The Implications of the Hormuz Energy Crisis on South Asia

Good morning from Washington DC. Thank you for joining CSI's webinar series. This is Jane Nakano, senior fellow at CSIS energy security and climate change program. We're having the third in a series of webinar that focuses on the implications of the hormones energy crisis for sort of longer term policy making in uh Asia. But this uh today we're focusing on South Asia. It's one of the most dynamic regions in the entire world not just in Asia but really in the world. It it's home to a variety of countries including uh India which is the most populous country at the moment. But some of the economies are quite price sensitive to many of the uh not just hydrocarbons but many of the economic commodities that really are engines to the economic growth. I'm very pleased to be joined by three experts in uh this area. Uh first Anish De. He's the global head for energy natural resources and chemicals with KPMG international. The second is Buti Gar. She's the director for South Asia with the Institute for Energy Economics and Financial Analysis AIA. And Shashwatkumar who's my colleague from CSIS. He's the fellow with CSI's chair on India and emerging uh Asia economics. So, but let me just write you know jump right in as opposed to doing sort of a state um sort of prepared remarks um because we have quite a bit to cover for this very dynamic sub region within Asia. Um first let me focus on sort of the energy security this you know big notion that's really under spotlight at the moment. So let me ask all three of you um so you know in your uh view what is the single biggest lesson that this crisis has offered for uh to South Asia's management of let's say oil uh supply security. Uh let me go to um Anish first. >> Sure. Thanks for having me on this uh interesting topic because um you know over a period of time through this crisis and it's been more than six months now you know the viewpoints kind of changed some of solidified I think the biggest lesson for you know especially a country like India is diversification you know you look at uh I mean India dependent 90% of its for 90% of its LPG from uh the Gulf region more than 50% of its crude imports uh and India imports a lot of crude in it. 90% of its uh you know crude is imported. So a lot of it was concentrated in the Persian Gulf and that now has been diversified. Uh it started earlier with Russian crude but then eventually this is just now moved to US crude, Algeria, South America all of that and even if it cost a little more I think people are realizing the value of diversification. The second is storage and there here India has fallen behind China which has a lot of storage and that has actually moved the markets quite a bit. You know we didn't see the crisis uh including India we didn't see the crisis which could have happened had China not had that storage and the ability to flex its consumption basis that storage. So I think that's been a big lesson for India to build new storage capability. >> Thank you Anish. Let me go to uh you uh Bouti if you can offer what you know what you think is the biggest um lesson. >> Thanks Jane. Um I think one of the biggest lessons has been and not just the current West Asia conflict which is still ongoing but also the Russia Ukraine war. I think this is not like an isolated events. It is more like a systemic risk issue and how the uh countries respond to it rather than just going with the knee-jerk reaction of you know diversifying supply sources. I what at we believe is that can only help us buy time but what really the countries need is energy uh diversification not just from molecules but in terms of electrons. So I think there needs to be a better approach in handling um your fuel supplies. Yes. Right now I think India has expanded its say for example uh supply sources from 20 before the war began to 41 now we have lot many more countries uh through which we are importing you know oil and gas um but it is coming at a cost. It is definitely um had a impact on the current account deficit. We have seen how oil prices have gone up, how gas prices have gone up. While India still did had some uh cushion, fiscal cushion to absorb these prices. But if you look at other countries in the South Asia, I think they have been um very negatively impacted and not only in terms of uh diversifying their sources but say for example even uh they're getting loans from IMF you know where they had to increase and pass on these costs to the consumers they have not been able to manage uh the like the prices the pass on these costs to the consumers better and has been at the as I said at the receiving end much more than country like India where they have better uh in a position to uh absorb these shocks these price shocks much better. So as Anishh was pointing out uh I think energy transition is the way to go forward and where storage uh we are seeing how in Pakistan the solar boom has led to reduce and import bills. India also you know the expansion of renewable energy um has really helped in kind of again um ease out some of the supply pressures. So what India really needs and even in all the other countries in South Asia is now to look at expanding more on the energy storage so that uh we this becomes more reliable source of supply rather than uh intermittent power. >> Thank you Vhorti. Let me come to you Shashwat next. >> A few things I first of all I concur with my previous speakers. I think two important points that both of them have raised on diversification of oil supplies and we have been seeing in the context of South Asia that it is one of the most vulnerable country when it comes to uh uses of for oil security almost 80 to 90% of oil is imported from different parts of the world. So the question is from where do how much they can diversify the risk and the second most important component is the storage. How much of oil can you store? What are your lasting supply? uh in addition to these two points I think a few important uh lessons for these two countries would be on maritime security. Now while a country like India can diversify sources uh move beyond Middle East to Russia to United States but if the oil is moving through the choke points there will always be a vulnerability. So that is uh what what we are seeing uh right now at uh during the state of almost crisis as well that the oil tankers have to be guided out guided out either by the mostly by the United States military. So now as the supply lines get longer as India sources or in their south Asian countries sources oil from Americas from Africa