Geopolitics has returned to the centre of the energy conversation. | Pramit Pal CHAUDHURI

This is the energizing India podcast. Welcome to the energizing India podcast. Over the past decade, the energy transition sector has been framed as largely a technology and a capital story. As we were getting cheaper, EV adoption was accelerating and hydrogen was scaling, whilst climate capital was flowing freely across borders. But in the last few months, something fundamental has changed. Geopolitics is back on the energy industry agenda. The escalating conflict involving Iran, the return of a more protectionist and unpredictable United States under President Trump, and the increasingly assertive roles of both China and Russia are no longer distant headlines, they are in fact now shaping supply chains globally, they are impacting energy prices and are shifting strategic decisions in boardrooms across the world. For the CEOs of the energy industry, this raises some urgent questions. Are we entering an era of energy fragmentation, for example? Will supply chains be redrawn along political lines? And most importantly, how should business prepare? For a world where geopolitics and not economics is actually driving outcomes. To help us unpack this, I am delighted to welcome Promet Paachowderi. Promet is one of India's most respected voices on geopolitics and global strategy. He has been a foreign policy advisor to the Indian government and a senior fellow at leading global think tanks. He is also a longtime analyst of how power, policy and economics actually intersect. Today, we will go beyond the headlines to explore the tectonic shifts that are impacting the future of energy and what that means for India and the world. Promet, welcome to the program. Thank you. Promet, let's start by taking a 40,000 feet view on what's happening in the world today. Are we seeing a temporary conflict or a series of temporary conflicts? Or is the world actually now heading for an era of permanent conflict where industry has to just build that in to how they operate? Well, what we're seeing is that the international system which was created effectively by the United States post-war and post-World War II as well as after the Cold War is effectively no longer being underwritten by the United States. And the new superpower, China, is not prepared to fill that space. So there's now a number of people who have come out with this number of analyses have come out this. What is going to happen now is a new, should we say, a new world disorder because in effect America is saying, look, we will not, not only will we not intervene to try to keep portions of the world stable. A lot of what we developed, including the alliance structure, the international trading system, in our view, especially under the Trump administration, are effectively negative, are negative issues as far as America is concerned. That the trading system bleeds us. The alliance system people will arrive free right on us. So NATO, cornerstone of American foreign policy for going back to the 1950s, is no longer seen as actually all that useful for the United States. So what happens then, if you don't have what would be called a Hegemon by an international relations theory to basically act as the balancer to provide the, or even act as a policeman in the international system, how do countries react? So in some cases, you have a country like Russia saying, okay, this is an opportunity to overcome an ancient problem, which is why is Kiev the heart of Russian civilization when the ancient roots sitting outside Russia? Now, we'll try to see if we can change that. You could see Netanyahu of Israel saying that maybe this is a time to take over the West Bank, the ancient kingdom of Judea and Samaria. You see the Taliban saying, well, actually the border between us and Pakistan set 400 years ago by the Sikh Emperor, Ranjit Singh, and then formalized under the Dur'an line of Britain. We never accepted that. It's time to change it. So you can see a lot of, and all of these countries are sitting there and saying, and the one country we know that won't intervene is the United States. So therefore, this is a chance to do that. So you get a lot of these small ancient struggles or new ones coming up. You can go off and do what you want and the system won't care. Another part of that, however, is also civil wars, which people aren't paying much attention to because they don't have that much international repercussion. We now have civil wars in Ethiopia, in South Sudan, in Sudan, almost half the Sahel countries of Africa now. Yemen is probably the bloodiest war in the world. It's probably over 600,000 dead, and it's been going on for 20, 30 years, and nobody is stopping it. It just goes on and on. So because, again, nobody cares. So you have that part of it. And you have attempts by other countries, regional powers increasingly, saying, how do we stop this? So you saw the UAE and Saudi Arabia try to set up the ITU to the IMEG to create a regional architecture in which other parts of the world get invested in the stability of my region to try to compensate for the fact that the Americans are going away. And unfortunately, it didn't quite happen in time for them to stop that falling apart. Say, then let's focus in on what's happening in Iran with the United States and Israel right now. But actually, there's one other element. War is much cheaper now because of the drones and technology. So you, as a small nation or a medium-sized nation feel you can actually launch a war without having to build aircraft carriers and giant fleets of tanks and so on. And in fact, we're seeing that in the Gulf right now because cheap Iranian drones. But the real test, the real example was Ukraine. I mean, the Ukrainians have now developed, really, the world's masters of drone technology. In two years ago, they launched three and a half million drones against the Russians. Today, at least their manufacturing capacity is close to a million drones a month. Let that number sink in a million drones a month. So I'm going to bring it to Iran, US and Israel. They're in a bizarre situation. There were peace talks going on and then the Israeli's in the Americans bombed the entire leadership of Iran. Now we're in a position of cheap drones taking out their friends and finally Trump saying Iran wants to talk and Iran saying they don't want to talk. What's your assessment on what's going to play out here? How does this all end? So we have a number of scenarios. It's not clear yet how it plays, partly because there are a number of personality factors that are involved. Now you can know the Israeli strategy is very clear. Israeli interest in this. The Netanyahu government, in fact his former minister of strategic affairs, Ram Dermer was in Delhi a few months ago. He spoke at a dinner, I attended. And he said, look, for Israel is very clear. There is only one country in the world that has perpetually said or continuously says, we wish to wipe this Israel off the face of the earth and that is Iran. They have attempted to do various things to undermine Israel for decades as well. And many ways the heart going beyond what he