Monday, 30th October 2017

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Secret histories - Ministers get away with what peons can't, when it comes to oil

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By Diplomacy - K.P. Nayar
  • Published 25.02.15

My first encounter with an Indian "official secret" from the petroleum ministry - which is making front-page headlines this week - was in the 1980s. It took me only minutes to realize that almost the entire "secret" document had been plagiarized from an oil and gas industry newsletter published every week from Cyprus.

I was visiting New Delhi and called on a senior official with whom I had developed an association during his frequent work-related visits to oil-producing countries in the Gulf. He always made transit halts in Dubai, where I lived then, because it was his "approved route". This meant that he was required to fly on Air India from New Delhi to Dubai, and could only take another airline to his final destination if the State-run Indian national carrier did not fly on that sector. His overnight hotel stay in Dubai and other transit expenses meant that the government spent more on his trips than it would have cost the exchequer if the official had taken, say, an Iran Air direct flight from Mumbai to Tehran or an Iraqi Airways flight from Delhi to Baghdad. But then, those are still the ways of the government of India.

On this particular trip of mine to New Delhi, the official in question thought that he was doing me a professional favour by passing on a petroleum ministry document on crude-oil fundamentals, including international market-price assumptions. Now, this was a time when the Iran-Iraq war was raging. The price of "sweet" crude, for instance, had gone up from $14 a barrel before the start of the war to $35 a barrel at the worst phase of the conflict in terms of falling production by the two warring oil-producing states.

The document I received was prominently classified as "SECRET" on the right-hand side of its opening page. India's foreign-exchange reserves were a far cry from today's comfortable levels and an increase in oil import prices by two and a half times imposed an unbearable burden on the treasury. But when I went through this so-called secret document which supposedly had a bearing on critical oil imports by India in my hotel room, I instantly knew that I had read it a few weeks before in the Middle East Economic Survey, better known by its industry acronym of MEES.

For 57 long years, MEES has been an invaluable reference material for anyone who had any serious interest in the West Asian oil and gas industry - a highly priced, controlled-circulation weekly newsletter published originally from Beirut and later from Nicosia after the Lebanese civil war of 1970s forced most businesses with international ramifications to relocate. It was widely believed, but never confirmed by its publishers, that MEES was part-owned by the Saudi Sheikh Ahmed Zaki Yamani, the mere lift of whose eyebrow could send global oil prices up or down, depending on what Riyadh desired. For 24 years from 1962, including the first "oil price shock" of 1973 when oil prices went up by a whopping 400 per cent, Sheikh Yamani was Saudi Arabia's oil minister, the virtual czar of the Organization of Petroleum Exporting Countries or OPEC.

It was also rumoured during my years in the Gulf that a top source for MEES editors like the highly respected Ian Seymour was Mana Saeed al Otaiba, Yamani's counterpart in the United Arab Emirates, who holds a record of having served as an elected president of the oil cartel. An accomplished poet with a doctoral degree who doodled during OPEC meetings, Otaiba stood out among his peers, most of whom in those years, were rough bedouins not only at heart but also in manners and behaviour. For most of us who had to write about oil because it was the lifeline where we then lived in the Gulf, Otaiba was accessible and professionally a delight to deal with. It would not at all have been surprising if he routinely got a kick out of leaking stories to the most influential oil and gas publication worldwide.

Several years later, when the shock had worn off from a disturbing realization that decision-makers in the petroleum ministry were plagiarizing from specialized media and presenting it as expert analysis to ministers and even the cabinet committee on economic affairs, I mentioned this episode to an Indian diplomat. I shared this information with the diplomat because he had a passionate and devoted interest in Arab affairs. Of course, it was typical of the ways of our government that this diplomat had much earlier been posted far away from Arabia, where he would have been best suited to serve.

This diplomat had his own story to tell about the petroleum ministry. Saddam Hussein had invaded and set ablaze oil fields in Kuwait sending oil prices soaring. India would pawn its gold reserves in a few months to tide over a foreign exchange crisis. One day, the diplomat ambled into the offices of the petroleum ministry to see his batchmate from the IAS. The latter, knowing the diplomat's interest in Arab issues, shared his wisdom that oil prices would further go up sharply. The conventional wisdom was that once Saddam was beaten back, oil prices would gradually ebb.

Annoyed by a quizzical look on the diplomat's face, which was meant to question the "expertise" of his IAS colleague, the latter flung a booklet towards his visitor from the ministry of external affairs. What else but a copy of MEES, where the IAS official had highlighted paragraphs predicting a market surge. The man from the MEA noted that the copy of MEES was from the previous autumn. Oil prices always go up in winter from the European demand for heating oil. The petroleum ministry was nine months behind the market. The MEA official nearly cried for his beloved country, which was making energy policy with grossly outdated data.

There is no reason to believe that anything has changed in the petroleum ministry in terms of creating a strategic vision or far-sighted policy. The difference between the 1980s or '90s and now is that the energy pie has become larger with the entry of domestic conglomerates and foreign oil majors. A sector that was once routinely plundered by ministers, politicians, family members of diplomats posted in oil- and gas-producing states, and energy bureaucrats is now open for pillage by multinationals and Indian energy firms as well. That explains the latest scandal in the petroleum ministry that is being referred to as "Shastrigate" after Shastri Bhavan, where oil bureaucrats have their offices in New Delhi.

I know of a petroleum minister who went to Venezuela not long ago and sought a meeting with the late Hugo Chavez. President Chavez, otherwise a charmer with great affection for India, was notorious for his lack of punctuality. Our minister patiently waited for four and a half hours in the outer office of the president and did not leave until Chavez gave him an audience. A close aide of Chavez told me that presidential aides were impressed that the minister was a devoted Chavista, the term for followers of the Bolivarian revolution that Chavez brought about in Venezuela. I disabused my friend of any such notion. This minister had a reputation of being at the beck and call of a business house that is now embroiled in the leak scandal. At the time the minister was visiting Caracas, the same business house was bidding for oil exploration blocks in Venezuela. That explained his willingness to wait for four and a half hours in Chavez's outer office.

Ministers get away with such egregious behaviour and other serious acts of commission. But peons who purloined documents for a few hundred rupees without even knowing their worth will now go to jail. Since K.D. Malviya was hounded out of Jawaharlal Nehru's cabinet because he was determined to build India's domestic oil industry instead of giving in to multinationals, the only time India was serious about energy security was when Mani Shankar Aiyar tried his hand at oil diplomacy. But we know what fate befell Aiyar as petroleum minister.