currently supplying a total of about 450 MW of power to Nepal. An Agreement on ‘Electric Power Trade, Cross-border Transmission Interconnection and Grid Connectivity’ between India and Nepal was signed on 21 October 2014. The Agreement is aimed at facilitating and further strengthening cross-border electricity transmission, grid connectivity and power trade between Nepal and India. The Agreement provides a framework for power trade between the two countries, import by Nepal from India until it becomes power surplus and subsequent import by Indian entities from Nepal, on mutually acceptable terms and conditions. Two mechanisms, Joint Working Group (JWG) and Joint Steering Committee (JSC) envisaged under the Agreement have been established. Joint Technical Team (JTT) was formed for preparation of a long-term integrated transmission plan covering projects up to 2035.

    Cooperation in the Domain of Hydro Energy: Cooperation in water resources primarily concerning the common rivers is one of the most important areas of bilateral relations. A large number of small and large rivers flow from Nepal into India and constitute an important part of the Ganges River basins (Refer Map-3 above). These rivers have the potential to become major sources of irrigation and power for Nepal and India. A three-tier bilateral mechanism was established in 2008, to discuss issues relating to cooperation in water resources, flood management, inundation and hydropower between the two countries. A Development Authority was set up in September 2014 to carry out the Pancheshwar Multipurpose project. A Power Development Agreement (PDA) for the 900 MW Arun-III hydroelectric project between India’s Satluj Jal Vidyut Nigam Limited and the Investment Board of Nepal (IBN) was concluded in November 2014. Also, a PDA for the 900 MW Upper Karnali hydroelectric project was concluded between IBN and M/s GMR in September 2014.

    Projects under Planning/Execution

    Pancheshwar Multipurpose Project: India and Nepal had signed a Treaty known as Mahakali Treaty in February’1996. Implementation of Pancheshwar Multipurpose Project is the centerpiece of the Mahakali Treaty. Required field investigations for the Pancheshwar Multipurpose Project have been completed by a Joint Project Office (JPO-PI) in 2002 (except for some confirmatory tests). But mutually acceptable DPR of Pancheshwar Project is yet to be finalised. The constitution of Pancheswar Development Authority has already been notified. Pancheshwar Multipurpose Project (PMP) is a bilateral project, primarily aimed at energy production and augmenting irrigation in India and Nepal. A Treaty known as “Mahakali Treaty” concerning the integrated development of the Mahakali River, which included Sarada barrage, Tanakpur barrage and Pancheshwar Dam Project, was signed between the Government of Nepal and the Government of India on February 12, 1996. During the year 2009, pursuant to the Article-10 of the Mahakali Treaty, the Government of India and the Government of Nepal agreed and framed draft ToR for setting up the Pancheshwar Development Authority, as an independent autonomous body, for development, execution and operation of the Pancheshwar Multipurpose Project. To accomplish this shared goal, the Terms of Reference (ToR) of the PDA as agreed upon by the two Governments and as may be amended from time to time, were created. As per the Statute of PDA the administrative organs of the authority are the Governing Body (GB) and the Executive Committee (EC). In order to execute the specific tasks assigned to the Governing Body, five meetings of GB have taken place so far. Pancheshwar Main Dam is proposed on River Mahakali (known as River Sarada in India), where the river forms the international boundary between the Far Western Development Region of Nepal and State of Uttarakhand in India. The dam site is around 2.5 km downstream of the confluence of River Sarju with River Mahakali. The project would comprise of a rock-fill dam with central clay core of 311m height from the deepest foundation level. Two underground power houses at Pancheshwar dam, one on each bank of Mahakali River, each with a capacity of (6×400 MW) with the total installed capacity of nearly 4800 MW are proposed to be constructed. The power plant at main dam will be operated as the peaking station to meet energy demand in India and Nepal. A re-regulating dam at Rupaligad is proposed around 27 km downstream of the main dam to even out peaking flows released from Pancheshwar power houses for meeting downstream irrigation water requirement. Here, two underground powerhouses on both sides of river with total installed capacity of 240 MW (2 x 60 MW on either bank) are envisaged. The main dam (when impounded with water up to Flood Regulating Level (FRL)) will form a reservoir of around 11,600 hectare area with a gross storage volume of about 11,355 million cubic metres. The submergence area on Indian side is 7,600 hectare, covering districts namely Pithoragarh, Almora and Champawat in the state of Uttarakhand whereas remaining 4000 hectares of submergence will be in Nepal. The project aims at producing hydro power and enhance the food grains production in both the countries by providing additional irrigation resulting from the augmentation of dry season flows. Year round irrigation will be possible in agricultural land in Kanchanpur district in Nepal due to enhancement in flows during non-monsoon months. The project will generate Two underground power houses at Pancheshwar dam, one on each bank of Mahakali River, each with a capacity of (6×400 MW) with the total installed capacity of nearly 4800 MW are proposed to be constructed. The power plant at main dam will be operated as the peaking station to meet energy demand in India and Nepal. Power generated will be shared equally between both the nations as per Treaty. Irrigation benefits in form of annual irrigation will be about 0.43 Mha, out of this, annual irrigation in Nepal would be 0.17 Mha and remaining 0.26 Mha in India. In addition, due to moderation of flood peak at reservoir(s), incidental flood control benefits for both the countries are also envisaged from the project. Pancheshwar Multipurpose Project is one of the top priority projects to be implemented in phased manner to reap the benefits of the project as early as possible. The work of preparation of Detailed Project Report (DPR) was entrusted to Water and Power Consultancy Services Limited (WAPCOS) by PDA and WAPCOS have in turn submitted the draft final DPR of the project to PDA in November, 2016. At present the finalization of Detailed Project Report (DPR) of the project is underway. A Team of Experts/Officials has been formed by both the countries for discussing and resolving all issues towards finalization of the DPR. After finalization of DPR, the Pancheshwar Development Authority shall undertake the execution, operation and maintenance of the project, including the work of re-regulating dam at Rupaligad site in an integrated manner.

