Iraq And India Inc

It’s a delicate game of economic diplomacy, with no blacks and whites, only shades of grey. A game whererules change every minute. One where whatever you say or do has a direct or indirect impact on what you get.And that’s exactly what’s happening regarding Iraq. Almost all the powerful nations, including India, areconstantly measuring the gains and losses of their decisions vis-à-vis Iraq. There are no doubts that Indianeeds to play it cautiously, intelligently and aggressively. For, the stakes are quite high. Not justpolitically or diplomatically, but even for India Inc.

Before we venture to discuss the nuances of this age-old game, let’s put a few things in perspective.Global think-tanks have estimated that the reconstruction work in Iraq could entail an expenditure of awhopping $100 billion over the next decade or so. More importantly, there’s immense potential in theunexploited Iraqi oilfields. Estimates indicate the actual oil reserves in Iraq could be larger than SaudiArabia; in effect, the largest in the world. Obviously, every country worth its name - including India - istrying to get a slice of this lucrative pie (both reconstruction and oil).

So, who’s is likely to bag these mouth-watering contracts? How? Why? When? These are questions that aretroubling the Indian policy makers too. That’s why, despite the overriding public opinion against it, theyare not outrightly rejecting the US initiatives to pressure India to send its troops to Iraq. New Delhi hasinstead said that it’ll do so only if the UN is involved in the peace-keeping efforts. But will this stanceirk the US so much that it may start blocking out Indian firms eyeing the Iraqi contracts? That’s one of thequestions that needs to be addressed while New Delhi is formulating its Iraq policy.

While India does that, it’s also critical to understand why the US is insistent that nations like Japan,India and Pakistan send their troops to Iraq. Washington has three clear objectives.

• One, it wants to expand the coalition so that the world stops perceiving its army in Iraq as an "occupation"force.
  
  
• Two, it’ll enable the US to sideline the UN further. For, if not many nations agree to send troops,Washington will be forced to introduce another resolution in the UN and agree to the latter taking over amajor chunk of "command and control" structure until a stable government is formed in Baghdad. In fact,there’s already a talk of such a resolution.
  
  
• Three, the US thinks that if more countries are "actively and militarily" involved in Iraq, thesenations will be forced to pick up the reconstruction tab too. For, neither the US nor the prospective Iraqioil revenues can generate the sums needed to rebuild Iraq.

Therefore, if the UN does not get involved, or if the US continues to call the shots in Iraq, nations thathave hurt Washington’s interests may need to be 'punished'. One of the penalties could be to block theirfirms from getting Iraqi contracts. To realise the import of this argument, just take a look at how theFrench, German and Russian firms are finding it difficult to get into Iraq. The reason: all these threenations vociferously opposed the US 'war' on Iraq. Could a similar thing happen to India?

A few military analysts contend that sending troops to Iraq has nothing to do with winning businesscontracts there. In a panel discussion aired on All India Radio, retd. Lt. Gen. Shankar Prasad made thefollowing points:

• India has enjoyed good relations with Iraq and, therefore, cannot be totally blocked out.
  
  
• A lot of Indians work in West Asia and a sizeable portion of the labour force required to rebuild Iraqwill be of Indians, and that
  
  
• The cost advantages of Indian firms will force major US or UK contractors to subcontract some work toIndia.
  

Now consider the flip side. After the first Gulf War, several billion dollars were spent on rebuildingKuwait. Only one or two contracts came India’s way. We did send a number of labourers, but most of theseincluded low-skilled jobs. So, what’s stopping history from repeating itself? New Delhi should alsounderstand that a number of its companies were perceived to be close to the Saddam Hussein’s regime, and notto Iraq. Now, the political equations have changed. So, a number of opposition politicians in Iraq mayactually not wish to do business with Indian companies. In fact, one Indian firm has been banned by the US forallegedly supplying sensitive equipment to Saddam’s government.

The facts indicate that the going has indeed been tough for India Inc. Three months after the end of GulfWar II - and the battle for Baghdad - not too many Indian companies have won any contracts, or subcontracts.Ashok Leyland recently claimed it bagged a $50-million deal. And ONGC hopes that Iraq’s provisional regimewill honour the contract for Block 8 that the former signed with Saddam’s government in 2000. (However, itmay be said that Block 8 has recoverable reserves of a mere 54 million barrels and the real test for ONGC iswhether it bags the contract to explore Tuba oilfields, which has the capacity to produce 200,000 barrels perday.) Still, most Indian firms are clueless about how to bid for tenders, many of which don’t includecompetitive bidding.

What’s more important are the games that New Delhi is playing elsewhere in West Asia. One of them is inIran, considered to be an integral part of the "axis of evil" as defined by the US. Over the past twoyears, New Delhi has been cosying up to Teheran for a variety of reasons. Obviously, there are macro reasonssuch as sending the right signals to the Islamic world and strengthening the country’s oil security sinceIndia imports nearly $1.4 billion worth of oil and gas from Iran each year. Not to mention the micro factorsthat Iran could provide a conduit to outflank Pakistan vis-à-vis Afghanistan.

For years, Pakistan has been more involved in Afghan affairs, initially by providing monetary and militarysupport to mujahideen fighting against the USSR occupation and, later, by supporting the previousTaliban regime. Now, India has a chance to change those equations, given that the current Afghan leadership iscloser to New Delhi and there’s a lot of warmth for Indians there. That explains why India, Iran andAfghanistan are talking of a comprehensive energy agreement and India is building a 213-km stretch of road toenable flow of Indian goods via Iran to Afghanistan. (Despite all this, India has not been able to make majorinroads in getting contracts pertaining to rebuilding Afghanistan after the fall of the Taliban. The onlydeals India Inc has got is part of the $200-million aid that the Indian government has promised to Kabul.)

But the changing Indo-Iran ties are troubling the US policy makers. The Bush administration has alreadyraised questions about it in several high-level meetings. Let's remember that Washington views Teheran as anenemy and has imposed several sanctions against it. Recently, a report by Rand Corporation, one of the leadingUS-based think-tank has pointed out that India and Iran are:

 "developing closer ties that will affect not just Southwest Asia and the Middle East but also theUnited States. Their new relationship could powerfully influence such important matters as the flow of energyresources, regional and worldwide efforts to combat terrorism, and political developments in Pakistan,Afghanistan, and other states in Central Asia. The consequences will not always suit U.S. interests."

Given such complexities in West Asia, it’s clear that New Delhi has to be careful in treading thisdiplomatic terrain. Especially when billions of dollars' worth of contracts are at stake, apart from thetenuous Indo-US relationship and ties with the overall Islamic world.

Endnote: The appointment of Robert Blackwill, the former US ambassador to India, as George Bush’s keyadvisor on Iraq may be a boon in disguise. Blackwill is known to be pro-India, especially on issues likeKashmir and cross-border terrorism.

Alam Srinivas is Business Editor, Outlook