said, the heart of what their ability to contain Israel, if you wish, was a sheer crescent that was created. And Hezbollah being a real sword that they held over Israel. Hezbollah in Lebanon, you saw the Assad government in Syria. Of course there was a degree of control in Iraq. This sheer crescent after Israel began to turn on Hezbollah after the October 7th fight that they had at the Palestinians, Hezbollah disintegrates. You see Hezbollah basically wiped out the famous Pageer bomb attack. The Assad government fell for a host of different reasons. Suddenly the sheer crescent has gone. Now it's basically just Iran. And on top of that, Iran is just economically extremely weak. So Iran in its present state is probably the weakest it has ever been, at least the regime has, since the Islamic revolution took over. And so for Israel, this is the perfect opportunity. And it's an opportunity that whether it works or not, it's still worth an effort to take out literally the only existential threat they face and given the history of the Jewish race, existential threats are taken very seriously. So therefore going after Iran was always something that they have been carrying out this sort of steady set of attacks to hold back that nuclear and ballistic missile program. Now for Iran, obviously it's now mainly about regime survival, was the first stage of this war. I would argue Iran is now starting to look a little longer term in their view that we've kind of taken on so far the worst that we thought that Americans and the Israelis could hit us with. We are now in a situation because they immediately expanded the attack to incorporate the Gulf monarchies in the South and are now veto power control over the streets of Hormuz. They are now in a position if America does unable to assert itself militarily over the next few weeks to become end of this war to be the dominant power in the Gulf. A weak power in many ways, but the one that has at least vetoed or specially over the streets of Hormuz. And one in which the Gulf monarchies will look at them and say, "We look at no longer depend on America to provide a security, we have to strike a deal with terror." So Iran is now sort of fighting on two levels. One is survival or at least maintaining the ability to ride out. And in many ways, we're down not so much these railings, but as the United States, they look at Trump and say, "This man doesn't have patience. All we have to do is ride him out until the point and inflict enough economic damage on him to eventually say, "This war is not worth it for me politically." He's already doing that. Yes, exactly. You could see he's already looking for an off ramp to some degree. He's working on two levels as well, off ramp. And maybe if I'm not getting an off ramp, I want to go for one big final hit on the ground in this case. So therefore, the Iranians are now looking at it on a slightly longer term. He could end up, the Persian Gulf could be genuinely Persian at the end of this war. And then there'll be a very different, and we can talk about what that would mean economically with a genuinely Persian Gulf. Trump is the part that we can't predict, right? You can see within the U.S. government and within Washington, and among the American public, definitely, total confusion as to why they are involved in this war, right? They went in. He seems to have gone in thinking that the Israelis told him, or after the Venezuelan experience, this regime will fall very quickly. It's true that he has a personal dislike for the Iranians, that combine a number of things, one being that he is part of the generation that remembers the Iranian hostage crisis. And he has said that very often in interviews that this was the most humiliating thing that America ever faced in its history was the Iran hostage crisis, Jimmy Carter, the worst president America ever had because of this, and why nobody ever hit the Iranians after this baffles him. It's another thing, also another interesting, is that the Iranians also tried to assassinate him. It seems to be a very bizarre thing, run done. It seems like a rogue operation within the revolutionary guard. But after he ordered the assassination of the revolutionary guard, so, so, so many guard head in his first administration, after he ceased to be president, some group in the guard seems to have hired a Pakistani as if merchant who is now presently on trial in America to organize the assassination of Trump. And for fellow he's in court now, and he insists that he hadn't, he didn't deny this. He just says that I did this because they hadn't, they had my family hostage. But I have no clue. I'm just a businessman. I have no idea how to do assassination. He had just gone to the, I think, the dark web and tried to hire somebody who proved to be non-decover FBI agent and therefore, great. But it's such a bizarrely amateurish way to do this. But it ensures that you get a certain degree of animus from the US president. And I think for the Iranians, the shock was, oh God, he got reelected again. And so, and I believe the Israelis remind him regularly. Don't forget the one people who tried to assassinate you. I think it's guys. I think it's guys. So, and that's important because Trump is very personality, he's very personalized in his foreign policy. So you combine a number of issues, the nuclear program, the ballistic missiles, a regime that has definitely under tried to get pickets fights with the United States about really with the Israelis. And then a regime that Trump himself has a personal dislike for. And then the hubris of thinking that Iran and Venezuela more or less the same thing. So you combine all that. So, but the support he done of this is really a strategically sensible reason for America to be involved. And as I said, what is happening is the prices at the pump are rising in America. They've gone from roughly $3 a gallon to I think over five and are still rising. And you can see other than the core maga support base of about 30% of Americans, every other group including independence and non-maga Republicans have turned against the war. And Trump is now struggling to figure out what is my end game in this. So I think we're now looking at two parts here. We saw an attempt at a negotiate. I mean, I wouldn't say really an attempt at sort of a bizarre. First he tries to, you can see Trump now moving into a certain path of getting, trying to sit down and buffer himself against a potentially probably very bad political outcome for him. One he's blaming other countries like the Europeans. Why didn't they show up? There were cowards. They were supposed to help me keep the streets of hormones open. The Europeans said we were never consulted on this and given your other target as Green Land, we're not interested. And is going around and as you mentioned, suddenly coming up that they want to come and talk to me, I'm prepared to talk to them in the Iranians saying that we don't know anything about this and we're not certain where this is going. But when I've asked Indian officials, they said, well, our understanding is that guard is now the most powerful body in Iran and we're not getting any sense that the guard is