    Sapta-Kosi High Dam Project and SUN Kosi storage cum diversion scheme: After exchange of letter of Understanding between the two Governments in June’ 2004, a Joint Project Office (JPO) was set up in August’ 2004 to undertake detailed field investigations for preparation of DPR of SaptaKosi High Dam Project at Barakshetra in Nepal.  DPR is under progress.

    Kamla and Bagmati Multipurpose Projects The JPO-SKSKI has also been entrusted to undertake the feasibility study of Kamla Dam and preliminary study of Bagmati Dam Projects. These studies are in progress.

    Project Completion Prospects

    Hydro power projects have a long gestation period and therefore, it can safely be assumed that the export from Nepal of power will not be able to commence before 2025. Nepal will be able to export 18 billion kWh in 2025 which will go up to 93 billion kWh by 2035 and then will start flattening and by 2040 it would be 115 trillion Watt hour because by that time it is anticipated that because of the growing prosperity domestic consumption will also pick up. In rainy season when the reservoirs will be at their peak capacity, it is estimated that by 2030 13 GW would be available for export.

    Conclusion

    Notwithstanding the political division within South Asia, it is important to appreciate that the energy resources are monolithic in nature. Due to topography of the country most of the hydropower resources are concentrated in the Himalayas; spanning Nepal, Bhutan and Indian states of Arunachal Pradesh, Sikkim, Uttarakhand and Himachal Pradesh. Hydro power is a form of green energy and it would be ideal in case a mechanism can be evolved to exploit it for common good. It is essential that India, in conjunction with Nepal, Bhutan and Bangladesh, needs to make attempts to make use of energy resources available in all these countries; hydro power is one such resource. In this connection the platform of BBIN (Bhutan-Bangladesh-India-Bhutan-IndiaNepal) needs to be exploited. In fact recent pipeline laid by India between Motihari in Bihar and Amlekhgunj in Nepal is great example of cooperation that benefits the region and the parties involved.

