Today's Editorial

25 August 2018

Belt and grid

Source: By Ashok V Desai: The Telegraph

I wrote about One Belt One Road — how China was planning to connect its east coast with the west coast of Europe by road and rail, and develop and connect 39 ports from Australia, across Asia, Europe and Africa, to Latin America. It called a conference in May 2017 to which it invited representatives of 130 countries. All came — except anyone from India, which issued a statement saying inter alia that "No country can accept a project that ignores its core concerns on sovereignty and territorial integrity". It meant that it was annoyed because China built a road from Central Asia across the part of Kashmir occupied by Pakistan to Gwadar in Balochistan where China is building a port.

India believes that all of Kashmir belongs to itself, and hence took the China- Pakistan Economic Corridor to be an intrusion on its sovereign territory. So it boycotted the OBOR meeting. Instead, it hosted heads of 10 South and East Asian countries, seated them behind its president on Republic Day and made them watch the parade and the spectacle. In my view, this was an utterly pointless response to OBOR: it would not lure away any allies from China, and would not create any infrastructure that could even begin to compete with OBOR.

In 2016, the Chinese hit on another bright idea. Liu Zhenya, head of China's electricity grid, called a meeting in Beijing on March 29, 2016, and created a new non- government institution under the grid's aegis, called Global Energy Interconnection Development and Cooperation Organization. He made himself chairman, and appointed three vice- chairmen, including Steven Chu, professor of physics in Stanford who won the Nobel Prize in 1997 for laser cooling and atom trapping, was Barack Obama's energy secretary from 2009 till 2013, has written 280 papers, holds 15 patents and has filed for another eight — in other words, one of the world's most distinguished physicists.

The declared aim of GEIDCO is to create a global grid which would connect the world's renewable energy power sources and transfer their electricity at low cost. Historically, every country in the world has made itself a separate electricity market; by connecting and combining all these markets GEIDCO would make it possible to achieve the highest capacity levels and maximize economies of scale, and transfer electricity across the world at lowest cost; And why electricity? Because every form of energy — coal, oil, gas, solar, wave, wind — can be converted into electricity. As the world runs out of non- renewable energy — coal, oil and gas — it would have to rely increasingly on renewable energy.

Renewable energy sources are distributed very unevenly across the world; if a big energy consumer like China (or India) is to continue consuming imported energy, it would have to have means of transferring that energy to itself from all over the world; the electricity grid would enable that transfer. China does not want to own the ports it is building under OBOR. They will be owned by institutions within the countries where the ports are situated, although China may lend money to build the ports.

Nor does China want to own the global electricity grid. The grids already exist within countries; GEIDCO will integrate them and upgrade their technology. The members of GEIDCO are not governments; they are NGOs, research institutes, academic institutions, companies and individuals. Its aim at present is to work out the cheapest ways of transmitting electricity. That will eventually connect China to possible sources of electricity; its power generator can then negotiate with those sources for generation of electricity and its transmission to China. Compare this planned network with the present non- renewable energy network. A host of enterprises, private and government- owned, mine coal, oil and gas, and transport it to consuming countries by ship.

This network is extremely vulnerable to attack by governments and non- State actors. The major oil and gas companies are American; countries that want to be supplied by them have to stay on the right side of the United States of America. Even countries that have oil and want to export it are extremely vulnerable to the US; Iran has had a tough time ever since Muslim Student Followers of Imam's line raided the US embassy in Tehran in 1979, took 52 Americans hostage and kept them for two years. The US president, Donald Trump, bombed Syria because the US does not approve of its dictator; he casually threatens other nations from time to time. Just now he is forcing China to reduce its exports to the US because they compete with (more expensive) American products and reduce American employment in their production.

So any country that wants to have far- flung economic connections has to be prepared for American hostility backed by its enormous armed forces. China's economy has grown too large and open; it would be difficult to shrink it and disconnect it with world trade and investment. And energy is the lifeblood of the economy. Hence China's brilliant plan to create a global electricity grid and use it to import energy.

It is not only China that would have access to the grid; India could equally use it to import and export electricity — and it would make as much sense for India to do so as it does China. It made sense for India to join OBOR, and that the economic loss from refusing to join it was a very high price to pay for the privilege of showing India's annoyance at the road China has built across Pakistan- held Kashmir to Gwadar.

The China- led electricity grid may or may not pass through Pakistan- held Kashmir; whether it does or not, it makes economic sense for India to participate in GEIDCO. While hostility towards China may make some Indians happier, its economic value is zero or negative. Participating in OBOR and GEIDCO may embarrass those Indians, but the potential economic returns on participation are enormous. Because we are sunk in hostility, we fail to see economic opportunities.

OBOR and GEIDCO are not the only examples. India could offer China access to Indian ports; the transport services Chinese goods would require to be carried across India would create income for India. India could offer direct train services between Pakistan and Bangladesh; the freight carried can only bring new revenue to Indian railways. Similarly, it could ask Pakistan to let Indian trucks or goods pass across it to Afghanistan; it would make Pakistan richer. And then there are the billions of dollars of Indian goods that are exported to Pakistan with the intermediation of the United Arab Emirates; if they were shipped directly to Pakistan, it would find them a lot cheaper. If Pakistan benefits more from economic relations with India, it will give it an incentive to stop financing and supporting terrorism in Kashmir.

Economic relationships are a part of economic diplomacy. Their rejection makes the task of Indian foreign policymakers easier, but it is contrary to the interests of India. One could understand the reluctance of Manmohan Singh to take the initiatives I have mentioned; they did not suit his cautious mien. But our present prime minister is a born entrepreneur; surely he can be bolder.



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