interested or is not taking this seriously. Anyway, the demands on both sides, the minimum prerequisites for an agreement of even a ceasefire are so far apart between the two. Iran basically give up its entire enrichment program, wipe out almost how most of its ballistic missile structure give up its presence, its hold on the streets of Hormuz. In return for as far as Iran can say very little from the Americans, especially no definite evidence that Israel and America would not attack them again, I don't see the basis for negotiations in which is one reason nothing is really happening on that front. So therefore he's now heading into another cul-de-sac as far as talks are concerned. To some degree, he may not even be taking them all that seriously. So now we're seeing the next stage of the war seems to be some kind of a land attack, either on Karg Island or some other part, some other chunk of piece of land of Iran with the idea, I think to use that as a negotiating chip more than anything else. I force you to the table because I now hold a piece of your property. But then you end up where Iran would really like to inflict damage on the Americans, is body bags because they know the American capacity to absorb that is a lot less than their ability to absorb even high oil prices. The problem we will face is does oil infrastructure, energy infrastructure in the Gulf then become a byproduct of the next round, I mean fall out of the next round of that battle? I wanted to linger on this subject just a little longer and ask you about why America always gets it wrong. You know, Nixon and Johnson have got Vietnam wrong. George Bush got Iraq and Afghanistan wrong. I think Obama got Libya wrong. Trump's very clearly got Iran wrong. Venezuela was a weekend with their kind of loss in a quagmire here. What is it about the American system where they can't seem to learn from their missteps over five decades? Well, I mean the game is to look at the different ways to look at war. One is to look at a tactical side. I mean, how well are you doing on the ground militarily? The other side is to look at it strategically. Do you broadly get the strategic objectives, which often you can get even if you lose the war, right? Or you can lose all your battles, but still win the war because you strategically get what you want. So Korea, they were caught by surprise. And in the end, they got more or less what I think they got the strategic balance they wanted. They got to keep half of the Korean peninsula, which at that point they didn't control very much of. And South Korea became an economic success. It's become an economic success. It's a reasonably powerful military nation. So Korean war, given that the original at one stage, it actually lost the entire Korean peninsula right until in Chun and the amphibious landing. Many ways established their post or the first major war, the Cold War. They were able to pull themselves in. Vietnam, which was less than with Nixon than with Johnson. Nixon in many ways, he came to power, recognizing, he and Kissinger recognizing America had to get out of Vietnam in many ways. What they were trying to do is get out in a manner that maintained American credibility. And so yes, that was a terrible war for America. But ultimately, what was interesting is it succeeded in the sense that Vietnam is now a very close friend of the United States. But that's more about the pragmatism of the Vietnamese government than it is. That's true. But the Vietnamese, as once Vietnamese general who came to India and give the lecture, and actually socialism was more destructive to us than the Americans were. They recognized that their economic model post the war was a disaster. But yes, there I think there was a terrible mistreating of the Vietnamese because Ho Chi Minh was in fact a fan of the United States. And the Vietnamese are quite happy to work to the United America as opposed to working with somebody else. So, but in the end. Then the damage to American strategic interests were minimal. Southeast Asia, after the Vietnam War, ASEAN was created, Vietnam joined. And in many ways, until recently, had become a completely American lake and a key corner stone of their own Pacific policy. It's now losing that, but largely because America is losing interest in Southeast Asia, it is another parts of the world. So Vietnam was a classic example of a war you lost tactically, you lost politically at home, and then strategically the results are actually quite minimal, very little damage to your strategic position. Many ways you came out stronger. The Middle East has been a nightmare for them. That has been a nightmare for almost everybody who's tried to go in. It's one reason I think the Indian government has been very, very wary of ever getting directly involved in anything in the Middle East, that the deep fault lines in the Middle East make it very, very difficult to come to any strategic, sensible strategic balance. So you've seen the American strategy first build up Iran under the Shah as your primary source of power. Then the Shah collapses and then Iran becomes your number one enemy in the Gulf. You build up Iraq to balance it. And then Iraq goes mad and attacks Kuwait and does other things. So you have to knock out the Iraqis. Then try to build up a set of alliances in where you have a little bit of Saudi Arabia, a little bit of UAE, a little bit of this and that. In fact, the only country that has remained completely stable and credible has been Israel, at least, but only being from only about the 1960s, late 1960s onwards, before that Israel was not an American ally. So they keep having to re-badge or rework their Middle Eastern policy. But the heart of it, the strategic heart of it remained reasonably functional, which was the carto doctrine, that the Straits of Hormuz would remain open. They would guarantee the energy supply of the world would remain constant and untouched by anybody. And there were other a couple of blips, but otherwise that has been to say this war interestingly enough may change that. It may bring to an end the carto doctrine. And in many ways, the basis for the role of America as the hegemonic power, the stabilizer of the Gulf. And what is interesting, I think, for Americans is they may not care anymore because they are energy independent. They don't need oil and gas from the Gulf. And they haven't had two for several years. And the point is a lot of the governments in the Gulf realize this quite some time ago. When Modi met Muhammad bin Zayed for the first time in 2015, in their conversation, bin Zayed told him later what later became the ITU too. And he says, I want India to be part of this new regional architecture I'm building. And one of the reasons he said is because I can see the Americans are leaving us. They're losing interest in the Gulf. And before that happens, I need to do, build something here to stabilize this region. Was the motivation, I mean, there was the obvious motivation to destabilize Iran. They've taken out the entire leadership, 47 people of America. But was this, if you look at Venezuela and Iran together, is this also a strategic chalk point for access to China for