  • American Sanctions on Iran and the Underlying Oil War

    American Sanctions on Iran and the Underlying Oil War

    Adithya Subramoni                                                                                      June 24, 2019/Analysis

    In a shocking turn of events, America in 2018 announced its withdrawal from the Joint Comprehensive Plan of Action 2015. This came as a surprise to the international community for good reason, because subjecting Iran under harsh sanctions when they kept up their end of the bargain seemed like a punishment from the US for keeping up this good behaviour. President Donald Trump, calling towards the international community and specifically ‘like-minded countries’ for a team effort, said it was time to curb Iran’s state-sponsored terrorism. But his idea to get Iran to re-engage on this field was through the ‘maximum pressure campaign’. This strategy is unlikely to find takers owing to the fact that the nuclear issue and state sponsored terrorism are two completely different issues, and hence need to be dealt with separately. To charge Iran with state sponsored terrorism is completely misplaced. Iran has not caused any damage to US or its citizens in the last twenty five years. On the other hand terrorist acts affecting the US and its allies have almost always had a link to Sunni Islamic fundamentalism with its links to Saudi Arabian Wahabi organisations. The real motive is USA’s geopolitical targeting of Iran. Trump’s recent designation of the Iranian Islamic Revolutionary guard corps (IIRGC), a unit of the Iranian army, as a terrorist outfit defies all logic and may become counterproductive to the US interests, the very issue that Trump wants to safeguard.

    Iran’s support to Hamas is fundamentally a regional and geopolitical struggle with Israel, while the Sunni vs Shia conflict is a manifestation of the regional power struggle between Saudi Arabia and Iran. If the USA wanted to pressurise Iran on its support to militant outfits like Hamas, it should have ensured it has support of its allies and multilateral institutions. USA’s unilateral action on Iran does not have the support of other members of the P5 +1(Germany) as well as other oil-dependent countries. With the latest round of sanctions, countries with economies having exposure to Iranian trade industry are gearing up to take a major hit. This brings us back to the subject of concern, why take such hasty decisions impacting the global economy without consultations from other members of the P5 + 1?

    The exit strategy

    In 2018 shale oil catapulted America to the leading position amongst the oil producers. As companies in Texas adopted fracking technology to good use in optimising their oil production, America climbed up to the first position in the oil producers list, surpassing major oil producers such as Saudi Arabia,Russia, Iran and the UAE. Climbing up the oil ladder came at a cheaper price for America considering the OPEC countries, excluding Iran, and Russia had agreed to reduce their oil production to protect the free-falling price of oil. This gave America a free hand at capturing the oil market especially where the demand from emerging economies was increasing rapidly. The only barrier to becoming the largest oil exporter was qualms from the emerging economies and other countries who found the American alternative to be an extremely expensive replacement for their oil needs. With emerging economies deeply dependent on Middle Eastern oil sources, one of the options for America to increase the demand for its oil was by blocking Iran’s oil exports through sanctions. This could give multiple advantages to the US: one is to create economic pressure on Iran; second is to boost American oil exports by eliminating Iran’s oil supply from the market; and third is to strengthen its ally Saudi Arabia’s pursuit of regional domination by squeezing Iranian oil-based economy.

    America’s play on executing its exit and sanctions in such a speedy manner may be rooted in the fact that the major countries dependent on the Iranian oil are in the Asian continent. European countries such as France, Greece, Italy and Spain all combined import close to 500,000 barrels a day as opposed to China and India who import close to 600,000 barrels per day and 500,000 barrels per day respectively. With America limiting its oil imports primarily from Canada and Saudi Arabia, and the European Union sourcing two-thirds of its oil requirements from Russia and Saudi Arabia, American sanctions on Iran do not impact the energy requirements of the western power bloc significantly. Hence, it may have been an American expectation that other members in the JCPOA (P5+1) would support Trump administration’s move to scrap the JCPOA and resume the earlier hard line approach of sanctions on Iran. This, however, has not happened.

