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Energy Crunch Forcing India to Look Abroad

Rising oil prices are fueling concern not only for the U.S. economy, but for booming markets in China, India and other parts of the world. The crunch is forcing India to look to new energy sources in South Asia to maintain growth.

The United States has long been the world's top consumer of oil, but competition for the fuel is growing as more nations seek to expand economically. President Bush expressed concern this week at the damaging effect of high oil prices, which he says are partly due to continued growth in China and India. While China continues to grow at a record pace, business in neighboring India is showing no signs of slowing down either.

The problem, says India's former ambassador to the United States, Lalit Mansingh, is that growth is already taking a toll on energy supplies and other natural resources across South Asia.

"So when this region, one-third of the world's population, is growing at the rate of 7 percent, you can imagine what enormous demands it's making on the resources of the region and of the world," he said.

He says the gap between the discovery of new energy supplies and expanding demand in South Asia is worsening, with demand growing more than twice as fast in recent years.

To remedy the problem, India is looking for alternative energy sources and new deals with nearby countries, including plans for natural gas pipelines from Iran and Burma. While supporters of the plans say the economic benefits will be significant, others doubt the costs are justified, even if the projects are approved and completed.

Senior analyst for U.S.-based Energy Security Analysis Incorporated, Rick Mueller, says the gas pipeline from Iran is of special concern because it would run through rival Pakistan.

"It has some serious political questions around those pipelines. Relations with Pakistan have never been easy,” he noted. “They do seem to be thawing out now. But to try to predict a long-term rapprochement between India and Pakistan is risky at best."

The pipeline could also generate political tension between India and the United States, which is highly critical of Iran's nuclear ambitions and the lack of democratic reforms. Earlier this month, during a trip to India, U.S. Secretary of State Condoleezza Rice voiced concern about the project.

Another possible source of natural gas to fuel India's economic growth is from its Muslim neighbor Bangladesh. India has expressed frustration at Dhaka for stalling a decision on whether to allow gas exports or preserve its resources for domestic use.

Bangladesh's former foreign secretary, Shafi Sami, says the nation's gas resources have become a divisive political issue, causing massive labor strikes. But he hopes the nation's economic ties with India will not suffer.

"I would definitely agree that it was a missed opportunity. However, I would not be able to conclusively say that it was a totally lost opportunity," he said.

Until Bangladesh resolves the debate, the former Indian ambassador, Mr. Mansingh, says India remains open to a future gas deal, to help its own economy and to strengthen ties with its neighbor.

But the long-running debate in Bangladesh raises the question of whether business or politics is more important to foreign relations in South Asia. Deepa Ollapally, a professor of Asian studies at George Washington University, says political differences remain a strong force in the region.

"In this, the question is to what extent can economics really lead politics. Can economics play a transformatory role? And it seems to me the jury is still way out on that in South Asia," he added.

And as long as economic disparities and political differences exist between South Asian nations, it's hard to tell if business is enough to transform relations in the area.