the oil that they were buying from Iran and Venezuela because suddenly this is a lever, isn't it, to China that says if you want to be difficult about rare earths, we'll just be very difficult about oil because we control it all. But oil, the problem with oil, and that's why I don't take that too seriously, is that while Venezuela, what I mean useful because it was sanctioned oil, so China is the one country that doesn't care about the sanctions, right? There's simply two independent and two powerful for America to sanction them or to be bothered if my company is sanctioned, big deal. My currency is, is perfect. I don't need to work with the dollar. Is that China has, there are many other sources of energy in the world nowadays. And among all the countries in the world, China, many ways is the most advanced now on green energy. It has Russia, it has Central Asia in its back. In fact, much of what China has been doing is slowly reducing its dependence on maritime seaborne fossil fuel and has become much more based on land. So China knows that one, it has a, that in a battle in which everybody is, is bidding up the price of fossil fuel. And when you have what, two trillion dollars at the foreign exchange reserves and you're the second biggest economy in the world, you're the one who's definitely not going to be bothered at, well, you know that you're going to win most of the contracts. Second, you also recognize that you are far ahead of everybody else in a whole set of non-fossil fuel technologies. So when the rest of the world, who will be more damaged by disruptions and fossil fuel supplies, tries to go green, they have to come to you. Or they will end up coming to you for help, not the United States. So in many ways, I don't see that. I mean, I could see that being part of the throwing in, when you're sitting down in the situation room in the White House discussing, why are we doing this? I could see that as being number six or seven on the list, but definitely not a priority, because when you actually do the numbers, you realize that China is not overly concerned. So then let's talk about where we are in the war right now, right? In a couple of days, Trump's deadline expires. He says he's going to bomb all the electrical or the grid infrastructure around. Let's see where that goes, whether they talk or they don't. Already some oil infrastructure has been attacked. We have the big refinery shutting down and the opportunity to start them up as months. What's going to happen in the global oil gas infrastructure energy industry, even if the war ends in the next few days? So right now, I would argue both sides are sort of tip towing around the energy infrastructure hits. So you're hitting one LNG train out of something like 12 that Qatar has, and then you stop. You're not hitting Abikak, which is the giant, you know, the biggest and most sensitive part of Saudi energy infrastructure. You're not hitting Yanabu, the port, which about five or six million barrels a day of Saudi oil is exiting via the Red Sea. You're not activating the Houthis who could completely shut down the Yanabu without even after hitting Yanabu by just saying any tanker. And even as we speak, oil tankers are actually flowing out through the Red Sea pasta Houthis. And Houthis are sitting there and saying, okay, we're not doing to do anything to you. So Iran is, Iran has basically, Iran knows that this is in many ways almost mutually short destruction. If we decide to destroy the oil, the oil and gas infrastructure of the Gulf War and the South, then automatically our oil infrastructure. And still functional. I mean, we, you know, India reliance just announced, we're buying what is it? Five million dollars worth of Iranian oil is still flowing through the Gulf. So each side is really saying don't go beyond a certain point. And there's been more warning shots, I would argue, against each other than a deliberate attempt to knock out because they know that they're both equally vulnerable on this. And if I'm Iran, I'm thinking that if this war ends in, let's say, six months from now, I would have to rebuild my economy. If I have to spend the next five years just rebuilding, and I have nothing else to sell. Except oil. Except oil. I may have a lot of gas, but I don't even have one LNG terminal to ship it out. I can only send it by pipeline. And that limits my customers to a very handful. I'll take me years to rebuild, because I have no revenue source, you know, almonds and carpets that's all that to sell. They don't actually allow carpets to be sold exported. So therefore you end up with nothing. We end up being the winner of a war that we are totally emisorated for the next 10 years because of this. So you can see that both sides are trying really hard to avoid that. And the only concern everybody has is the United States because they don't need oil and gas from the Gulf. But oil prices are global. And even a gas price is to some degree because a lot of them are oil linked. So if you knock out too much of energy infrastructure in the Gulf, if pump prices in America will rise, even though America is energy independent. So right now both sides are trying to avoid going beyond that. The question is does somebody make a miscalculation along the way and trigger a battle between in which you cross the red line here, you've knocked out too much of my energy infrastructure, I'm going to impose that same cost on you. And that's one of the reasons the Gulf War is a so nervous about both sides try to stay within a certain perimeter or where this war is going. So the outcomes we've discussed is you could get America controlling the states of our nation. and our man in Iran, so to speak, the old American foreign policy way of working. In either scenario, or you could of course get contagion and everyone goes mad and you've got mutually assured destruction. But in either of those two most likely situations, what's actually keeping the Indian government awake at night at 3 a.m.? Right now the short term is LPG because we did build up some crude reserves. LNG is largely a fertilizer story. We have actually enough fertilizer to last us quite a while till about July, August. LPG is the one thing we did not build up a reserve of and partly because LPG, which is normally a niche product in the past, niche demand there, because of the welfare programs of the past 10 years, we've massively expanded LPG out reach and consumption. But we've never really built up reserves. It's actually very hard to store. It's very dangerous. The store is propane butane. Mixed store LPG. And so you ended up with, you had basically nothing when this crisis broke out, but politically affects among some of the poorest people, not just in the form of cooking and street side catering and so on. But also a lot of industries, small and medium-sized industries, anything that has welding, anything that has furnaces, small furnaces, ceramics and so on. As you've seen a lot. So that's the short term, big concern. And you're starting to see India desperately look around for LPG almost anywhere. I mean, we're getting a little tiny amount of some Argentina from here, from Canada and so on. And