CHAPTER-I

INTRODUCTION

1. India's economy undeniably, is on a roll. However the parallel energy discourse, sadly, moves at a slow pace, lacking in requisite agility and momentum. If India is to secure it's interests in a more healthy manner, it's energy discourse must keep pace qualitatively and quantitatively, in concept and in execution, with it's economic flight. There is indeed a need to take an analytical look at the entire paradigm of India's energy security and critically examine whether or not it is appropriately poised and try and to identify the necessary correctives that will help propel the Indian economy along its growth trajectory.

2. A UNDP report defined energy security as the continuous availability of energy in varied forms, in sufficient quantities and at reasonable prices. For India, the Parikh Committee report stated that a country is energy secure when it can supply energy to all its citizens and meet their demand for safe and convenient energy at affordable costs, at all times, with a set confidence level, considering shocks and disruptions that can be expected. It is the, 'affordable' rather than 'reasonable' source of energy that any country would like to have. While describing the concern over Energy Security three major reasons come to mind as far India is concerned:

(a) To achieve the aimed domestic economic growth rate of 7-9% energy security is an absolute necessity.

(b) High overall global demand and limited supply constraints are continuously pushing up oil and gas prices to higher and higher limits.

(c) With Energy supply constraints, there is tremendous international competition to secure the scarce energy resources.

3. Energy is paramount for the sustained economic growth of our country and to fulfil our aspirations of becoming a true Global Power. High projected economic growth rate call for greater availability of reliable and cheaper energy. India and China's energy demand growth is unfolding in the midst of a perfect storm: economic, geopolitical, and environmental factors are combining to create new challenges, pressures, opportunities and alliance. Furthermore economical per capita energy consumption (through better governance and distribution mechanism) and access to cheaper energy will help in reduction of energy poverty which is a key development goal for any country. In search of oil and gas these, countries are exhibiting a 'hunger for energy resources', which has resulted in establishing new ties in South East Asia, in Africa and in Central Asia.

4. It has been seen on various occasion, that these countries are been pitted against each other and this competition has given rise to concerns about the potential for re-emergence of conflict over energy resources. A fallout of this has been a realization by the West of the new geopolitics that endangers the global security and a realization by South Asian, Middle East and Africa countries of the attractiveness of Asia as an alternative market to Europe and the US. On another front, climate change and the links it has with energy and energy choices are also creating significant pressure for low-carbon economy paths for these emerging new economies, adding yet another restraint to energy choices and a new geopolitical dimension.

METHODOLOGY

Hypothesis

5. China has sought to gain strategic advantage over India in South Asia not only militarily but also through securing energy recourses by progressively making India's neighbors dependent on China to a large extent for their defence supplies and other economic goodies . Chinese aid to Islamabad , Bangladesh , Sri Lanka and Myanmar is designed to lock India in a low-level deterrent relationship with its immediate neighbors and keep India confined to the sub-continent. The expansion of Chinese influence into Myanmar provides China, the potential to deploy their sea power in the Bay of Bengal, in India's sensitive areas of maritime interest and to eventually pose a direct threat to India's eastern seaboard. Also, China is competing for foreign investments and markets in these countries for their products in the next 15 to 20 years to achieve economic marginalization of India. The close relations between China and Myanmar also pose a threat to overall Indian security and economic interests in the Bay of Bengal region.

6. China has been providing military, economic and infrastructure support to these South Asian countries with a long term interest in mind. By providing this support, China aims to secure energy resources for its growing economy, build better relations with its neighbours, and gain a foothold in the South/South East Asian region.

7. Another aspect of China's interest in India's neighbors could be simply be to support to its growing economy. China is aiming to quadruple its per capita GDP by 2020. This would imply an average annual economic growth of 7.2% till 2020. In order to attain this, China will have to keep meeting the enormous appetite of its energy. Thus, the China's interest may purely be to strengthen its economy with or without any malicious intentions towards India. However India can afford not be complacent with China's intentions if she wants to maintain a safe and secure scenario in South Asia for its own economic and social development.

Statement of Problem

8. Are India's future energy need concerns justified and what is its affect on the South Asia's overall security scenario in the backdrop of China's aggressive quest for energy in the South Asian region .

Justification of the Study

9. Energy crisis is a situation in which the nation suffers from a interruption of energy supplies, coupled by rapidly increasing energy prices that threaten economic and national security. The threat to economic security is represented by the possibility of declining economic growth, increasing inflation, rising unemployment, and losing billions of dollars in investment. The threat to national security is represented by the inability of the government to exercise various foreign policy options, especially in regard to countries with substantial oil reserves.

10. China and India are two rapidly growing economies. China's real GDP growth has shown a sustained growth of 8-9%. India too has shown an impressive growth.

Both these countries are also one of the most populous in the world. China is the third largest importer of oil behind US and Japan whereas India is the fifth largest consumer in the world. The Energy hunger of India and China is already pushing oil

and gas resources to its limits its their own countries. Both these countries also cannot afford any disruption to their energy supplies.

11. India, will face an energy crisis, if there is any disruption in the energy flow, either by war, terrorist strikes on oil production platform or blockage of SLOCs, resulting in increasing oil price. It is therefore imperative to understand the steps taken by India to ensure Energy security, especially in the backdrop of China's aggressive quest to secure its energy supplies in the South / South East Asian region and the growing ties between China and Myanmar.

Scope

12. The study will discuss the energy forecast of India and China up to 2030 and the availability of energy resources in the world and South /South East Asia( With special reference to Myanmar ) . Having considered the energy resources available, it will explore the way and means adopted by both these countries to secure their energy resources and transportation without challenging each other and affecting the overall security scenario in South Asian region.

Method of data collection

13. The source of data collection is Defence Services Staff College Library and Internet . The bibliography is appended at the end.

Organisation of Dissertation

14. The study is carried out in the following sequence: -

(a) Energy requirements for India and China.

(b) India's efforts to secure energy supplies and the importance of Myanmar (China – Myanmar relations).

(c) India's initiatives in Bay of Bengal region to secure energy sources and maintain regional harmony.

(d) The way ahead (Importance of cooperation with neighbouring countries for regional peace in South Asia).

(e) Conclusion.

