There has been much hype about the Australia-India relationship over the past few months. The PMs of both nations did a lap of a cricket ground before a Test in a “Popemobile” and the Opera House was lit up with the Indian flag on the India PM’s recent visit to Sydney.
But after all the talk, where is the beef? Behind the scenes of all these theatrics, there was no reporting of the fact that Russia had overtaken Australia as India’s largest source of PCI coal for the past five months.
What is most surprising about all of the hoopla around the Australia-India relationship is that it is a love that dare not speak its name. In all of the meetings that our PM Anthony Albanese has had with Modi over the past few months, he has never mentioned Australia’s biggest export to India, coal.
Our coal exports to India dwarf any other products. Coal makes up 70 per cent of Australia’s exports to India and it has been a figure that has been growing in recent years.
Over the next few decades, the World Bank predicts that almost 300 million Indians will move to cities. That will require more than 10 billion square metres of new housing. To build that, around 1 billion tonnes of steel will be required, and more than 500 million tonnes of coking coal will be needed to make that steel.
We have a huge opportunity to help India provide this housing to its people through our world class coking coal reserves in Queensland. Yet India sees how we treated Adani, India hears that our leaders never mention the world coal so it logically decides to look elsewhere for its needs.
Enter Russia. Russia has been quietly pursuing a strategy for years to connect itself to Chinese and Indian markets. Even before the Ukraine war, Russia had a $10 billion plan to upgrade rail lines to export more coal to Asia. Russia has been upgrading the Tsarist-era Trans-Siberian and Soviet-era Baikal-Amur rail lines that link western Russia with the Pacific Ocean. In early 2021, Vladimir Putin met with Russian coal miners urging them to make faster progress on these upgrades.
India has also become Russia’s largest destination for oil exports since the Ukraine invasion. This has given India a massive energy cost advantage from discounted Russian oil, and it is exporting much of that oil to the rest of the world, including to Europe.
Russia is now a massive threat to Australia’s previous domination of the Asian hard commodity trade. Our wealth and prosperity has been built on supplying natural resources to Asia but there is almost zero discussion in Australia about these risks.
Instead, we are loading up so much red tape on our resources industry that we are not seeing increased investment despite record prices for our commodities. The unit value of our commodity exports is now 30 per cent higher than during the last mining boom. In that last mining boom, annual mining capital expenditure peaked at over $100 billion a year. However, over the past year we have attracted just $40 billion in mining capital expenditure. This $60 billion gap is a massive missed economic opportunity for Australia because of our excessive red tape.
Japan’s largest gas company, Inpex, warned recently that Australia risks world peace if it fails to develop its resources. That might seem dramatic but WWII started because Japan was denied access to resources in Asia.
The world has become a more dangerous place over the past year and it will become more dangerous if we do not help our friends develop their economies through the use of our resources.