that's going to take a while. I think even now I would estimate we're about 50% gap in LPG, LPG demand, supply and demand in India. The long term question is price. If the war drags out, if the war continues and we assume that the states of Hormuz remains constrained and bit by bit bits and pieces of oil and gas infrastructure, the Gulf get wiped out or get fall off the production site, then you're going to see prices rise. The question is when does it really start to hit you? Is a combination of two things. How long does the price rise last and how high does it go? And in the worst case scenario, when it goes to let's say $150 a barrel and it lasts for six, seven months, then you're looking at almost certainly some kind of a global, mild global recession. And probably India would lose maybe two percentage points of growth easily, if not a little more, plus inflation, which in turn has another problem of interest rate starting to compensate and further knocking off your GDP growth. On the other hand, if you get $120 from the a couple of months, you can write that out. But the uncertainty factor is a huge thing. Nobody, including whether it's Indian governor and the other government knows how long this will go on. Now India has a couple of things to its benefit and the biggest one is ironically geopolitics. So you'll see and immediately Russia offering their notewary. You stood with us, we'll stand with you. You paid a little bit more obviously. But Russia in terms of crude has been the big savior, virtually all of the non or large chunk of the non-sanctioned Russian crude that's in ships is coming to India. And you've seen Sir Gail Lavrov say, "If you want LNG, you want LPG, you tell us, we're ready to spread." You've seen Canada say, "We're also prepared to sell to you." And we see the Iran sell to us. You can see that Iran and even a reduced Saudi oil production. The Saudis are set a priority country on our list is India. And there's a certain sense that India is now big enough and important enough and independent enough in the sense that it's remained, it hasn't really angered anybody in all of this. It may not have been wildly in favor of anybody either. But we don't have any, nobody's looking out at us and saying, "You're a country we will not deal with." That this is somebody we need to keep reasonably happy because in the future, I remember many years ago I interviewed King Abdullah, Saudi Arabia, I think it was 1998 before he came to India. And he was saying that we we have to basically outline how he wanted to make Saudi Arabia India's number one energy partner. And I said, "Why?" And he said, "Because you are going to be the future hydrocarbon market of the world, America doesn't need to buy hydrocarbons from anybody. China is plateauing often in terms of growth, but more importantly, they're turning green. Who's left? It's you. Growth, no hydrocarbons production domestically of any consequence. And huge demand. You're going to be the market for us, for everybody. And I think the Iranians have made the same equation. So as Russia, who do we sell to? The best client you could possibly have is India. We've never defaulted. We've always paid. And we need a lot of it. Prime Minister, you talked about propane, propane butane, which is LPG. What we see across India today is restaurants having to close down or having limited menus. We've had factories that use heat treatment, whether you're making ball bearings or whether you're doing fasteners or even big companies like Aliyani Ford, having to either stop using gas and stop their processes or very quickly pay a lot of money to move to pipe natural gas. But then you eventually will have the impact on LPG that moves transport. And then you might have agriculture. Have you modeled market failure in any of these sectors and what the impact is if this wall continues for another two or three months? I've never seen anybody who's done that much detail because a lot of these are, I wouldn't say microsectors, but they're slightly different in the way they function, right? So restaurants, a lot of what you're seeing, the damage in the restaurant sector is a lot of that is in the informal sector. Very difficult to measure. And how much of that, for example, can you switch, as you can see, the government trying to really push hard for piped gas because that's pressurized, that's at PNG and that's just normal LNG. The other element is that you can convert LNG into LPG. And one of the biggest assets we have is the giant refinery structures we have, both reliance, IOC and so on. And we actually do have the capacity, which is what we're seeing of them converting LNG into LPG. We have unfortunately our natural gas reserves in KGD-6 are methane, but you can condense that into propane and butane through a chemical process, which can be done through the refineries. So the question for me is that there's so many variables, it's very hard to work out where you're going to be going on this, is how much can you have to guarantee an LNG supply? How much of that can you afford to divert to LPG? How do certain sectors can shift to LNG or to PNG, if you wish? And then how many shipments can you keep bringing in? One tanker, one giant tanker coming in, is roughly one or one and a half days worth of our requirements. But we've seen by raising the price and basically rationing the new cylinder that are produced. We've seen demand destruction fall by about 20%. We're seeing the refineries come in with about another 15 or 20% increase in LPG supply. So then you're looking, therefore, at about that 60% that's missing in between, and about half of that is starting to arrive in ships. Part of the problem with your fact is that a lot of the ships that carry the LNG and LPG required are trapped in the Gulf. There are only limited number of ships that actually do this kind of thing. And a lot of them are now busy shipping. So you can go to Canada and say we want to buy it, and they'll say, yeah, fine, but the ships, all of our ships are carrying this to another customer. They'll have to drop it off, come back, replenish themselves, come to you for four weeks now, you're good. These are the ULGCs that are scarce commodity right now. With your reason, we were calling the South Koreans, who look basically the world's largest builders. Do you have any lying around that are not doing anything right now? Because we're very happy to take them. The other problem India has, and it's something we also, I think, will be, we are already obliged for our own strategic purposes. That some of our smaller neighbors, we will have to help them out. And this includes Sri Lanka, Bangladesh, and Nepal. Nepal is anyway economically completely integrated with India. So when we actually talk about our LPG consumption, we're actually India plus Nepal. And Bhutan. Bhutan, it gets some of it as well. I mean, basically, these are porous borders. So the cylinder that we produce in India crosses over to the, it's just, when we, when we calculate our domestic consumption, we're actually concluding these two countries into our figures. Bangladesh is really an LNG story, not so much an LPG story, and they are also