should their navies also start preparing for securing those oil supplies if or if talking about future planning. So I think that's one aspect which uh these countries will have to manage. And the second point would be on energy efficiency. Uh so can these countries also make their economy more efficient and whatever oil that they have they can get more out of it. I think this is a lesson which South Asian economies could learn from America from 1970s Gulf War when which which literally made us and Europe become more and more energy efficient. uh so that would be the other important learning uh when it comes to oil supply security for these South Asian countries. >> Thank you all three of you. Let me stay with the topic of oil security supply security for a moment. So you know one of the things that I always feel like that's sort of underappreciated is that India is in fact one of the largest uh you know producers and suppliers of refined products the oil refined products and I'm very interested in sort of seeing how you know this may mean for India uh India's role um you know it does export you know petroleum products to you know European markets through the Netherlands even to the United States uh to Africa to Australia. So it's not just a sort of a regional um you know key stakeholder you know as far as refined products markets go. So um any taker as to you know um you know what you're thinking uh maybe the longer term implications for uh India's role as a refined product supplier. Um maybe Shasha can I start with you while others you know if others want to jump in later but >> yes I think we have seen India's role especially as the refiner grow quite a lot in last few months uh given the fact that the scale at which India refineses crude oil and supplies to the world I think here the one important lesson uh I think for rest of the global refineries as well and for the Indian refineries as well is the flexibility uh traditionally India has always imported a mix of 75 to2 25 medium to light crude for domestic consumption as well as export. But the moment you diversify your supplies and start sourcing oil from different countries, say even from the United States which has more of a western Texas intermediate, a lighter source as well as Russian eurals which are much more heavier. The refineries need to be flexible to process all these crud. So I think one of the adaptation or lessons for Indian refiners has been the flex just building this flexibility. So from so even if they have to go to a different market altogether tomorrow they are able to blend those crude oil and able to supply uh to rest of the world I think that is where the role of India's and Indian refinery is much more important I think it's getting highlighted the fact that they are able they are flexible they are becoming more flexible they're adding more capacity India almost is going to reach around 300 MMT refining capacity in next few years so when when the new capac capital expenditure is happening additions are happening these flexibility is going to be built in which will keep India's role much more prominent in refining and exporting the petroleum products >> I think the you know flexibility is a you know very important attribute and I think >> I appreciate how yeah that's you know not just sort of the as an importer of the the crude but then also um you know subsequently um you know the refining side of it >> I don't know if any other colleagues who want to jump in but if not let me move to uh oh >> I can add a little bit you know I I see various countries in the course of my work I think India sits very nicely at a place where from which you can supply a lot of the world because Africa which is a large and growing market has actually been losing refineries barring Dangote which is a large west African refinery but eastern Africa has kind of been shutting down refineries South Africa has been shutting down refineries. So there's a very large available market for Indian refiners who serve that. And then you have Europe which again has been shutting down refineries almost to the point of realizing that it's created a massive vulnerability. Now one person's vulnerability is another person's strength right India is craves for global strength you know global you know impact and I think this has suddenly become a way to have that impact. Uh the only challenge remains that whenever there's a crisis so there is always a tendency to prioritize the local market and local politics over the export commitments. We've seen this even in this round that is something which you have to watch out for because if you have to be a reliable supplier at scale then you cannot have it. So I think there will be a little bit of work required on policy to make sure that the customers the offtakers see that uh India as a reliable supplier but barring that in the refining capacity is modern more is getting built uh very high NES on Nelson index which is a complexity you can take Venezuelan through to Arab crude line everything so so effectively you have a certain position of strength in India uh both from his geographic location as well as its capability to define at low cost uh and if you are able to couple that with stable policy regime which doesn't come in the way of exports I think it's it's an infound power for India that's f okay so it's it's sort of a could be extension of foreign policy to and then potentially even geopolitics uh not to you know politicize or geopoliticize everything but that's that's a very uh interesting and important uh consideration. Um let me move to natural gas if I may because there's also a bit unpacked there. So about you know the hormone energy crisis uh basically you know uh really you know strained about 20% of the global supply of LG and even you know um the LG supplies from you know elsewhere basically h you know have seen price uh uh levels increase in the past six you know seven months and as far as the immediate responses go you know there have been let's say like turning to more of a domestic production in countries like Pakistan also you know natural gas rationing in uh for example Bangladesh but how um if any do you think this crisis may alter the uh the role of natural gas in the regional economy's energy supply mix and also for policym so this is like beyond really the initial reactions to survive this you know the current crisis um let me start with uh bivhuti Um um talking about gas, I think um countries which were relying more on gas were again more severely hit especially you know Bangla Bangladesh, India, Pakistan which were sourcing