CHAPTER-II

ENERGY REQUIRMENT F OR INDIA A ND CHINA

India's Energy Quest

1. The Hydrocarbon Vision 2025, published by the Government of India in the month of February 2001[1], set out in very clear terms, India's energy security dilemma : its crude oil self-sufficiency declined from 63% in 1989/90 to 30% in 2000/01. In 2024/25, crude oil self-sufficiency was expected to be a mere 15%. The situation relating to gas was equally grim. From 49 BCM (billion cubic metres) in 2006/07, India's demand for gas is expected to rise to 125 BCM in 2024/25. As against this, production from existing fields and discoveries was 52 BCM, leaving a gap of 75 BCM to be filled through new domestic discoveries and from imports. The electric power sector was projected to account for 71% of the total incremental growth in India's natural gas demand from 2000 to 2025. India's installed power capacity at present is based on coal (59%), hydropower (26%), gas (10%), and nuclear (2%). In the period up to 2025, the share of gas in the energy mix would be 20%. The Integrated Energy Policy (IEP) document prepared by the Planning Commission, in August 2006, under the Chairmanship of Mr Kirit Parikh, takes a holistic view of India's energy requirements up to 2031/32. The report postulates that, in order to reach growth rates of 8% per annum up to 2031/32, the country needs to do the following:

(a) Increase primary energy supply by three to four times.

(b) Expand electricity generation capacity by five to six times from the 2003/04 levels, that is, power generation capacity must increase from the current 160,000 MW (megawatt) to nearly 800,000 MW by 2031/322[2] .

2. Taking into account power and other commercial requirements, the report suggests that India's primary commercial energy requirement (in million tonnes) would be as given in as following[3] :

(a) Primary commercial energy requirement (million tones) .

Year

Coal

Oil

Gas

Nuclear

2011-12

257

166

44

17

2021-22

464

278

97

45

2031-32

835

486

197

98

3. The place of gas in the energy mix between 2006/7 and 2031/32 is projected as given as following[4]:

(a) Energy mix (million tones) .

Energy source

2003-04(%)

2031-32(%)

Coal

51

50.5

Gas

09

30

Nuclear

1.5

12

Hydro

2.14

06

Oil

36

2.12

4. To reach its growth targets, India would need to hunt all available fuel options and energy sources, conventional and non-conventional. However, the current position with respect to specific energy resources is also to be noted. Presently, India's energy mix is: coal and lignite 50%; oil and gas 45%; hydropower 2%, and nuclear 1.5%. In 2022, fossil fuels will continue to dominate India's energy mix to the extent of 75%, with hydropower providing 14%, and nuclear power 6.5%. Even the proponents of nuclear power have noted that, most optimistically, nuclear energy will provide only 8.8% in India's energy mix in 2032, as against 76% for fossil fuels, and 12% for hydropower. In 2052, when nuclear energy is likely to be 16.4% of our energy mix, coal is expected to be 40%; hydrocarbons 35%; and hydropower 5.1%[5] .

5. The IEP report has looked at different international scenarios pertaining to coal and gas. Its conclusion is unambiguous. Any supply strategy over the coming decades will have to emphasize India's major resource, that is, coal. Coal is the most abundant domestically available primary energy resource other than thorium and solar. In the 'coal-based development' scenario, the total demand for coal increases from 172 MTOE (million tonnes of oil equivalent) in 2004/05 to 1022 TOE in 2031/32. Measured in MT of Indian coal with 4000 kcal/kg (kilocalories per kilogram), the requirement of coal will thus increase from 406 MT in 2004/05 to 2555 MT in 2031/327 [6].

China's Energy Requirments

6. Before analyzing the Chinese forays in Energy markets South Asia , a basic question needs to be answered ,Why China? .The answer lies in the fact that India and China share many similarities. The countries are located in the same geographical area and are amongst the world's most populated countries. They are the fastest growing economies in the world and are dependent on oil imports to fuel their economic growth. The way China has jump started its economic growth holds some important lessons that can be learnt.

7. The main reason fuelling China's aggressive forays into the energy markets are China's economic growth which has led to a near doubling of oil consumption in China. The average growth rate has been between 8-10% in the last decade . At this pace of economic growth, the Gross Domestic Product is expected to reach four times of its present value to 4.7 trillion dollars by year 2020 [7] . This high rate of growth has been fuelled by growth in heavy industries which will increase the demand for energy by 150% in the next decade. The near doubling of oil consumption is also partly fuelled by the fact that there is a high requirement of petro-chemical products in heavy industries and an increase in automobile growth in China. This has led to an increase of 7.5% in oil demand every year.

Competition to Access Oil Resources in South / South East Asia

8. The oil situation emerging in South/ South East Asia is further complicated by the ongoing tussle between China and India to secure their own energy supplies in this region. The stiff competition is mainly because of two reasons, firstly the countries are amongst the fastest growing economies and secondly they lack in sufficient domestic energy sources and are net importers of oil. The two nations are resorting to efforts, both in the diplomatic and economic spheres. These efforts include forging new diplomatic alliances, high profile diplomatic visits, financial aid to the South Asian countries and investments in economic sectors like infrastructure, telecom and mineral extraction and resource development etc.

9. The state oil companies at the same time, are involved in deals in the oil and gas sectors purchasing stakes in oil fields which are already producing oil or are being explored, exchanging the know how in return for oil and participating in exploratory efforts to discover new oil and gas finds in the region . India is learning from the Chinese efforts in these fields as they have a head start over us in this area and have been quite successful in their efforts to secure their energy supplies. Both India and China are looking towards SriLanka, Bangladesh and Mayanmar for oil and Gas.

Chinese Forays

10. China is not only a major energy consumer, but also a major producer with a high degree of self-reliance. In 2008, China's energy production reached 2.06 billion tonnes of standard coal and the consumption was 2.22 billion tonnes, ranking the second both in terms of production and consumption with a self-sufficiency of 93%. Coal is the primary source of energy for China and oil comes the second. While meeting the domestic demand, China exports 60–80 MT (million tonnes) of coal every year and is a main exporter of coal and charcoal in the world (even to India). China's power generation capacity in 2008-09 was the second largest only after that of USA. China produced over 182 MT of petroleum and 54 BCM (billion cubic metres) of natural gas.

11. To fulfil its growing appetite for energy, China is aggressively pursuing various energy resources. Chinese companies are involved in acquisition of oil companies, buying oil fields and purchasing partnerships in oil fields that are being developed.