scouting around. But we are giving them crude, diesel fuel, for example. Sri Lanka is much more crude oil story. They have a shortage of crude oil. There, again, our refining capacities are useful. We can provide aviation fuels and so on that they need for their transport and so on. So let's go to a more contentious subject. - Sure. - And that's Modi's visit to Israel. Prime Minister Modi was there on the weekend and they basically attacked Israel right after he left. It's almost they were waiting for his plane to touch down in Delhi before the Israeli Jutsk to cough. Is this a coincidence or intelligence failure? Did India misread these signals or willingly participate? - I think India needed, actually I think I did the right thing. Modi, Israel is easily our most dependable military and defense partner in the world. And they helped us in operations in the last year. They helped us in Cargill. They helped us in almost every struggle. We've battled, we've had Pakistan and China in recent times. Russia comes a somewhat distant second, but in my view it's easily the Israelis who have proved to be the by far the most dependable security partner we have. Definitely not the West, part because they take a long time to respond to any emergency situations we have. And often because they're very wary of getting into fights with it, that includes China and Pakistan. So the view, my sense is that that Netanyahu is going for elections in September, October this year. Modi had to do a thank you visit to Israel before that happened. It was also a little boost for Netanyahu because it seems, by Israeli friends saying that because Netanyahu is a bit of a pariah right now on the international system because of Gaza, getting a leader of Modi's statute of visit Israel is actually useful for him politically. So the question therefore India is, when do you make that visit? And my sense was the calculation was, because it was already pretty clear that a war was brewing on the horizon. And I'm sure they would have gotten a tip off from the Israelis that look this is a very good chance. This is going to happen if we get to go ahead from America. Do you do it before the war or you do it off to the war? And the answer is definitely not off to the war. So therefore it made perfect sense to do it now rather than later. The timing of the war, yes, I mean, well we do know that if because he's, when you have us, person like Modi visiting you or a state visit, if you launch an attack, it's normally an insult to the guest, right? So you saw Russia invaded Ukraine when Imran Khan was there. That was quite rightly seen as a rebuffed to Imran. And he was, he was criticized heavily in Pakistan as you should have left the country immediately. You may remember when Vajpayee was foreign minister, he visited China the day they invaded Vietnam. And that was very clearly a snout by the Chinese, which we are treating you basically as as as pointless in our calculations. So that was definitely part of it. But I think the real timing, well that may be one sets opens up one set of windows. The real timing of you, as you know, for the attack was waiting for the Iranian leadership to meet to carry out the first decapitation strike. And that was the crucial point of the visit. This type of thing happens going off. And I mean, in the attack on Venezuela, the day that that was launched, Modi and Trump were supposed to have a phone conversation and it had to be canceled. But it wasn't because Trump knew, because what had already happened was that the order for the war had already attacked had been given. But the Pentagon decides when they feel they have everything ready and there was bad weather that delayed that attack. And suddenly the weather cleared and the Pentagon said, we're going in. And so then immediately they contacted India and I presume some other governments said, okay, the Trump will not, you probably don't want to take a phone call right now with Trump, because it'll look a bit pretty bad for you. So that's that's part of the game. But yes, if there are windows that get opened up at different times for diplomatic reasons, for weather reasons, and then just for, but the really big one is, is the strikes, the the targets that we first want to get, are they in place for us to get? So I'm staying on that subject for just one more question before we go to China and Russia. The Iranian Navy participated in the Indian, the naval exercise Milan, which happens every year in the Bay of Bengal and then the Americans took out one of their ships as it was returning. And then India of course gave shelter to the other one. Is this seen as a slap on India? Or is this just a misleading by the Indian, you don't mean it's as a slap on India? People have just forgotten what naval warfare is like. Because the rules are very clear. International maritime rules are very clear. The Iranian, if you are a ship that is far away from your home and when a war breaks out, if you don't, if you feel you are vulnerable, the captain under international law has the right to declare himself a non-combatant and seek safe harbor in a third country. But that's a standard world war two, world war one practice. It's well established. As you know, so with three Iranian ships in the neighborhood, two of them took that role. They said it will accept safe harbor. One is in Sri Lanka and one was in Coaching. This captain was offered safe harbor by the Indians. And he decided not to take it. He wanted to make, try to go home. And that decision, we have no idea why he decided to make that call because he's dead. Or so we have no sense of, did he receive instructions to Tehran or just did he feel that he run the risk of going out? The Americans did exactly what international law prescribes for submarine warfare. They had already made a public statement that every Iranian navy ship would be a target. And that destroying the Iranian navy would be a war aim. So when he went out and he entered international waters, at that point it is nobody's jurisdiction. And if you run into an American submarine, then that submarine has the right to shoot you down. The thing is we have forgotten what unrestricted submarine warfare, the rules that actually are engaged that are very clear. But there's only been two ships ever sunk since World War II by a torpedo in a submarine. So I think nowadays we've sort of forgotten what this would mean. But a simple example I always give to two people in India. It's like, look, if tomorrow, Indian Pakistan go for total war with each other, India makes the same announcement. As you would expect, any Pakistani navy ship anywhere will be a target for the Indian navy. A Pakistani ship leaving a naval exercise off the coast of Russia, let's say Vladivostok, decides to make a run for it home. Would we then, if an Indian submarine captain runs across that ship, say, oh, there are Russians are our friends, so let it go. The answer is no. If he did, that captain should be court-martialed, because he is disobeying a direct military order. And if that submarine goes home and then or shinks, sinks an Indian ship on the way, he's responsible for the deaths of an Indian naval