roughly twothirds of their LNG through this route uh you know uh saw massive supply disruption and also uh massive price shocks. uh if you see in a short span of time how the LG prices spiked from $10 MMBTU to even $30 MMBTU and this as a whole led to kind of uh countries again looking at alternative uh sources but more importantly you know we did see um some of the impacts specifically say if we talk about Pakistan you know turn from an LG surplus country to at a situation where they were actually doing emergency supply management. It also led to you know they using more coal which again rose to about 30% of generation in the March April period alone. And if you look at their future supplies while uh few or maybe limiting to even just two LNG cargos are confirmed for September but how they're going to tie up uh the whole winter period is something which they have to again carefully evaluate. Bangladesh as you were also talking about you know saw blackout there were factory shutdowns export order cancellations especially after Qatar suspended deliveries. Um so the these were some of the kind of impacts that we saw and India again you know um shifted from 60 days of gas talks um and the supply reserves were depleting. But then what India also did was again um you reduce supplies LPG supplies to commercial consumers and prioritize residential consumers. So there were some kind of I would say uh uh reactions is to in terms of you know how they were tying up with supplies from of LNG because there was a huge reliance from this route but again if you look at from the perspective of again I'll bring cost economics into uh this whole argument uh we have seen how uh in the recent bits in India uh I'll take India as an example where roundthe-clock solar plus storage now costs around 60 to 65 megawatt hour versus US dollars 130 to 140 megawatt hours for gas fired power in India. So if you look just at the electricity sector this is the cost differential. So it's the cost economics which is driving you know uh should be the basis for what the future should look like in the future. So role of gas as a transitory fuel um we are seeing uh it becoming more and more questionable primarily because of the cost imperative rather than anything else in India. Again we have seen how we have slowly and gradually shifted away from u uh gas fired capacity and coal is playing a role in meeting your evening peak which is not again ideal. So again bringing back this discussion on storage how if India would have had storage we would have been in a better position to meet your evening peaks um and we are also looking at solutions not just for the electricity sector. So for example electrification of transport how this can again help you tie up with better uh you know such kind of shock. So even looking at all the end users whether it's industries we have seen closure of industries uh because of lack of uh LPG and LNG suppliers because uh that was the primary primary fuel which was being used. So there have lot many more impacts and we really have to drill down to now sector by sector how do we diversify what kind of alternate solutions that are available which are more in the long run and rather than just looking at as I said short-term supply fixes for now. >> Thanks uh thank you voody. Yeah let me come to you Anish. Um what's your perspective on this question? Okay. So, so most countries which are offtakers significant offtakers of gas uh like India is even Pakistan, Bangladesh, you know, all of them have a lovehate relationship with gas uh because you have a certain amount of dependency. Gas fired power plants used to come up. They're more flexible. Uh in the carbon constrained world, this was less carbon intense. So, you went for gas. But then the prices are a challenge and not just the prices but the volatility of prices because the end market doesn't adjust so well and as a consequence you have a lot of challenges which are coming out of gas. India is fallen out of love with gas for power generation. Okay. not so in Bangladesh and Pakistan but uh it India is is not using that kind of gas which is potentially good for the size of its economy and I don't think we are going to change that in the utility sector but India is also big on data centers and you know uh and the whole AI thing is is a big story in India so we need to see where gas power plants lands up for those both for on-site and off-site generation because renewables are never going to meet that scale of demand. Whatever India does on renewables and storage that combination especially when you look at transmission constraints there's always going to be a gap. So whether coal fills it or gas fills it I think it's going to be an interesting story but that story is a little postponed because there are no supplies of gas turbines available in anywhere in the world till 2029 till 2030. So we'll see uh but uh it's it's hard to see uh gas scaling up like it would be in the US because that's the place where gas is abundant. Okay. But in other sectors of the economy we are seeing uh gas uh complement uh other other sources. So if we even cars there's a big proportion of CNG cars uh which run on Indian streets. uh so that's that's something which is going a pace it's that's not uh softened because of this despite some increases in gas prices so it's it's going to be an interesting place industrial and transportation purposes I think there's still a long runway power in the utility segment I don't think there's any fondness for natural gas they've already been burned before in the non-utility space I think there it'll be interesting to see especially when gas turbine supply situation eases up whether there's uptake of gas Thank you. >> I just to cover Bangladesh and Pakistan and then yeah a little bit over there. I think both are very very wary of gas and the Bangladesh is struggling because of the gas prices and you know they have been raising you know both oil prices and gas prices because in India the affordability is much higher for example in in especially in oil in the case of oil the Indian government concentrated the effect in just three companies stateowned companies and let the rest of the economy run Bangladesh and Pakistan have no such ability now Pakistan is interesting because it had already started on you know consum consumer le solar and it's just going to continue to accelerate because there was anyway a shortage there so three different countries three different places broadly issu issues are the same but the response strategies are slightly different in different places >> I'm actually