China is pursuing a multi dimensional approach which is a mix of diplomatic and economic efforts. One of the main thrust of China's oil policy is towards Asia and Africa. The importance of Africa countries to China can be appreciated from the fact that the trade between these is expected to rise many fold by the years to come . As part of its "Go West" policy, China is also accessing the Central Asian Region. It has plans to build pipelines from Tarim Basin in China to Kazakhstan and Turkmenistan in order to import oil and gas. In 2004, construction began on a pipeline from North West Kazakhstan to Xinjiang to carry oil. Chinese influence in the Central Asian Republics can be gauged from the fact that these republics now subscribe to the Chinese view on a multi polar world, and its views on various regional and international issues like Tibet, Taiwan etc.

CHAPTER-III

INDIA'S EFFORTS TO SECURE ENERGY SUPPLIES AND THE IMPORTANCE OF MYANMAR

1. India Hydrocarbon Vision 2025 document as discussed earlier had given considerable importance to the role of gas in the energy mix to realize the projected national growth rates. This may be is primarily because though we may be having a large deposits of coal however the domestically produced coal has very high ash and sulphur content and is of very low calorific value . The coal utilized in the country has 4000 kcal/kg as against 6000 kcal/kg available in imported coal. In fact, the coal used in the Indian power plants has a calorific of value 3500 kcal/kg. Large estimates of total coal reserves do give a false sense of security because current and future technologies will convert only a small portion of the total reserves into a mineable category. Owing to all these reasons the govt has started looking towards new sources of energy supply so as to have a requisite amount of strategic energy reserve [8].

2. There have been several large natural gas finds in India over the last five years, predominantly in the offshore Bay of Bengal (Krishna Godavari region). The discoveries also fit into the recent trend of large upstream developments in the Bay of Bengal, especially in the Krishna Godavari basin. Gujarat State Petroleum Corporation (GSPC) holds an estimated 20 Tcf of natural gas reserves in the Krishna

Godavari area [9]. ONGC has worked to maximize its recovery rate at the Mumbai High, which supplies the bulk of the country's natural gas at present.

Transnational Pipeline to meet India ' s needs

3. Iran-Pakistan-India Pipeline

. India has considered various proposals for international pipeline connections with other countries. One such scheme is the Iran-Pakistan-India (IPI) Pipeline, which has been under discussion since early nineties (1994). The plan calls for a roughly 1,700-mile, 2.8-Bcf/d pipeline to run from the South Pars fields in iran to the Indian state of Gujarat [11].

4. Turkmenistan-Afghanistan-Pakistan-India Pipeline

. India has shown interest to join onto the Turkmenistan-Afghanistan-Pakistan pipeline. The TAP project consists of 1,500-mile pipeline originating in Turkmenistan's Dauletabad – Donmex

natural gas fields and transporting the fuel to markets in Afghanistan, Pakistan, and to India. Initial plans for the TAP call for the line to have a capacity between 2-4Bcf/d at an estimated cost of $3.4 billion. While India has publicly promoted this scheme while negotiations with Iran have slowed, the TAPI(India) project faces a variety of hurdles. India has concerns about the security of the proposed line, which would traverse unstable regions in Afghanistan and Pakistan. Furthermore, a recent review of the TAPI project raised doubts whether the Turkmen natural gas supplies are sufficient to meet its proposed export commitments.

5. Imports from Myanmar

.

A third international pipeline proposal envisions India importing natural gas from Myanmar. In March 2006, the governments of India and Myanmar signed a natural gas supply deal, although a specific pipeline route has yet to be determined. Initially, the two countries planned to build a pipeline that would cross Bangladesh. However, after indecision from Bangladeshi authorities over the plans, India and Myanmar have studied the possibility of building a pipeline that would terminate in the eastern Indian state of Tripura and not cross Bangladeshi soil at all. Let us now discuss the impotence of Myanmar and see as to why is it so relevant in the overall energy game.

GEO-STRATEGIC LOCATION OF MYANMAR

Geographic Loc

6. Myanmar shares common borders with five countries Bangladesh 193 km, China 2,185 km, India 1,463 km, Laos 235 km, and Thailand 1,800 km. India dominates Myanmar's western borders, just as China dominate its north-eastern borders. Thailand borders the entire eastern part of Myanmar except for narrow strip that borders Laos. And this makes Myanmar a strategic land bridge linking South, and Southeast Asia [12].

7. As a littoral of the Indian Ocean, Myanmar's strategic value further increases. Its 1930 km long coastline dominates the eastern arch of the Bay of Bengal, leaning on to the Malacca Strait. Thus Myanmar provides China the shortest land and sea access to South Asia, just as it provides convenient external land and sea communication options to India's landlocked north-eastern states. Myanmar's ocean boundaries are barely 30 km from the Andaman Islands increasing its maritime security potential.

8. Most of Myanmar's mountain ranges and major river systems run north-south. This makes construction of road communication and movement from India's east to Myanmar against the grain of the country difficult. At the same time it facilitates easier movement from the Chinese border in the northeast, and provides for natural flow of traffic. The Chinese have used this favourable terrain configuration to build road from the Chinese border to Mandalay in the heart of Myanmar and onward to the coast. As Myanmar provides the shortest access from mainland China to India's eastern borders these developments have special long term strategic significance to India.

9. India's north-eastern states bordering Myanmar are not as well developed as Yunnan province of China bordering Myanmar in the northeast. China has found it useful to link the development of Yunnan region jointly with Myanmar and Laos. Thus the two-way border trade and commerce is qualitatively and quantitatively better with China than with India.

10. While India's relations with Myanmar have seen substantial improvement in recent years, Myanmar apparently remains within the Chinese sphere of influence. India has moved from voicing its opposition to the military junta's crackdown on pro-democracy activists and the arrest of Aung San Suu Kyi, the leader of the National League for Democracy to a more pragmatic, non-interventionist policy. This change in policy by India has been prompted by its desire to access the region's energy resources, gain access to the vast markets of Southeast Asia and to balance the influence of China.

Strategic Significance of Myanmar

11. Strategic Importance to India

.

The reasons for the strategic importance of Myanmar to India are:

(a) Myanmar is located at the tri junction of East Asia, South Asia and South East Asia.

(b) Myanmar is the second largest of India's neighbours and the largest on the eastern flank.

(c) Myanmar provides the Eastern littoral of the Bay of Bengal. An unfriendly Myanmar hosting foreign naval presence would pose a threat to Indian security.

