September 5, 2013

Petroleum Jelly

'Writing' this on the back of yet another fuel price hike. I must also apologize to any readers who find this post (and some of my previous blog posts) annoying with my near continuous Iranian a** kissing. Also, my views on what the foreign policy should be like is meant to reflect how it can ease the lives of 1.3 billion of the world's populace. It is not meant to be anti-American but if you want to construe it that way, then, too damn bad.
I don't think the babus in the ministry of external affairs (MEA) realize how much influence they actually wield over the Indian economy. With the sharp rise in the value of the dollar, we are getting much less oil for the same amount of rupees spent. Sure enough, the government has upped it's import of oil from Iran who are willing to deal with us in rupees. Which is more of a reactionary decision. Imports should have been scaled up even before the rupee started sinking or at least after sure signs that the economy had stalled. What the government and RBI are doing is waiting for impact before making a course correction when they should be making course correction (of the economy) to avoid impact. 
Despite this belated measure, Iran still ranks third in the number of barrels imported. Why STILL third? Iran should by far be number one in our current economic situation. This half-hearted measure by the UPA government to reduce the dependency on USD is only a weak attempt to keep the value of rupee stable and the value of oil steady. Our imports from Iraq and Kuwait which are in USD should be reduced drastically (I don't think cutting imports altogether is a good idea). Either they deal with us in rupees or bow to US pressure to deal only in USD with us. Until the former happens, we should lean more on Iran. This would reduce fuel prices in India in the near term and even bolster the currency due to demand even if it is from a singular source (albeit significant).
I do realize the major sticking point here would be relying largely on a single source (for crude) to run our economic engine. Which is never a good idea. This would also be a good time to reach out to other countries like Venezuela and Myanmar - the Bolivarian state for its super rich oil fields and Myanmar for natural gas. It's easy to channel gas from the neighbouring country assuming our government cares enough to reach out to them. Venezuela has had it's oil exports reduce mainly due to the US relying more on shale and the Middle East. This could be an opportunity for India here. It could theoretically be possible to deal in rupees with Venezuela as US would have no sway in a deal with them. This could increase the security of oil imports by not relying on one country alone. Logistically speaking, the viability of dealing with Venezuela could be bothersome on account of the distances involved. But, sea transport is cheap and I won't believe it is impossible to trade on account of distance. The MEA has in recent months improved its vision on diplomacy and the role India must play globally (I'll wax lyrical about that later). Question is, will it assume the latent responsibility of playing an active role in the Indian economy by means of it's overseas activities? Time will tell. But lets hope its not too late.