glad I appreciate you know um Anish bringing this up and also all you know three of you have been doing this I you know that part of this uh webinar idea is to really highlight diversity within Asia but then also you know diversity university within the sub region within Asia there's so many different types of responses meaning that there will be the long-term solutions have to be different the policym needs to look different so um but while we're still talking about natural gas uh Shasha let me come to you so it's sort of a follow-up question and and so you know the you've sort of mentioned this already a little earlier about the maritime based trade you know the energy um supply versus non or landbased. And when I think about it in the context of South Asia, you know, projects such as Tapi uh the the you know pipeline which the the you know idea is to bring the Turkmen natural gas through Afghanistan and then through Pakistan and then you know to India. those ideas have been around and and I've been reading it is still you know it's you know still you know making some you know progress um you know although some people call it very slow progress but given the way in which that this crisis the homeless crisis has highlighted the vulnerabilities of the you know ceiling choke points uh ceiling securities and choke points do you think that uh more of the south Asian countries may uh be much may become more interested in landbased um sort of a gas trading relationships with neighboring countries. Um let me start with you Joshua. Uh I think it's a it it is one of the most I don't see that happening anytime soon because even the the TAPI pipeline that you mentioned I think it's been more than two decades that it was discussed and nothing has progressed. So as long as there are geopolitical tensions in South Asia uh I don't foresee any g any landbased transportation of oil and gas happening from one country to the to the other. uh because even if you look at what that pipeline would be, it would most likely flow from the west of Asia towards south of Asia. So that's where I think the real uh political choke points are and given the current situation I I I don't foresee that and I see most of the South Asian economies will be dependent on maritime route for deporting their energy needs. >> Thank you. Um anyone else would you like to jump in Anish on that question? It's it's one of the most geopolitically reven regions you if you look at India's neighborhood okay I don't think in even if the prospect of uh prospect exists I think it's very hard to have overland uh you know connectivity from anywhere it's really hard uh but you can have undersea uh thing be it power be it gas from the Middle East into India and while it's expensive it's it's still in in in the context of everything in the world that we live in might be a viable option. Um so maritime either through ships or on the sea cables you know both are both are likely choices. >> Interesting. Yeah. Thank you. Um let me move to the the question of energy transition. I think quite a few of you have already mentioned um so uh let me start with you uh Booty on this one. So the you know the we've seen you know supplies constraint um you know out of the hormuz also you know higher fossil fuel prices around the world and I think this is you know this is I think certainly creating some of the political and economic momentum for energy resources and also technologies that you know that are that help these countries many countries around the world become you know uh u become less exposed to um these you know forces So um you know I do wonder you know in your view how you know whether this is you know already happening this is actually sustainable for many of the South Asian countries and why do you think so um and I'd also love to hear from all three of you if you know what are some of the specific resource or technology winner um in you know in South Asia maybe you know I think some of you have already mentioned energy storage but I'd love to hear a little more of a specific u you know uh technologies and resources here so yeah let me start with you Bhuti um yes Jane as you said countries were already doing that so it is not just as a reaction to the west Asia conflict the solar boom in Pakistan to reduce its reliance on um uh LG suppliers had already kind of uh made inroads in the country India again uh did extremely well in terms of adding more and more renewable energy capacity to the extent of I think 55 gawatt in the last financial year alone. Um it was total non-fossil fuel capacity and renewable energy was the largest contributor and we have already kind of uh achieved uh 300 gawatt of renewable energy capacity by July 2026 and achieved our NDC target as well. So that's that was already happening. Uh but as I was making a point on the cost basis, this kind of made countries even more kind of accelerate its shift towards you know uh more renewable energy deployment. We are seeing increasingly even in Bangladesh uh they have recently just two weeks ago uh reduced the duties on imports of you know modules and cells or so solar exports to set up more and more uh solar capacity because they have seen how Pakistan Vietnam have reduced their import bills by shifting to solar. Bangladesh definitely has constraint in terms of land. So they are looking more uh you know in terms of decentralized renewable energy. solutions of setting up more and more solar rooftop. Uh the there is limitation in terms of they expanding to utility scale uh renewable energy projects. So within the context of Bangladesh solar rooftop is playing a bigger role and the cost angle which I discussed you know uh renewables plus storage is already half the price. So if they are really um you know um um looking it from the perspective of how do we also further reduce the overall uh prices for consumers uh you know bring those prices down. So they have to look at these solutions uh which is more cost effective. So from that perspective again you know uh we are seeing that shift happening. Pakistan um while uh going with the solar boom did see increase in coal generation uh their reliance as I said was 30% more in the recent months. So 30% of more generation was coming from coal to meet the energy demand. India on on the other hand also increased its coal based capacity but they share an overall generation did not increase uh it has remained flat in the last two years. So that also highlights the incremental new demand which because India did add to to six six and a half% of electricity demand was witnessed in India and