30 January 2006

Pouring troubled water on oil

Regular readers of my pieces on energy issues would have noticed the key role India's oil minister, Mani Shankar Aiyar, was playing in pushing cooperation between India and China, Iran and other Asian countries. Why do I say 'was'? Because on January 29, the Prime Minister unceremoniously removed him from the oil ministry...

to the sound of popping champagne corks at the U.S. Embassy in Delhi and Reliance Petroleum headquarters in Mumbai, no doubt.

30 January 2006
The Hindu

Pouring troubled water on oil

Siddharth Varadarajan

The Cabinet reshuffle disrupts the gathering momentum on energy security while leaving unaddressed core areas of underperformance such as home and foreign affairs.

— Photo: S. Subramanium

PAYING THE PRICE FOR PERFORMANCE? Mani Shankar Aiyar who was moved out of the Petroleum Ministry.

UNDER NORMAL circumstances, a Minister is divested of his charge for one of three reasons: non-performance, dishonesty or promotion to bigger and better things. But these are clearly not normal times.

Mani Shankar Aiyar, who was stripped of his Petroleum, Oil and Natural Gas portfolio and demoted to Youth Affairs and Sports, is widely regarded as not just one of the best performing Ministers in the Manmohan Singh Government but the best. Only six months ago, both India Today and Hindustan Times — in their survey-based `report cards' on the United Progressive Alliance's first year in power — put Mr. Aiyar at the top of their list for his stewardship of the Petroleum and Natural Gas Ministry. His performance was judged better than that of corporate favourites like P. Chidambaram and Kamal Nath. If non-performance or underperformance were the issue, then surely other Ministries should have been touched by the latest reshuffle, particularly Home, where Shivraj Patil's handling of his remit is seen as lacklustre at best, even by sections of the Congress party.

Mr. Aiyar brought to his Ministry a dynamism and vision, which opened new vistas for India on the energy security front. Earlier this month, he laid the foundations for a partnership with China whose potential is so significant that his visit made front-page news in financial dailies around the world. Moreover, his proposals for an Asian energy market and an Asia-wide hydrocarbon grid generated excitement in energy producing and consuming countries from Turkey, Kazakhstan, and Iran in the north and west to Korea and China in the east. With Mr. Aiyar's inexplicable ouster, a question mark has now been placed over the Manmohan Singh Government's commitment to these initiatives.

In the absence of official clarity, all we have to go by is the whisper campaign emanating from the Prime Minister's Office. That Mr. Aiyar was "all gas and no energy," that he got into a public spat with ONGC chief Subir Raha over the company's poor performance on the exploration front, and that many of the deals his Ministry sought to enter into — like ONGC Videsh Ltd's attempted purchase of a lucrative oil field in Nigeria — were hare-brained and ill-thought-out. The last objection went out of the window the minute the China National Offshore Oil Corporation (CNOOC) picked up the Nigerian field at a higher price than what OVL was going to pay and saw its own share price go up as a result. As for the ONGC issue, one could criticise Mr. Aiyar's handling of the matter but the core concerns he raised about the oil giant's performance inside the country are widely shared by industry watchers. In any event, none of these reasons adds up to a coherent explanation.

Until the Prime Minister comes forward to offer a public explanation of why this portfolio change was felt necessary, it will be hard for his handlers to dispel the public perception that powerful forces within and outside the country have prevailed over performance. It is also true that the oil ministry has always been considered important by ruling dispensations as a lubricant for party finances. Even if these forces and factors had no role to play in the reshuffle, there can be no denying the fact that Mr. Aiyar's ouster is likely to be reassuring to them. The opposition of the United States to many of the energy projects he was pursuing is well known. U.S. Secretary of State Condolezza Rice has said on more than one occasion that the Bush administration is dangling the carrot of civil nuclear cooperation in order to get India to stop looking at countries like Iran as sources of energy. Earlier this month, a written demand was made that India not invest in Syria. The common feeling will be that rather than issuing a demarche each time the Oil Ministry makes a move, the U.S. felt it would be better to lobby to get rid of the man at the root of this uppity behaviour. India is not a banana republic so this is presumably not what happened. But in politics, perceptions matter as much as reality. The new incumbent, Murli Deora, who brings with him the burden of proximity to not just private players like Reliance but also the U.S., will have to work hard to ensure that these perceptions are proved false.

If India's energy diplomacy suffers a setback as a result of Mr. Aiyar's removal, the slack is unlikely to be picked up by the Ministry of External Affairs so long as it continues to remain headless. The Prime Minister may make an able Foreign Minister as well but the modern demands of foreign policy require dedicated leadership. Apart from protocol-related issues — simply put, Foreign Ministers from many countries have indicated they would prefer to stay away from New Delhi for the moment rather than being fobbed off with Ministers of State — the lack of a full-fledged Minister is also taking its toll on the pro-activeness of India's external outreach. Even when Natwar Singh was the incumbent, the exclusively U.S.- and P-5-centric approach of the United Progressive Alliance Government meant vast swathes of the globe remained unvisited, particularly in Latin America and Africa.

The MEA's territorial divisions and secretaries are energetic and gung-ho; but the absence of direct political leadership means many important diplomatic initiatives are languishing.

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Anonymous said...


good site. It still doesn't answer the question as to why he was moved? I'm curious.

Umesh Patil said...


If American Embassy to uncork champagne for such simple reasons then they will need to have uninterrupted supply of champagne bottles. I am doubtful if Americans will be happy for such simple and mundane things.

Well, anyone would resort to influence peddling. Otherwise India would not be spending some millions to lobby on Capital, Washington DC. But to assume Indian Gov. totally submissive to wishes of foreign countries is nothing but to trash our politicians. Or are you saying that only Left has the consciousness to look after India's interest unfailingly along with fearless journalists like you? Oh! I did not know that. It is hard to believe that once we notice ‘the change in tune’ after China sided with rest of UN-SC members in Iran case. May be I am wrong to imply that Left essentially takes their clues from Beijing.

Get over the obsession of seeing the world through Anti-American goggles. The world is quite big to encompass many countries and it is not a theatre for America to play. Assuming otherwise is to have 'Latin America' syndrome - cause of everything bad in the world is Uncle Sam. How shortsighted and irresponsible to one’s own people.