    Unfortunately for America, other members of the JCPOA did not see any justification in the logic and accusation given by the Trump administration and hence, there was no support forthcoming from them. Trump’s disdain for allies and his unilateral approach, virtually demanding complete acceptance from European allies bordered on disrespect and insult to the member countries’ sovereignty and pride. Reaction to Trumps position was one of disbelief and contempt, as his actions displayed, in their opinion, disregard and contempt for international norms and credibility. Quite clearly USA has sought to bulldoze its way through with utter disregard for international institutions and multilateralism, exploiting its domination of the global financial institutions, banking system, and the fact that the US dollar is still the world’s reserve currency.

    UK, France and Germany together set up Instex – Instrument in Support for Trade Exchanges, to facilitate the trade of medicines, medical devices and food supplies, which trades in Euro through a financial channel having zero exposure to the American financial intermediaries. This marked a milestone in the chapter of American supremacy, where its European allies took a stance against its imposing regime. Though the volume of trade is negligible, the all important European message is that it will not support the American unilateralism. In the absence of any European support, Trump administration should have recognised its folly of trying to impose its decision on its allies, but on the other hand it made it even worse by virtually threatening diplomatic ties with those countries. Others in the P5, such as China and Russia have agreed with the European counterparts to re-examine and review if necessary the terms of the 2015 JCPOA deal and look for ways to deflect and overcome the US sanctions. Iran too, has welcomed the idea and agreed to keep its end of the 2015 deal. Time however, is running out as Iran has demonstrated its loss of patience over the lack of progress on the issue, and has stated on more than one occasion, in the last six months, that it will recommence its nuclear fuel reprocessing and enrichment activities.

    Asian approach to the Iranian issue

    Asia is the largest customer of crude oil, importing 53% of the global total oil imports, translating to an approximate amount worth $628.2 billion. One major reason for this huge oil influx is the fact that Asia is home to the fastest developing economies such as China and India. Though China and India have maintained that they will continue to import oil from Iran, one issue that concerns all the countries importing Iranian oil is the availability of insurers willing to take up the risk for oil supply from Iran. Most insurers will be cautious to take up projects for fear of losing business and financial access in the West.

    With the ongoing trade war with America, China is fighting a dual war. For America, the opponent has been weighed down with two hurdles co-incidentally and conveniently. With the trade war impacting the export industry and sanctions on its oil supplier indirectly hitting the Chinese economy, China may chose well to hit back on America by disregarding the sanctions on Iran. Iran might just have earned itself a powerful ally because of American hegemony. Chinese imports of crude oil from Iran have surged to record levels in April and May. Iran is set to become China’s 2ndlargest supplier of crude oil.

    Steering the wheel of attention towards India, Iran is its third largest oil source. Particularly being an oil dependent emerging economy, the sanctions on Iran will force India to look at more expensive oil options. The six month credit line and insurance included price for Iranian oil made it the most lucrative oil supplier in the business. Another issue that has come to India’s doorstep is the longevity of the rupee account based trading system with Iran using the UCO Bank. UCO Bank being the only bank with no exposure to American financial channels is the only means for continued Iran-India trade relations. In light of the US sanctions, India reduced its oil imports to turn eligible for a sanction waiver. This sanction waiver came to an end on 02May 2019, and oil imports stopped owing to the election period as well. Now the primary concern for the new Indian government is to prioritise the Iran issue. Iran is accountable for thirty percent of India’s exports, and given that the rupee account is fuelled by the INR deposited in favour of oil imports from Iran, the systematic reduction of oil import also creates a proportional fall in demand for Indian exports, owing to the curb of Iran’s purchasing power. Since the end of the sanctions waiver, India has stopped import of Iranian oil, hopefully only as a temporary measure.