not only the additional demand was met through uh clean energy but also some of the existing demand. So the generation while coal is still meeting 70% of the generation but it has remained flat over the years despite having increase in additional demma. So I think that's the change which we are seeing and uh yeah um so coal did increase but not to that extent what has really saved most of these countries has been uh the clean energy to the rescue. >> Um let me come to you Anishh do you um are do you have very similar views or do you see different kind of divergent views? Yeah. So, so you know it's it's Jerry Watz of Eurasia made a very nice comment that you know we choose between we we try to balance or find the perfect place between security, affordability and sustainability. But at best you can have two of them. You cannot have all three of them. So you and and I think that's that's that was very you know telling for me. Um in in these conditions people who can uh work for security because if you can afford security like India can potentially work for security uh and uh you know because you can manage the affordability aspect also as I said you know you control it through some stateowned enterprises so you just keep the end endpoint affordability at how long it can sustain is a is a is a key question. Um I think uh what we're going to see uh to okay let me wheel back a little bit uh security for a long time in this crisis has been conflated with sovereignty okay and then you look at which energy is more sovereign coal fired energy is very sovereign for India so that's why India is going forward with coal because you have domestic coal okay um renewables because you depend on the cells and modules from China or the battery materials and packs from China. There's less sovereign than coal but then you will um you still it's a one-time purchase and after that you you control the thing and anyway you can store modules you can store batteries. So it's it's a it's not as exposed as you are with oil or gas. Oil and gas makes you the most vulnerable. So that's why you know do because systemically you depend on that you'll go for storage to at least reduce the vulnerability but on the whole I think it is just taking the renewable story further because it is a cheaper than most alternatives today the combination of firm renewables uh is is cheaper than most alternative today if you can give it scale and you can if you can give it the transmission that it requires. So that is becomes the first priority for a country which can uh which can make the ecosystem or any good ecosystem work. So it's not the energy transition is not driven by sustainability considerations is driven by energy security and sovereignty considerations and I think we need to understand it's not a bad thing because in the name of uh you know clean energy if you're loading a lot of costs on customers consumers there's a massive amount of backlash. It's happen in every country. We cannot uh ignore that. But if it comes at the cost point which helps the customers and helps the country be more secure, more sovereign so to speak, then it's very welcome. So I think that's what we have seen. But oil is back because that's more sovereign than oil and gas uh including LG imports. So I think it's going to be a combination of uh renewables, nuclear in the longer term uh because again you you have greater control over that coal and then LNG in the end of the chain. Yes. So I think that's how I see it. Now countries which can't afford that will make their own choices. As I said that it depends on what you can afford or what you can build your choices depend on that. So Bangladesh and Pakistan though they have the same problem uh they are very differently placed or Sri Lanka is very differently placed. So you'll have to make independent choices but India's choice is very interesting because it's a large country it's making some very conscious choices but there's a there's a hierarchy of choices and it is not driven by you know irrespective of what the public discourse might be it is not driven by sustainability consideration it is just driven by practicality. Anisha, I think you read my mind because as you started sharing your view, I thought to myself, I really want to ask him a little more about, you know, the the sort of, you know, energy technology that sits right at the intersection of energy transition and sort of this, you know, energy security and then I guess sovereignty. Um, you know, sovereign choice. Um, and you did mention nuclear. So you know India of course has its own sort of nuclear reactor design and and industry for a while. In Pakistan's case it's you know Chinese made Chinese supply. So do you think this will be uh part of the choice for Pakistan uh the same way that it may be for India because again you know it's one thing that it's you know something that also incentivizes the you know your own industrial you know competitiveness in in the case of India even if it ends up importing some but there's also you know domestic supply chain but um you know for Pakistan uh it's you know probably you know I I just don't know if that will be part of the domestic industrial landscape. >> It won't be. It's almost uh very unlikely to be. I mean, you can't say for indefinitives, but it's very unlikely to be. But as you pointed out, India is a full supply chain and India's essentially the the the sets which is building fleet style the 220 megawatt sets okay they are pretty much indigenized in terms of design even if that had foreign origins and the whole supply chain is heavily indigenized. Okay. So, so to that extent uh you you can build fleet style you know keep the costs in control and feed the local economy. Pakistan's case is very different because you know it while uh it will depend on China >> which effectively means that two questions one is that what's the cost point uh and the second is how interest is China because if you look at how where China's you know unlike the earlier belt and road initiative which was focusing heavily on infrastructure and energy China's Barri is no longer focusing on infrastructure and energy and Pakistan is not in the same place that it was 10 years ago. So I think the choices are much more difficult for Pakistan both in terms of domestic value addition affordability and the interest of the supplier in giving you cheap finance or cheap supplies. >> So Anish while we're at it in in that you know to sort of we start talking about you know ch you know China you know Chinese supply and then etc. Um let me stay with you and then I but um