(d) Myanmar has a big border with China in the north contiguous with the Sino-Indian disputed border which has many implications.

(e) India has both a land border and a maritime boundary with Myanmar in the Bay of Bengal. Four Indian states (Arunachal Pradesh, Nagaland,

Manipur and Mizoram) border Myanmar (Kachin & Chin states and Sagaing Division) .

(f) China can gain easy access to Indian Ocean through Myanmar.

12. Strategic Importance to China

.

In recent years, the strategic landscape in Southeast Asia has begun to change with the emergence of the People's Republic of China as a regional power. China's economic and military capabilities have grown dramatically at a time when China's traditional security challenge, Russia, has faded. Japan remains a long-term, but not an immediate security problem for China. This has left China free, in geopolitical terms, to shift its attention to the south Asia. Most striking manifestation of this development has been a very assertive policy toward the South China Sea; i.e., the entire sea and all the islands within it are now claimed as Chinese sovereign territory. Myanmar has a great deal of strategic significance for both India and China. Myanmar's role in providing China a shorter access route to Indian Ocean and South Asia is going to be crucial in the strategic scene of South Asia. The Chinese have used the geophysical advantage they enjoy to gain access to Myanmar's mineral and natural gas resources. Following a policy of non-interference in internal affairs of the country, China has become the main supplier of arms to Myanmar. This has enabled the military junta in power to beat the western sanctions and double the Army strength.

The Energy factor

13. China's building of a port in Pakistan, its extra-polite friendship with the rulers of Myanmar and now its offer to Iran to pick up gas from Pakistan, is all part of the

country's quest for energy to feed its export economy and to marginalise India's traditional dominance in the South Asian region. There, a mix of its own but rapidly depleting oil, low-grade coal and imported oil and gas are keeping the wheels of the export industry churning.

14. Myanmar is being cultivated as an exclusive oil and gas supplier to China. The extraordinary friendship the Chinese have struck up with the Myanmar rulers is not so puzzling if it is appreciated that oil and gas are China's main interest there. To this affect all loans advanced and all military hardware being sold have only one purpose to allow them to grab as much oil and gas as they can [13] .

15. South-East Asia's biggest proven gas reserve lies in the Shwe field, just off the coast of Ramree Island. There is a plan to build a pipeline to carry the gas from Shwe field to China. A parallel pipe is also planned to be completed in next two years that will carry Middle Eastern and African oil from a new deep-water harbour at

Kyaukphyu, bypassing the Strait of Malacca and fuelling the economy of China's south-west . China has made huge energy investments in Myanmar and plans to construct overland energy transport routes through that country to avoid the Malacca Straits choke point. This is a possibly the key factor behind Beijing's support for the military junta in Myanmar.

16. The China National Offshore Oil Corporation (CNOOC) signed six contracts on production sharing with the Myanmar Oil and Gas Enterprise (MOGE) of the Ministry of Energy from October 2004 to January 2005 [14] . The China Petroleum and Chemical Corporation and its subsidiary Dian Quiangui Petroleum Exploration also work the inland fields. Moreover, the China National Petroleum Corporation

(CNPC) and its subsidiary Chinnery Assets also won contracts to upgrade the four old oilfields in central Myanmar.

17. In a development of strategic importance, recently China beat India to sign a 30-year mega deal to import natural gas from fields in Myanmar offshore where interestingly India's oil companies have 25 percent stake. China's State-run China National Petroleum Corp (CNPC) entered into a gas sales agreement with South Korea's Daewoo International for buying gas from the Shwe field in A-1 offshore block and the adjoining A-3 block[15] .

Possible Implications Of Chinese Intentions

18. Myanmar, after decades of neutrality and a strictly non-aligned foreign policy has today emerged as China's principle military ally in Asia. China was the first country to officially recognize Myanmar's State Law and Order Restoration Council (SLORC) after it seized power in September 1988. However, prior to this coup China had poured in arms, ammunition in Myanmar and actively supported rebels in Myanmar. This change can be explained in terms of China's changing post-Cold War

strategic thinking and its priorities. Apart from sharing strategic and economic interests, China and Myanmar also share more than 2,000 km long common border. Besides, Myanmar has also been historically viewed as a buffer state between China and India. Thus, for reasons of geographical proximity, history and security, China has been going overboard trying to sweep Myanmar into its sphere of influence with a combination of economic, diplomatic and military ties[16] . China also views Myanmar as a gateway to Indo-China, South - East Asia and the Indian Ocean.

Domination of Myanmar enables China to encircle littoral and degrade India's security environment along its North-eastern border and in the Bay of Bengal.

Energy Security

19. It is now very clear that China is an emerging economic and military super power. Its economy has been growing at a consistent rate of 8-10% for the last 10 years and is expected to grow at the same rate in years to come. To be able to sustain its growth rate, China has huge energy requirement and is forging alliances all over the world to not only meet its requirements but also secure energy resources for future. Myanmar has reportedly world's tenth biggest gas reserves estimated to be more than 90 trillion cubic feet.

20. Eighty percent of China bound oil and liquid natural gas passes through the Indian Ocean. Therefore, China is giving special importance to building strategic naval assets in the Indian Ocean. The building of the Gwadar port in Pakistan ia s part of this plan. Its naval listening facility in Myanmar is also augmenting China's blue water capabilities. But China's chief interest in Myanmar, analysts say, may lie

in its strategic location as a site for pipelines that Beijing reportedly wants to build from Burma's ports to southern China for trans-shipping oil and gas brought by tankers from the Middle East. That would reduce China's need to ship oil or gas through the Malacca Straits, which Beijing worries could be closed off by the Indian Navy in the event of a conflict. Standing in the way of Chinese mastery of Indian Ocean shipping lanes is the Indian naval facility in the Andaman and Nicobar Islands in the Bay of Bengal, opposite the Malacca Straits. In addition, India's modernization of its navy and its proposed acquisition of nuclear submarines and aircraft carriers

are not sitting well with the Chinese. From these small islands, India can interdict most of China's energy imports.

21. In the last five years, China has also been building up its naval fleet to safeguard its supply route. It is also building strategic alliances with Indian Ocean littoral states. China's strategic objective appears to be to gain direct access to Bay of Bengal and Andaman Sea through Myanmar bypassing the narrow Strait of Malacca. With this aim in view China had been pursuing the development of roads from northern borders to south in Myanmar. In fact, China is perhaps the single most important power with influence over the military regime. In the ten year lead time it had, China has established close military cooperation with Myanmar. It also has established four electronic listening posts in Myanmar to monitor Indian and Thai communication traffic.

