The Afghan president, Hamid Karzai is ringing in the New Year by concluding two major oil deals — with China and Iran — while the Barack Obama administration is on Christmas vacation.
The signing of the agreement earlier today in Kabul between the Afghan government and China National Petroleum Corporation [CNPC] is a defining moment in the scramble for oil in Central Asia. The CNPC has won the rights to “explore and extract” the Amu Darya River Basin oil deposits in northern Afghanistan in the provinces bordering Uzbekistan and Turkmenistan.
The deposits are estimated to be in the region of 90 million barrels of oil by current estimates. The oil is expected to flow in 2 years and China can feed it into its pipeline system from Turkmenistan and Uzbekistan.
Xinhua reported that CNPC will pay a 15% royalty on the oil to the Afghan government and a 20% corporate tax, apart from a share of 70% in the profit proceeds. It is a generous package. Obviously, China is preparing for the long haul by creating a ‘win-win’ situation — unlike Karzai’s tight-fisted western partners.
The oil deal with China was on the cards but on the other hand, the petroleum deal with Iran comes as a pleasant surprise. The agreement involves purchase of 1 million tonnes of petroleum products from Iran by Afghanistan.
It means two things. One, Karzai has ignored the Obama administration’s sanctions policies toward Iran. Two, Tehran is showing its thumb at Washington by underscoring that not only is Iran self-sufficient in petroleum products, it even has surplus for exports despite the US efforts to arm-twist other countries from supplying Iran with petroleum products. (Here is a lesson for India’s Reliance Group, which chickened out rather too early.)
The intriguing part is whether Karzai is learning from Iraq’s Nouri al-Maliki. I have been mulling for a full week already over Karzai’s strange interview with the Afghan TV in which he called on Pakistan to have an ‘independent policy’ toward Afghanistan, disengaging itself from the US and based on Pakistan’s legitimate interests.
Curiously, Karzai bemoaned that Pakistan has far too long subserved the US regional policies in Afghanistan. Coming on top of Karzai slamming the door rather unceremoniously on the US’s private dalliances with the Taliban and then proceeding to make it a ‘precondition’ that any talks with Taliban should be with Pakistan’s participation, there are indeed some straws in the Hindu Kush winds that need to be noted as we get into the new year.
Non-aligned foreign policy and apolitical international business environment
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The example of Reliance makes an interesting case study in management studies. Business investment choices are made not on criteria of politics but business returns. It was reported those days that Reliance had made a significant investment in Texas for shale oil. This extraction and processing experitse has the potential to significantly alter energy security. If the political legal framework imposes either-or kind of political choices on business investment, then the criteria for investment determination alters fundamentally. This is the rationale with which the politics of sanctions is played any way.
Indian industries need to be seen as the victim of such policies and it is in a sense failure of Indian diplomacy, particularly the policy of non-alignment to expand the choices available to Indian business and insulate against external political-legal constraints which are contradistinct from international law within UN aegis.
The failure for Indian business is doubly tragic because, in the domestic scene also, the disassociation from politics is not feasible. Infact, always admired the courage of Late Dhirubhai who chose to master the domestic political process rather than be victim of, simply for doing the right things for Indian economic growth.
While reflecting on the double-whammy situation for Indian business may some thought be also spared for the plight of Indian management professionals who being incompetent to withstand pressures of harsh environment opted for flight abroad, even when for some of them it meant working only in non-managerial domains.
With this last post, this personal effort to provide bit of feedback from management studies perspective shall end.