move on to talking about the geopolitics of the energy procurement uh for a moment. So you know Russian crude accounts for you know about half of you know India's imports um in some months since you know the the hormos crisis. we you touched upon some of those things. Also, you know, imports come from a lot of different countries, but how do you think the the current crisis uh may reshape or alter the way that a South Asian countries energy ties may evolve visav all these major global suppliers. So, you know, including Middle East, Russia, uh and also, uh the United States in the long run, especially on the hydrocarbon side to begin with. What's your view? So, so I mean in the near term it's all colored by what's happening on the geopolitics right and especially with the new law passed which President Trump has you know signed off honestly it puts it in a Russian imports in a very tricky position for China as well as India more for India than China because China has massive amount of heft which can get away with stuff but Indians don't want to get hit by sanctions okay so I think it is something which one has to look at whether the sanctions will come into or there'll be waiverss and so on and so forth because finally oil supplies are limited in the world because of logistics reasons not because of you know supply availability but eventually when all of this eases off I think it's just going to be a combination no country is going to be dependent on one particular source so heavily uh we talked about storage I want to repeat but also I think that the supply chains will be reoriented you'll see a lot of pipelines in the Middle East in the in the in the Gulf region coming up uh so that they can access different ports and different supply points to do that. Some of it has already started but it's it's the immediate reaction but you'll see more of this coming in because it's not just the Persian Gulf, right? It's also the Red Sea, the Houthis uh you know causing certain amount of concern and that situation is getting worse and worse. So eventually the longerterm response will be both for the supplying countries to diversify the points of supply so that they can keep their trade on and protect their assets which is harder these days but they'll still do what they can and for the buying countries to diversify their bases even if it costs something. So this will get coded into the risk management systems and and eventually uh that cost will be justified from a risk management and resilience standpoint. I think it's it's fundamentally going to rewire the the the approach that the companies or the nations took which was least cost earlier. I think it's going to be a combination of cost and risk balanced and this is going to be reasonably codified as we go forward into the future. >> Thank you Anish. Let me turn to you Shashua. what's your view on uh South Asia's you know economies uh you know key uh in the relationships with key suppliers so particularly you know Middle East, Russia and the United States you know Anish just mentioned you know reminded me of the latest sort of secondary sanctions and I think earlier also mentioned you know the Russia crisis and you know the way in which the Russian uh you know refining capacities has been under attack um uh or you know defense you defensive attacks I guess from uh Ukraine. There's quite a bit happening. So what's your perspective on these uh big relationships? >> Uh I mean at least in the South Asia I mean Middle East for for South Asia Middle East offers geographical proximity. So at least in my p in my view whenever a situation normalizes I do see the share of Middle East hydrocarbon supply retaining its share back and we have seen this happening in the Indian context as well when the Russia Ukraine war started and when there were global oil uh India's supply of Russian oil had increased but it had come at the expense of Middle Eastern oil. So the 10 to 15% share that Russia gained was at the expense of the Middle East but what we have seen in last one year that that Middle East was able to regain his share the moment the discounts on the Russian oil kept on reducing. So that it shows that uh for South Asia, Middle East will always be uh I would say the energy ties will always be stronger given the proximity and the fact that a very strong relationship exists between let's say example of India and UAE when UAE stepped out of OPEC OPC plus group India was the first country to go prime minister Modi was the first country to visit UAE and uh for an announce I would say a deal that India will continue to buy oil and gas from UAE then there is also an exploration I think as Anishh had alluded to looking at alternative ports. So Oman with Oman there is an discussion going on. So I think Middle East will always play a central role and just just because of the geographical proximity it has to South Asia. Now when it comes to Russia and United States at this point Russia is India's largest oil supplier and US is India's largest gas supplier. So you can see that India has a strong relationship with all three countries and as and when uh if for a country like India and South Asia when they take a uh decision on how to treat the liqufied petroleum gas which has come under the serious strain in all three countries we're trying to transition to clean cooking and that's where if the role of more and more the role of pipe gas is increased I think the the energy component especially the relationship with the US will continue to increase because US is one of the largest energy suppliers in the world and so I see at least in mid to mid uh to long term that the south Asian relationship will continue to p we'll try to balance out all three resources uh with Middle East always having an advantage just because of geographical proximity and the cost benefit it it offers to the south Asian economy which is very price sensitive >> I I have a follow-up question to you so the you know I think this you know so as you this crisis, you know, is al like sort of highlighting some of the underlining u ration for the relationships that have been going on for, you know, many decades um if not, you know, centuries. But when it comes to the United States, I do think there's quite a bit that the US, you know, can offer. But now, you know, throw throw in China into this equation. you know, China does supply a lot of uh clean energy uh technology components and some of the even you know have strengthened the underlining materials and minerals. So you know what's your view on how this you know South Asian countries approaches may