Strategic Intent

22. China's is upgrading the military facilities installed on the Coco Islands. Myanmar's location in the northern Bay of Bengal itself carries immense strategic import for India, its Coco Islands are sited so close to India's Andaman Islands that in good-visibility conditions one can see it with the naked eye from the northern-most island of the Andaman group. A Chinese military involvement in Myanmar, particularly in the Coco Islands, may thus have grave security implications for India [17]. It cannot be ignored that almost all of Myanmar's military infrastructure - bases, airstrips, radar stations and electronic-intelligence facilities- have been constructed with Chinese financial and technical assistance since 1988.

23. The latest is China's involvement in the naval wharf project in Great Coco Island, which was launched on November 4, 2002 and completed a year later. It is hardly conceivable that China would not expect any dividends from these facilities. In addition to the Great Coco, Myanmar's naval facilities at other locations may be used by Chinese warships and submarines. Even if Chinese naval vessels do not dock at any of these facilities, they could be replenished at sea by Chinese state-owned 'commercial' tankers, thereby facilitating China's naval presence in the Indian Ocean. It is well known that the links between China's state-owned shipping companies like COSCO (China Ocean Shipping Company) and the PLA are so close that COSCO ships are often referred to as "Zhanjian" (warships) in Chinese language. The presence of China's 'merchant' ships along the Myanmar coast is likely to be established soon when its planned oil pipeline from Kyaukphu (facing the northern Bay of Bengal) to Yunnan province (southern China) is built.

24. Furthermore, the Chinese-built Irrawady road-rail-river corridor from Yunnan province to Yangon and Thilwa ports in Myanmar (facing the Andaman Sea) is already operational. Its cargo-carrying capacity is being enhanced further through dredging of the Irrawaddy River. The work is being done mostly by Chinese engineers and workers, using Chinese dredgers. While the intention is stated to be to improve trade connectivity, its potential as a logistics supply route to Chinese naval forces in the Indian Ocean cannot be ignored. The PLAN would be able to shorten the distance by 3000km reducing the voyage by five to six days by not passing through the Strait of Malacca to reach the Bay of Bengal[18].

India ' s concer n s

25. India's 1991 economic reforms led, after a few teething problems, to rates of 7-9 percent annual economic growth. Both the fast economic growth and the nuclear

capability are prerequisites for India's ultimate aim of securing a place "in the sun". However, in order to maintain such economic growth India needs to sort out two vital issues: regional peace and a constant, reliable energy supply. The two issues are in part interlinked as India is obliged to import gas and oil at ever increasing rates. Gas in particular would have the potential to draw the South Asian region closer together as immediate neighbours Bangladesh and Myanmar have large amounts of natural gas supplies. Myanmar has reportedly world's tenth biggest gas reserves estimated to be more than 90 trillion cubic feet[19]. The proposed gas pipeline between India and Myanmar is of particular interest, as it shows how India intends to manage its relations with a neighbour it has shunned for many decades. Good relations with Myanmar will do much more than secure an energy supply which will help sustain economic growth for years to come, as they will open up the northeast to trade and solve a number of political and ethnic problems in the region. Trade with Myanmar will also enhance India's relations with the rest of Southeast Asia through ASEAN, and have a direct effect on relations with China.

26. Close relations between China and Myanmar may have serious implications for India's security and in turn to whole of the South Asian region in the times to come. Some of these seems to be directly aimed at India and needs to be addressed on priority if India is to maintain its traditional regional power status . The following are the indications which needs to be looked into very carefully:

(a) Spread of small arms, menace of drug trade infiltrating across our borders, onslaught of refugees, insurgencies, and fear of foreign naval build-

up in the Bay of Bengal are the primary threats that emanate from this increasing Chinese indulgence with Myanmar. This has the potential to affect

peace and stability of not only India, but of the entire South Asian region as well.

(b) As regards India, for reasons of geography and history, India has been traditionally preoccupied with defending its north western borders and has been generally criticized for neglecting much of its northeast beyond Assam.

India shares long and mountainous borders with both China and Myanmar and from time to time insurgents from India's northeast states have been operating from across these countries. Secondly, India's foreign policy has been guided, all these years by high moral principles rather than narrow national security considerations. As a result, when, in Myanmar, the democratic forces were themselves gearing up for reconciliation, Indian government had continued to neglect ground realities in Myanmar. But gradually, this security consideration has finally started making an impact on our foreign policy makers and a pragmatic approach can already be seen on our Sino-Indian-Myanmar front.

(c) Neighbouring countries have been watching these Chinese inserted uncertainties with fear and unease. China's naval build-up in this area has been a great cause for alarm. Five new ports have been constructed along Myanmar's coast, from Victoria Point in the south to Sittwe in the northern Arakan state, all using Chinese participation and aid. Moreover, apart from

these dredging of port and expanding dockyards, China has often been accused of building a major naval base off the southern Myanmar coast.

(d) In late 1992, a western spy satellite had detected a new; 150 feet antenna used for signals intelligence at naval base on Cocos Island, located barely 30 NM from the India's Andaman Islands chain. Myanmar, it is believed, allows china to monitor this sensitive maritime region, which apart from its seabed resources also constitutes major waterway for much of Asia's sea-borne trade.

(e) The facilities available in Coco Island give China a capability to not only monitor the movement of Indian ships and air traffic but also our missile tests conducted at Chandipur on sea on the northern coast of the Bay of Bengal.

(f) More recently, intelligence reports indicate that China is pressing Myanmar to allow it access not just to Cocos Island but to other strategically located listening posts on the Ramree Island south of Sittwe, off the coast of Arakan state and an island off the Tenasserin state in the south [20].

(g) China has funded both the development of the new deep sea-port at Tilowa facing the Bay of Bengal and the new six lane highway connecting the port with Yangon and Mandalay, which runs up the Irrawaddy Valley to Yunnan [21]. The highway provides essential infrastructure for the Myanmar's developing industrial sector and for marketing of its agricultural products. But

the highway is not just for commercial use. In times of conflict, this highway would provide for rapid transfer of troops across the length of Myanmar.