targets. So, so therefore, that makes no sense to me. People describe it as a slap on a sort of friendship. And the submarine warfare is not about friendship. That's not how it works. So let's talk about China and Russia then. I'm sure they've been busy scratching their heads this situation of the Persian Gulf, wondering what the opportunities are for them that would come out of this. And so the question is, is either China or Russia quietly winning in this without firing a shot? Well, winning is a strong word, but I would say definitely the Russians are benefiting enormously, because you've had sanctions lifted. They're making enormous amounts of money. What is it? Estimates $150 million a day, because they are fertilizer producers. They are oil producers. They are gas producers. And the price of all of them have risen. And they're standing in the international system as a risen as a consequence. It's ironically not going to help them that much on the war front where they're actually doing badly right now, because the Ukrainians attacks on them have accelerated. Now, what was interesting, I thought, was that in the last wave of attacks by the Ukrainians, they knocked out an estimated 40% of Russian oil production. So curiously, Russia is suddenly finding itself that we are both do benefiting from the international markets, but domestically or at least on our own local war front. We just lost the capacity to benefit as much as we would have liked to. And so they are getting it-- I mean, that would have happened anyway, the Ukrainian attacks in Pizune. But they're now recognizing-- well, they have a problem that the war is moving in a different direction at a time that globally they may be benefiting. So it's a bit of a two-sided sword for them. But yes, overall, they are a beneficiary of this. Because one thing-- I think the end of the war will also mark the end of-- also blow a hole in the sanctions regime. Because Iran almost definitely demand that the end of sanctions on their economy. And most countries now will not take the Russian sanctions too seriously, because in the hunt for the different sources of oil and gas, you are simply going to say we don't give a damn anymore about the sanctions. So that's one element of it, definitely. China benefits because it comes out looking much more credible than before. in the sense that this is an economy that more so than almost any other will ride out any storm that comes through quite easily. They have the least amount to lose as I said that they are going to look for renewable alternative you will tend to look to China. And you'll also just be seen as the country that is that seems to be a lot more stable right now than anybody else. The bigger problem I think for China is that at a time when their domestic economy is undergoing a huge transition which is proving extremely disruptive I think unemployment rates among Chinese youth are now raging somewhere about 14% 12 to 14% they are very nervous about domestic unrest as they shift from a manufacturing investment driven economy to one of advanced industrial technology. They need to keep their export machine running and that to large extent runs not only on keeping an international trading system that is more or less open. It also requires that the world economy grow that they'll be demand for their products. So for them on a macro level disruptions to the global economy are not good. It means less exports it means more protectionism it means higher prices it means inflation all of which make damage the the export machine and the manufacturing machine that that is keeping the Chinese economy running right now. So I would argue that broadly in one of the reasons that they came to India two to three years ago and said you know we had a problem with the Galwan Valley and we are prepared to overlook all of that return the border to its original position. So I think we are going to have a problem with the global economy before the attack including the four points of the line of actual control that we've taken over and all we want is to normalize a relationship and as part of it a sort of a track 1.5 discussion with the Chinese on this. And I said why are you interested in doing that they just said we need in the present in global environment and given our local domestic problems we want stability. India for all we don't have to be friends or enough friends but you're actually a force for stability the international system so stabilizing our entire southern border in return for. In our view very little as well worth it so therefore so you can see China is looking around and saying we prefer that people didn't actually mess with the international system right now because we have a bigger the big story for the future of China is domestic right now. And this is not making it easier. Are there any lessons for China on Taiwan based on what they've seen with the very stretched apparently stress United States and in the well there is actually a huge debate in China even at the academic and military level it's quite a public about what do we learn from the use of the Shahid drone by the Iranians and the fact that this missile anti missile battle that went on across the Persian Gulf is this a lesson for us on the Taiwan Straits. Mitigated by the fact that one the Taiwan Strait is much bigger than the Straits of war moves at the Straits of war moves and it's narrowest is what about 18 kilometers wide the Taiwan Strait of narrows is like 160 kilometers wide it's a it's a very stormy ocean it has a hurricane season that runs for four months of the year very different Persian Gulf is literally like a lake is nothing ever happens there in terms of the weather. So it's a very different environment that's one but second is that Taiwan is is is is a is a electronics and super power it has a massive drone capacity last year Taiwan National Day at the in India in Delhi I attended the reception and the centerpiece was a giant drone made by the Taiwanese to show this is what we're capable of and so they know that it's not that easy to to to use those it will be part of it but keep in mind it's also flip side is that Taiwan be looking at this and saying oh look Iran took on mighty superpower using 25 you know a $25 drones and did reasonably well this is something we can replicate quite easily given it we are actually electronically much superior to what Iran is so for the Chinese the other side is yeah this is not as there's a certain David Goliath element to this which we're not happy about very interesting times to come then a promise last question to you this one is advised to see yours in the energy and energy transition space in European whatever two or three big geopolitical risks that they must actively plan for in the next three years. Oh tough one see one is that's going to be and I think this is many ways specific to what we have to watch out for because one of the things Iran is clearly doing and they're Russia and China are watching and I think supporting with great interest one reason they are providing assistance to Iran is that it's not only demanded in a Persian Gulf it said basically look every ship you can we