change um or maybe refined um you know how they assess how they you know then engage with you know China and the United States and to some extent could they would they have to choose a side um I'm sure you know it depends on you know which country we're talking about but what's your sense as to how the this particular you know sub region considers the so-called great park uh competition between the United States and China. I mean u I mean if I mean what we are seeing now is that the energy security uh energy sovereignty and strategic autonomy these are the guiding principles that each of the countries are trying to follow because I think securing energy for their own population is becoming more and more prominent now between uh the four south Asian countries. Yeah I mean India is the bigger economy always considered as a China plus one strategy. China and India always had a different equation but overall I think neither of these two countries neither of these four countries would like to choose between US or as well as China. I think uh in your question I think you it was also very made very much clear that while one looks at hydrocarbons and fossil fuel based economy that's where a lot of role of US comes into the picture because it US is world's largest supplier of oil and gas at this moment uh in time as well as when we talk about nuclear cooperation US has one of the largest technological advantages when it comes to developing the existing fleet of nucleus as well as the the SMRs which are being talked about. So these are the two ends where I think the all these four countries would find a meaningful partnership with the United States but specifically in clean energy supplies solar batteries uh windmill uh in wind component all of them will come from China they'll have to import while these countries if you think of strategic autonomy start building their own domestic manufacturing at this point India is the only country I believe is investing in building domestic manufacturing for all these clean energy supplies equipments but it will take another decade for India to reach or produce enough to meet it own meet its own needs. So it will need to import from China and not only just equipments but also skilled expertise. China at this point has not only has built uh I would say dominance over the entire supply chain. The workers as well as these countries would also need to bring workers from China to train them on how to you know build clean energy supplies, how to operate clean energy equipments in their own country. So I see in mid to longterm both sides all these four south Asian economies maintaining a cordial relationship with China as well as United States because it serves their own particular interest of energy security and strategy predominantly. >> Thanks Sasha. Um the the last sort of a theme um the last but not least certainly is you know I I'd love to get your views uh perspectives on more of a domestic policym side. Um yeah, I think you know these the the current crisis putting a lot of pressures on government's you know sort of fiscal stamina if you will you know through perhaps uh a lot of u um you know in you know subsidies to help industries but also more importantly you know households uh survive uh the supply crisis and so but you know in the longer run um and let me come to you to next um so how do you think this crisis will affect some of the domestic policy Medicaid agendas uh you know in some of these key countries like for example energy subsidy uh reforms and and perhaps price you know rationalizations. Um uh yeah >> um I think what we are seeing that most of these countries are now struggling uh with this whole dilemma of you know how do we sustain economic growth but at the same time ensure uh there is more fiscal discipline and how do we shield consumers from price shocks because currently uh as we were talking about how the price dynamics have changed I mean how the increased prices has really led more um most of these countries further into debt trap. Uh we are seeing that in order to maintain energy security uh to ensure supplies coming from alternate sources and with increasing global prices how these countries are relying more and more on the likes of um uh barring India we are seeing Sri Lanka, Bangladesh, Pakistan negotiating some of these u um uh with the MDBs like IMF on the bailout packages to help them tied up with this kind of an impact. They were already uh like for example Sri Lanka two years ago already had signed with IMF and had kind of ensured that they they will do away with all subsidies by September 2026. But this recent crisis has again put them in a in a very um I would say in a situation where either the country themselves absorb such high prices without passing it on to the consumers and increased subsidy burden but at the same time what we saw Sri Lanka did increase the prices for the ultimate consumers for few months but beyond a point they failed which meant that they had to increase subsidies at their end to maintain that supplies, maintain that energy security. So again looking at what the long-term solution exists, India as I said was in a better position but we did see the impact u how the currency has depreciated for almost all the South Asian country. So, so it's not just about the increased subsidy burden or the price shocks, the other systemic risk which I was talking about the currency devaluation. Um, we have seen higher uh you know interest cost going up. India again has been in a better position and has not increased uh the interest rates but what we are hearing uh by September and or in October uh monetary policy review meeting India might increase the rate. we are seeing uh the capital which was finding home in these geographies are no longer finding it safe to invest uh whether it's on any kind of infrastructure development because suddenly the south Asia with all its debt uh burden increasing are not considered safe for economies for capital to be invested or deployed by investor. So there are other macroeconomic repercussions as well. Um and uh every dollar invested in building these uh I would say fossil fuel infrastructure um kind of will help as I said to tie it up with the current crisis but again in the long we need to look at from the longer term with prices going down. I'm again going to reiterate I think the energy security energy affordability can be served. Uh but we really need to have a more holistic approach rather than looking at the image response. So yeah >> thank you be hoodie. Um before I invite others to jump in maybe Anish uh you