27. With these clear indicators of China's expanding navy being in position of obtaining access to the Indian Ocean, both from our west and from our east, the Sino-Pak-Myanmar axis shall continue to be an area of great concern. In China's national security calculus, Myanmar now plays the same role in South/Southeast Asia that Pakistan plays in South/Southwest Asia. Considering that China also has a foothold in Sri Lanka and that Beijing's new "offshore" defence strategies are aimed at building China as a great military power by the middle of twenty-first century, India is likely to find itself encircled, though such projections may not seem very impressive unless seen in a long-term perspective. An essential component of Chinese expanding Naval power, its indulgence in Myanmar is also important as a force multiplier as its bases in this tiny country will in the long run also greatly facilitate logistics support in China's effort towards controlling the straits of Malacca and South China Sea [22].

28. In view of these developments, India needs to prepare for itself a long-term national security policy perspective .The first step was taken by India when its external affairs minister Mr J Singh visited Myanmar on 13 Feb 2001 to begin what could prove to be the most serious engagement with Yangon since visit of late Prime Minister Rajiv Gandhi in Dec 1987. This will help India not only in normalising the relations between the two nations but also help in establishing a foot hold in the energy rich nation, thus countering the Chinese presence to some extent.

29. India's policy needs to take into account the dangers emanating from Myanmar. By establishing a substantial presence west of Irrawady and on the Rakhine coast, China will neutralise India's strategic preponderance in the Bay of Bengal. China is also steadily extending its control over the northern parts of

Myanmar; it could overtime outflank India in Arunachal Pradesh, which it considers Chinese territory.

30. The growing Chinese influence in the areas bordering India would enable China to spread its influence and resume its support to rebel and insurgent groups in the Northeast. China has already established a foothold in Chittagong. A link-up between Myanmar and Bangladesh would bring the Chinese right on the India's doorstep and complete Chinese encirclement of India from the east. This is a matter of serious concern for India.

CHAPTER IV

INDIAS INITIATIVE S IN BAY OF BENGAL REGION

1. In January 2005, the Petroleum Ministers of India, Bangladesh and Myanmar approved, in Yangon, a trilateral joint press statement to transport gas from the Sittwe gas fields by pipeline through Bangladesh to India. It was agreed that officials from the three countries would prepare a tripartite MOU, to be approved by the three ministers, after which a techno-economic Committee would pursue the implementation of the pipeline project. The overland route of the pipeline passing through Bangladesh had two observations:

(a) A shorter route from Sittwe to Dhaka via Cox's Bazaar and Chittagong, and then to Kolkatta via Khulna and Basirhat.

(b) A longer overland route from Sittwe to Dhaka via the Indian State of Tripura, moving on to Dhaka through Comilla and then on to Kolkatta via Khulna [23].

2. The advantage of alternative (b) was that it would enable India to monetize its gas reserves in Tripura which have remained undeveloped for r twenty years. A variation of the routing proposed was to pursue the shorter version with a short spur pipeline linking Tripura gas to the pipeline.

3. The proposed pipeline was seen as a win-win-win proposition since:

(a) It enabled the transportation of Myanmar gas to India through the most economical transnational pipeline route.

(b) It also enabled Bangladesh to obtain transit fees for the length of the pipeline within its territory as also to transport its own gas from the east of the country where it is located to the west where it is required, at no cost to itself.

(c) It enabled India to exploit its Tripura gas reserves besides meeting to the power and industrial needs of east India.

4. Unfortunately, the trilateral government-to-government Memorandum of Understanding (MOU) could not be signed as Bangladesh insisted on the inclusion of certain bilateral India-Bangladesh issues in the MOU. These issues were:

(a) India should facilitate power transmission from Nepal and Bhutan to Bangladesh when the former had surplus power.

(b) India should facilitate the transit of Bangladesh goods to Nepal and Bhutan.

(c) India should take action to bridge the yawning trade gap between India and Bangladesh.

Chinas' Game Plan

5. Concerned about the delay in finalizing the MOU for the pipeline via Bangladesh, Myanmar (probably under the influence of china ) entered into an MOU

with Petro China in December 2005. The MOU was worded in general terms; however, news reports referred to the possible sale of gas from A-1 and A-3 blocks

to China besides setting up of oil and gas pipelines from Sittwe to Kunming in the

Yunnan province in southeast China, bordering Myanmar. The Myanmar press has recently quoted an unnamed Myanmar official as saying: "At present we have not decided which country to sell A-1 gas to." The official added that they were considering three options: selling the gas via pipeline, building an LNG plant, and construction of gas-based industries in the country . [24]

6. In the recent past several press reports have analysed the Myanmar-PetroChina MOU as part of the expanding bilateral Sino-Myanmar political and economic relationship over the last decade. The oil and gas pipelines from Sittwe to Kunming in southeast China have obvious positive implications for China's energy security interests, they provide an alternative route for oil and gas from the Gulf to China bypassing the Malacca Straits. They also enable China to diversify its hydrocarbon supplies from the Gulf by obtaining access to Myanmar's resources through the most economical route. It is understood that an oil pipeline linking Myanmar's deep-water port of Sittwe with Kunming in China's Yunnan Province was approved by the National Development and Reform Commission (a department of the Chinese State Council) in early April 2006 [25].

7. There are also other reports that other Myanmar-China connectivity are being pursued vigorously with development of road, railway and inland waterway projects. This is a cause of serious concern to India. As the close proximity of Chinese military presence in a neutral country is a cause of concer to overall regional and national security. Therefore it can be construed that China in the garb of securing its energy routes is in turn trying to encircle India on all sides , this approach has a full potential to imbalance the overall regional security scenario in South Asia and more

so in Bay of Bengal region.

India's Approach

8. Taking into account India's gas requirements and the impasse pertaining to taking the pipeline through Bangladesh, GAIL, the Indian lead-company in the pipeline project, commissioned a study to route the pipeline directly from Myanmar to India, bypassing Bangladesh . The project would include:

(a) A pipeline in Myanmar, 50-kilometre offshore and 200-kilometre onshore, up to the Indian border; and

(b) A pipeline of 1,500 kilometres from the Indian border to Gaya, where it would join the Jagdishpur-Haldia pipeline [26].The total cost of this project would be about $2.75 billion, and would provide India with 18 mmscmd of gas. The project envisages capacity augmentation to 28 mmscmd with additional compressors.