are going to allow your ships to go through but you have to ask for permission for each ship that you that you that goes through and we're also going to charge a type right so I think a charging roughly $2 million per tank per tanker Lloyd's London said the idea there I would argue is to try to get countries used to the idea that the states of hormones is not being kept open by the United States anymore it's being kept open it's being or we have veto power we'll be kept open by Iran but we have veto power on this so we will we are the overlords on this issue so some of the calculations are that if you were to in if we were to revert to peace time and this tight system must be continued you'd be looking at something like maybe $120 billion a year being paid to Iran by the basically the Gulf monarchy's and consumers of oil and they probably increase it to something higher $300 billion or so you basically have them pay for demand protection equivalent of protection money from the Gulf monarchy is America is no longer there you know you can no longer depend on America to keep fighting for you so therefore give me so we will start and then what is also interesting is Iran has said at least when it comes to our oil don't pay in dollars you pay in red minbee so Indians having to pay red minbee and other countries having to pay red minbee for this if they begin that process to let's say Saudi Arabia saying that you must at least have a non dollar option for your we will start to see a very accelerated process of de-dollarization in the world economy now we have massive shift in terms of the of what where currency rates go and how important the dollar is and where the dollar exchange rate I mean not actually bad for India one of our big weaknesses continues to be that the rupee doesn't do too badly in terms of its real effective exchange rate but it does horribly against the dollar as does everybody else but we could start to see a real shift in terms of where the dollar goes or its importance and that is going to be important for your treasury functions so watch where where the Iranians how much the Iranians impinge or able to undermine the petrion dollar in the next 10 years or how much even Saudi Arabia may say this is actually worth keeping the dollar because ultimately supported the dollar because we are getting a security guarantee from the United States we don't see that happening so that's one element of it second of course on the energy side is the need to diversify away from the Persian Gulf or from other choke points in the international system that's not going to be easy because the choke points exist because there are the geography of Indian particular is very bad that way our Indian Ocean is just like a massive choke points and more choke points in the Indian Ocean and there are in any other ocean in the world which means that we will see both naval power by India expand which is already happening but we will have to start reaching out to a lot of new countries in the world and the diversification story I think will also mean a lot of smaller countries will have to be brought into our energy web and we will see the governments probably skew the pricing structure to ensure that just because it's cheaper from Qatar we don't necessarily always buy from Qatar but the government does that is not clear to me but let's say a country like Guyana which is actually very interested in working with us it produces three times more oil per day than Venezuela does it's much much bigger it has a per capita purchasing power per capita income which is I think the third highest in the world already 50% Indian the president is Indian he's a great fan of Modi he's I mean if you read this to the kind of country that desperately wants Indians to be there to be selling products to be working with them on a these are the kind of countries we now need to be looking at and and get I think diplomatically we're already doing that to some degree but not corporate India has to follow in that trail Finally, you every single supply chain can now be is being weaponized, including airplane routes, which is now a huge headache for India because we have so many sanctions to see on air. Air flights, you know, you Western flights won't go over Russia, the nobody can fly over Iran, Pakistan, whatever, anybody except like British Airways in one or two to go through the psychokasous route and these crazy things that we we have to find India is going to have to work out some way to get new air corridors with the via Ethiopia or something like that. Multiple air routes to figure out and maintain that air traffic between us and the Western part of the planet and I'm not certain how that's going to I'm hoping that the slow destruction of sanctions will allow that to happen but those are sanctions that are very easy to impose and difficult and so it's not that easy. But almost all of this can now be weaponized so whenever you plan it makes perfect sense to say okay this is the cheapest route to do it but always have at least two or three not just a plan B but a plan C is your backup and start to put that together. I mean my company does exactly that for a lot of over a thousand companies around the world. We try to warn them these are the things that you need to be watching out for. Luckily and I remember the last RBI governor Shaktikan Tadas, which he when he was leaving office he said I'd really like companies to start to get a chief political risk officer some kind of a restructure into your system especially the bigger companies as you go overseas because that's increasingly going to be a big part of our story and we don't do that right now there's a tendency the government will save us if there is a problem but the government says there's a lot of this is outside our control now. This has been a fascinating but slightly unsettling conversation I'm going to have to think about this chief political risk officer clearly CEOs in the energy and energy transition space who had been building for the last two decades only around efficiency are really going to start thinking about resilience it's been a pleasure to have you on the show thank you so much for making the time and we look forward to having you back soon. Thank you. I'm your host for this episode Ravind Merchandani but I would not be here without the amazing energizing India podcast team. Aditya, I head of production and the man who makes it all happen in the end much like a big fat grand Indian wedding bringing together the research data and attention to detail all within the timelines to get the next episode out on time. Shrin, our podcast research head and Sammy, a podcast strategy consultant who beams in from New York with golden nuggets of advice. Swan and then Sunil who along with me are the executive producers of this program. The energizing India podcast is an adore group production giving a voice to the EV battery and hydrogen sectors in India. If you enjoyed listening to us today make sure to follow us on whatever platform you're listening on whether it's Spotify, Apple iTunes or our very own portal energizing India.tv. Thank you very much and see you on the next episode.