will you know add um your perspective that would be fantastic. Let me also quickly throw in not just you know some of the implications for domestic policy making energy sector but for example agricultural sector you know the you know the south Asia has you know the fertilizer industry dependence you know farmers are extremely important constituency so if you have any additional you know uh perspectives on that uh sector as well that would be great but let me go to you Anish. Yeah. So, so you know it depends uh on how the country is based from a fiscal standpoint and Pakistan, Bangladesh, Nepal, Sri Lanka, all of them have big challenges on that. Okay. So, they have been passing through there's still some subsidy but you can't call this subsidy reform just passing through what it comes bearing it till the point which they can and then passing on the balance there. Even today Bangladesh has substantially raised its retail fuel costs. So it's it's it's a unfortunate situation for those countries. They're just takers and in the short run they can't really do uh that much. India as I mentioned is quite different. India has had very limited uh cost increases and even that has been mired in you know challenges and controversy because uh you know the the possibly the narrative was policy narrative wasn't clear enough strong enough uh but honestly India could bear it and it contained all the impacts in three nationalized oil companies which you know are bleeding uh their shareholders are bleeding but they'll survive you know this is this is rare luxury in South Asia region and it's it's a funny thing that in in I in in theory India fuel prices are decontrolled okay uh so you're supposed to follow the market trends in reality you know it doesn't exist that fiction almost has gone away so it's a very very controlled fuel economy um which is so unfortunately others don't have that coming to fertilizer that remains a longerterm concern because the fertilizer cycle operates very differently from the fuel cycle until you order way in advance. sort of 9 10 I think uh if there is a sustained problem in these areas then there's going to be a massive hit again uh India is in a much better position because it's just you know checking out what is affordable for the economy at large and then making those passroughs and honestly farmers are not unlikely to see a big impact in India irrespective of the fiscal cost uh whereas in the other countries I think the vulnerable abilities end user vulnerabilities far too high and that will lead to inflation. One of the biggest things in India has been able to manage till now is that while it's hurting a few companies is inflation is still very very steady. You know Indian inflation and US inflation at this time is the same. So so that's or or comparable. So that's how India has managed it. Unfortunately others can't don't have that luxury. >> Shash would you like to um jump in and add your perspective? >> Yeah I would just like to add one point. I think uh while uh I mean all South Asian economies think of electrification as a way forward u and and pursue their respective domestic policy to ensure energy security for its uh for its people. One important thing the these countries should realize is the importance of crossber grid integration. I think that was something which will be very useful. Uh India I mean South Asia in general is when you talk about trade one of the least integrated economy. uh even in the energy terms the there is not enough energy export importing port between the countries. So if Bangladesh has land issue and it cannot have a lot of solar similarly India has some particular other kind of issues. This is where I think the South Asian grid can come in handy for each other where we look at places like Nepal and Bhutan have excessive hydro resources and they do supply to India. Similarly, there is one arrangement between India and Bangladesh. But I think going forward, the four countries should also need to think more seriously about integrating the grids at least from the energy sector point of view to make sure that any such uh crisis in future they're able to at least cover for each other have some kind of installation while their own domestic policy will always have a lens of energy security attached to it. I mean to give an example I mean moving from a from uh moving to a clean cooking was a big campaign and promise for prime minister Modi in 2014 and under the scheme he moved millions of people on clean uh on LPG cylinders and 10 years later what that was the thing which was hit most in the crisis and the crisis had hit home. uh while India did manage to uh know it was able to control the crisis overall but any such initiatives now will always have a security lens attached to it that if I'm moving for to a source of energy which is still I'm depending on someone else even for electrification there is a dependence is going to be a dependence how do we cover that aspect so I think uh this has to be an interplay of these two for south Asian economies going forward >> this was a fantastic webinar where we really explore a lot of important and often I guess somewhat competing notions. Um but you know also but some of the key things that came up like diversity but as you know uh some of you mentioned it's not just sort of a diversity of suppliers that's important but also the diversity of sources and technologies within and then also covering from uh you know electricity to the primary energy source you know sectors to even you know agriculture and then last um and also you know actually clean cooking that's something that's extremely important for the the sub region. Um I am extremely grateful for not you know certainly for the audience for standing in for the third um in this webinar series but also for Anish and Shashua uh for joining uh from all the way from India uh but then also Bifuti uh you know getting up early in the morning and joining us. Um thank you so much again to all three of you and to the audience. Um and we will be having the fourth uh focusing on Southeast Asia in about two weeks. Um I believe October uh 2nd, Friday, October 2nd. So please uh continue to follow our work in this area really unpacking and going beyond the short-term reactions. You know we have had you know six to seven months. So enough for all of us to start thinking the long-term implications and what this may mean uh just in not just for the sub region but perhaps for you know the US and continue US engagement with many of these key important economies. So, thank you so much again and uh have a good day.