9. Towards the end of 2006, there was continued uncertainty about the pipeline project, with reports from Myanmar indicating that the government had not been satisfied with the prices for the gas offered by the various bidders and that it would examine the LNG option for its gas. However, in January 2007, a senior Myanmar official said in New Delhi that there were no plans to shelve the pipeline project and that discussions on the price of gas were still on. The official said that no decision had been taken whether to sell the gas as such or in the form of LNG. The news report noted that India was competing for the Myanmar gas with China, Thailand and Republic of Korea [27].

10. In the latter part of 2008, there were reports that Myanmar had decided to sell gas in the Al and A3 blocks to PetroChina rather than to GAIL. This followed an earlier

Myanmar Government statement in March 2008 when stakeholders of the Al and A3 blocks had been informed that the Myanmar Government were considering export of gas in these blocks to China through a land pipeline [28].

CHAPTER-V

THE WAY AHEAD

1. The difficulties that emerged with regard to the Myanmar-Bangladesh­-India gas pipeline project have important lessons for all who are pursuing promotion of energy cooperation in Asia for a stable Asia and in the general interest of India to keep china out of this region through India's initiative and regional influence. Despite India's best efforts to balance the regional security scenario there are many hurdles still to cover . Transnational pipeline projects are mammoth projects thus are very difficult and complex ventures since:

(a) These projects involve different countries with differing interests.

(b) Being transnational in character, and involving neighbouring countries, they frequently carry a substantial and complex political baggage of disharmony and discord.

(c) These projects are beset with serious technical and financial difficulties, requiring the mobilization of huge resources from domestic and international sources in an environment of mutual trust and confidence [29].

2. These problems are particularly daunting in South Asia which has been the theatre of considerable intra-continental discord and conflict, and has relatively few success stories in regard to regional and continental cooperation. It is also true that some of the issues that divide Asian countries, particularly neighbors, are fairly complex

and are unlikely to be resolved in the near future. With the presence of foreign power (China) in the region the problems are bound to increase only.

3. The principal lesson that can be drawn by South Asian countries from the thirty-five-year history of transnational gas pipelines around the globe is that these projects are successful only if they are founded on a strong commercial base and at the same time, are effectively immunized from the vagaries of day-to-day political issues through arrangements based on government-to-government and commercial agreements. Bangladesh, by insisting on references to bilateral India-Bangladesh issues in the agreement pertaining to the Myanmar-Bangladesh-India pipeline project, ensured that the project would be a non-starter. This probably is a counter balancing act by Bangladesh to counter the growing Indian influence in the region. These kind of petty issues affect the overall Indian influence on the other South Asian countries.

4. The international community, over the last thirty-five years, during which thousands of kilometers of gas pipelines have been laid across all continents, has developed laws, rules, norms and practices that ensure that pipelines can be insulated to a considerable extent from day-to-day politics made "safe and secure" on the basis of international best practice. Not surprisingly, today 130 transnational pipeline projects, valued at US$200 ion, are at various stages of implementation in Europe, Africa, North and in America [30].

5. While the challenges involved in the implementation of transnational pipeline projects are serious, what gives them impetus is the common interest of oil and gas producers to have stable markets for their products and for Liners to have assured supplies to maintain their economic development programmes. Though Asia has

relatively little experience of transnational oil gas pipelines, the availability of abundant hydrocarbons within the continent has also the overwhelming demand for this resource, ensures that of national security and energy security can and should coalesce the various South Asian nations[31].

6. While China has either resolved or shelved its border disputes, India has active conflicts on almost all of its borders with neighboring states. Apart from India's poor relations with Pakistan on its western borders, the ongoing violence in India's northeast with sporadic attacks on pipelines and India's poor relations with natural gas-rich Bangladesh and China-friendly Myanmar have prevented it from fully exploiting its proximity to a region rich in energy resources on its eastern borders. Frosty relations between Bangladesh and India are rooted in accusations by India that Bangladesh is fueling terrorist movements in India's northeast in the presence of rising Islamic fundamentalism, illegal migration between both states, and Bangladesh accusing India of re-routing the Ganges and Brahmaputra river systems that traverse both states. These disagreements have slowed the progress for discussions on a natural gas pipeline from Myanmar to India, which will have to pass through Bangladeshi territory forcing India to look into the expensive option of creating a deep-sea pipeline through the Bay of Bengal that would bypass Bangladesh [32].

7. Disagreements have recently given way to progress as a joint statement was issued at a meeting of the energy ministers from India, Bangladesh and Myanmar in Yangon, which agreed to the construction of a 900 km gas pipeline from Myanmar's offshore Shwe field to Kolkata passing through Myanmar's Arakan state, the Indian states of Mizoram and Tripura, and Bangladesh. As part of the deal, Bangladesh will also get access to the gas as well as $125 million in transit fees. In exchange for agreeing to the project, Bangladesh is also pushing for a trade and transport corridor linking Nepal and Bangladesh through Indian territory as well as access to hydroelectric power generated in Bhutan and Bangladesh using India's power grid [33].

8. Notably, Myanmar has helped Indian security forces to crackdown on northeast Indian insurgent groups on at least three occasions over the past ten years. India's more conciliatory approach with Myanmar's military regime was demonstrated most recently when India became the first country to host General Than Shwe, the hard-line chairman of Myanmar's ruling State Peace and Development Council, since the ousting of moderate Prime Minister Khin Nyunt. However, India's warming relationship with Myanmar is making Myanmar a potential stage for Sino-Indian energy competition. For example, China is also in discussions with Myanmar for a 1250km pipeline from the deepwater port of Sittwe in Myanmar on the Bay of Bengal coast to Kunming in Yunnan province.

9. China is also looking at the possibility of pipelines traversing Pakistani and Bangladeshi territory, as part of its "string of pearls" strategy to bypass the narrow Straits of Malacca, which experiences 40 percent of the world's piracy and through which 80 percent of China's oil imports flow. Construction has been completed on a deep-sea port in Gwadar in the Pakistani province of Baluchistan, in which China has provided technical expertise and financing. China's involvement has been fueled by the proximity of the port city to the Straits of Hormuz, through which 40 percent of the world's oil passes. The port would compete with a port facility at Chabahar in Iran, which is being jointly developed by India and Iran to access the landlocked sates of Central Asia and Afghanistan. China's "string of pearls" strategy also forms part of a wider Chinese policy to encircle India [34].