    At the same time, a diplomatic concern that arises for India is its interest over the Chabahar port. Chabahar Port is a major investment arena for India to create a transportation corridor connecting Asia as well as the land-locked Afghanistan with the rest of the world. Though India plans on disregarding the US Sanctions and continuing business through the UCO Bank and Iran’s Pasargad Bank, attention needs to be paid to resolve the reducing Iranian imports, not only to secure India’s exports but also to show Iran the commitment India has towards its diplomatic ties with them and its vested interest in operating the Chabahar Port. Going ahead with the possibility that China would disregard the sanctions on Iran, a reduction in Iranian imports could weaken Iran’s ties to India and pave the path to strengthen Iran-China ties. This would particularly be drastic for India, if Iran were to give China operational rights to the Chabahar port. Needless to say, this would bring in interference from Russia, who wouldn’t be thrilled with the loss of regional trade autonomy to China.

    Approaching the dénouement

    From a bird’s eye view, the rising conflicts in the West Asian region, with Saudi Arabia and the UAE being the main champions who support the efforts for a change in Iran’s regime, Iran finds itself in a cornered situation amongst its neighbours. If cornered, both strategically and economically, Iran could resort to using its strategic location to choke the Strait of Hormuz by planting sea mines or through any other obstruction mechanism. Though unlikely, as it would put Iran in a very hostile situation with rest of the world, it cannot be ruled out as an extreme last resort measure. This could create major international crisis. It would, as a start contribute to the run up in oil prices and owing to supply security – it is possible that USA stands to benefit immensely in such a crisis.

    On the other hand, by imposing sanctions on Iran, America has pushed India to an uneasy corner. Owing to regional ties, it plays to India’s strength to take care of her interests by dealing with Iran and securing operation of Chabahar port. On the other hand it is essential to keep India’s ties with America on an even keel. If it refuses to acknowledge India’s ground interests and resorts to the muscle power of sanctions, China may end up as the beneficiary with a fortuitous win with Chabahar port, leading to an ultimate strategic loss to India and the US.

    The situation calls for global introspection into imposing sanctions by a country due to its phenomenal control over the world’s financial channels and the domination of the USD international trade. But this round of sanctions just might be the one where countries figure out alternate solutions together; considering the European initiative of Instex, Asian methods such as the trade using rupee account, Russian and Chinese support towards Iran; to finding a more cooperative and equitable solution that enables the world to trade outside the control of America. The sanctions may have just provided the edge to catalyze the changing world order, but the question is who’ll sit on the throne of the high table when the rubble settles? Or will it be, as it seems more likely, a more cooperative and less competitive, multi-polar world order?

    Adithya Subramoni is interning at ‘The Peninsula Foundation’. She has a Bachelors degree in Commmerce  from Christ College, Bangalore.

    Photo Credit under a Creative Commons Attribution 4.0 International License.: english.khamenei.ir

  • Strategic Autonomy and the Looming Oil Crisis

    Strategic Autonomy and the Looming Oil Crisis

    Kamal Davar                                                                                             May 31, 2019/Commentary

    The new Modi government will have to speedily contend with a serious foreign policy challenge on its hands.

    That this ordeal comes in the wake of some underplayed serious economy problems currently facing the nation will compound the problems for India which imports over 80 per cent of its burgeoning oil needs.

    Thus, if the looming crisis in the Persian Gulf between an arrogant US and an equally defiant Iran does not get resolved peacefully, ominous ramifications await the region, the world and all those nations which import crude oil from Iran.

    The genesis of the current crisis between the US and Iran has its roots in the Joint Comprehensive Plan Of Action (JCPOA) which was agreed upon by Iran and six western nations in 2015, led by the US, to curb Iran’s nuclear programme, which boils down to deterring Iran from developing nuclear weapons. But in May 2018, the US, under its mercurial President Donald Trump, chose to renege on this treaty as Trump felt that this was the “worst deal ever negotiated.”

    It is also a fact that Iran did not violate any norms of the law as regards this agreement.

    Meanwhile, the US allowed some nations, including India, which import oil from Iran a six-month waiver, which ended on May 2, 2019. As a consequence of the US action, oil prices the world over have jacked and soon its adverse effects will be felt in India as inflation will hit the already strained Indian economy. Over a 10 per cent hike in global oil prices has already taken place in the last one month and a crippling escalation in oil prices ahead is well on the cards.

    Notwithstanding any US pressure on India, the unalterable fact of Iran’s strategic significance to India in the region remains beyond question. India imported 24 million metric tonnes of crude from Iran in the 2018-19. India was Iran’s second largest buyer of crude last year, while Tehran was the third largest supplier to India after Iraq and Saudi Arabia (11 per cent of a total of India’s oil imports).

    Additionally, Iranian crude comes with a longer credit period and cheaper freight owing to Iran’s geographical proximity to India and, thus, Iranian oil remains the best option for India in more ways than one.

    Higher oil prices also make the Indian rupee weaker, making imports to India costlier. Importantly, that Iran-India collaboration in the development in the vital Chabahar Port in Iran will give India vital ingress to Afghanistan and the Central Asian Republics cannot be understated.

    Meanwhile, the US has rushed the formidable USS Abraham Lincoln carrier-borne Task Force to the Persian Gulf region and undertaken certain prophylactic steps in case war breaks out.

    The Iranians, too, have mounted some small-range anti-ship missiles on their warships. Iranian President Hassan Rouhani recently said that his nation is facing acute pressure from international sanctions, dubbing it a “war unprecedented in the history of the Islamic revolution.”

    The US has also branded Iran’s elite Revolutionary Guards as a foreign terrorist organisation. A war of words has broken out, with President Trump declaring that if “Iran wants to fight, that will be the official end of Iran. Never threaten the United States again.”

    Replying back sternly, Iranian Foreign Minister Javad Zarif retorted that Iranians have stood tall for millennia against aggression and that “economic terrorism and genocidal taunts won’t end Iran.” He added that “never threaten an Iranian. Try respect it works.”

    Importantly, even US allies have steered away from of taking any partisan positions with either the US or Iran. Meanwhile, oil-producing nations like Saudi Arabia, Kuwait, Mexico and the US itself have been requested to step up their oil production to cater for Iranian oil shortfalls.

    How this oil crisis will shape up to meet global demands is anyone’s guess.

    It is a strategist’s nightmare in conjuring up a scenario concerning the ramifications of a war between Iran and the US. The Persian Gulf is easily one of the world’s critically significant strategic waterways through which one-third of the world’s oil is transported.

    In the event of a war, Iran will definitely close the vital Straits of Hormuz for commercial shipping purposes, throwing the region’s economy out of shape — an eventuality which, hopefully, should not ever take place.

    Preoccupied with its General Election, India, as a major regional player, has so far not reached out to its strategic partner, the US, to impress upon it to defuse the crisis.

    Recently, the Iranian Foreign Minister made a trip to India to explain their position to India on the current standoff.

    India, however, need not succumb to any US pressures or take sides. India has an adequate financial standing and moral stature to play a peacemaker’s role. India must conscientiously follow the time-honoured policy of zealously guarding its strategic autonomy. Respect for India from nations even adversarial to each other — as in earlier decades — will follow automatically and some of India’s economic tribulations will also get simultaneously addressed.

    Let the new government in New Delhi bear in mind Iran’s more than significant strategic value for India in the region.

    The author, Lt Gen Kamal davar is a former DGDIA and is visiting Distinguished fellow at TPF. 

    This article was earlier published in The Tribune.