10. India's plans to generate hydroelectric power through damming and re-routing several river systems have also been delayed by changes in state and central governments and disputes with upstream and downstream states such as Nepal, Bangladesh and Pakistan. Most recently, Pakistan has been pushing for international arbitration to resolve a dispute over the Baglihar dam, which India is constructing to generate power across the Chenab River running through Kashmir. Pakistan claims this project is a violation of the 1960 Indus Water Treaty. The dispute now threatens to derail the peace initiatives between India and Pakistan.

__________________________________________________________________________________

29 A New Energy Frontier : Sudhir P Devare 2008, p 52

30 A New Energy Frontier : Sudhir P Devare 2008, p 53

31 A New Energy Frontier : Sudhir P Devare 2008, p 53

32 BasirAhmed JNU, New Delhi

33 BasirAhmed JNU, New Delhi

34. Lecture by Vice Adm Vijay Shankar PVSM,AVSM, CINCAN at DSSC on 11 Jul 09

CHAPTER – VI

CONCLUSION

1. It can be seen that there are no easy solutions to India's energy security considering the apprehensions of the neighbouring countries and Chinese inroads into this region . There are enough resources available in the country, some with proven technologies and some yet to be developed. India's energy challenges need to be tackled in a way that social, environmental, economic and security problems are genuine and not aggravated, as is typically the case with conventional energy strategies which either ignore these problems or do not deal with them adequately. Therefore it is necessary to adopt measures that will ensure secure supply of energy from all available sources to fuel the economy in the near future and also ensuring that the regional security scenario is intact.

2. If at all Indian government wishes to dilute the Chinese influence in Bay of Bengal region in particular and South Asian region in general, Indian being the big brother having long term strategic interest in the region and to gain a right full place in the world need to initiate a few confidence building steps which increases the regional cooperation,harmony and security. A few of the recommendations are :

(a) The global environment provides a historically unprecedented scale of capital flows, trade opportunities, information and technologies, which, if utilized, can dramatically transform the material and social conditions of life of the peoples of South Asia. This requires bringing to bear the new consciousness of South Asian cooperative and equitable partnership to undertake specific policy actions.

(b) To initiate Energy cooperation and water management and conservation within South Asia countries without external influence.

(c) Increased investment for accelerating economic growth, especially in social infrastructures and energy sector.

(d) India requires rapidly rising imports of oil and gas from the Middle East and Central Asia to fuel its economic growth. The oil and gas pipeline from Iran through Pakistan to India alone can generate over $700 million a year and with similar lines from Central Asia, Afghanistan through Pakistan another $500 million. This could add 1.5 percentage points to Pakistan's GDP growth. The gains from trade between India and Pakistan will be greater for Pakistan than India, and can accelerate GDP growth in both countries. Thus opening up trade and investment between these traditional rivals is vital for the overall safer regional security scenario in South Asia.

(e) Energy and Water are two vital resource inputs into economic growth. South Asia requires integrated gas and electricity grids for the welfare of each South Asian country. Though a distinct dream however it is not an impossible proposition considering the energy requirements of the SAARC countries , however this requires a strong political will and national consensus.

(f) Russia is a potential energy asset to the Asia Pacific region. However, to transport gas from there, India will need to construct a 3,700-km long pipeline, which is not commercially feasible. Compared to other regions, transportation of energy sources from the Gulf is cheaper. Therefore, the possibility of diversifying the regions from which to acquire oil and gas supplies in the near future seems somewhat remote. In the subcontinent, Pakistan has not been cooperating with India on Indo-Iranian energy schemes. The ambitious plan of the Russian company, Gazprom, to connect Iranian gas to India through the Pakistani coastal areas is yet to be initiated. Again, due to Pakistan's reluctance, the Turkmenistan pipeline could not be connected with India and it terminated to Pakistan only via Afghanistan. The case of Bangladesh is more frustrating. Despite Bangladesh possessing a good reserve of natural gas and India offering a huge market, Dhaka is reluctant to cooperate. Perhaps it views India as a regional hegemon or its internal party politics does not allow it to take a decision in favour of New Delhi.

(g) To initiate appropriate legal, fiscal and regulatory steps to create a more attractive environment for foreign investors such as streamlining the license approval process for private power producers, offering more incentives for upstream oil and gas exploration and promoting joint ventures across the borders.

(h) Indian leadership should consider promoting and strengthening its oil diplomacy on a regular basis. This will build up the confidence among the neighbouring countries and on the other hand India will succeed in gaining a secure supply of energy at much cheaper rates.

(j) India needs to open the energy sector to complete private participation & foreign investment. The success of New Exploration Licensing Policy in the oil & gas sector indicates the scope of extending the policy to other sectors as well. Foreign investment in Build-Own-Operate projects in the renewable energy sect may also be considered to harness its complete potential.

3. The economy & future of the country rely heavily on energy security. Energy security should thus shape major foreign policy decisions. Diplomatic missions should have an agenda to further the aspects of energy security and secure energy needs in foreign countries. The diplomatic missions need to be staffed with personnel adept in energy related issues and policies and having the knowledge and authority to initiate energy asset acquisition discussions. Also India apart from improving its relations with neighbouring countries must also enhance & exploit her relations with Central Asian Republics & African countries in order to secure her energy needs and counter the Chinese influence in these regions as well.

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(e) Energy for South Asia : Report on Regional energy security for South Asia.

4. Material obtained from Internet

(a) China: History, Geography, Government, and Culture: free encyclopaedia, 20 Oct 2009.

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(c) History of India and Names of India: free encyclopaedia, 24 Nov 2009.

(d) The Hindu: Online edition of India's National Newspaper.

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and Natural Gas, Government of India Presented in the Shell Distinguished Lecture Series , Rice University.

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Potential Conflict? Satyakee SenJune 6, 2006 submitted to GP 200A.

(g) Institute for National Strategic Studies National Defense University

Energy Security in South Asia : Can Interdependence Breed Stability? Joseph McMillan September 2008eiForum No. 232http://www.ndu.edu/inss.

(h) India-Asean relations analysing regional implications :Mohit Anand

former research officer, ipcs, New Delhi.

(j) The Rise of an Asian Tiger: India's Quest for Energy Security

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(k) China: A New Nuclear Doctrine? By Bhaskar Roy, 26 Aug 2008.

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