by Praveen Swami May 19, 2013

In the summer of 1914, Archduke Franz Ferdinand and his wife Duchess Sophie were assassinated on the Latin Bridge in Sarajevo. The shots weren’t, as pop history now has it, heard around the world. Europe was riding a great wave of prosperity that had stretched for over a century; its markets better-integrated than ever before and economic institutions better-developed than any in human history. Britain, focussed on the Irish conflict, paid little attention to the regicide in the Balkans. The United States had long retreated into isolation, choosing to know little and care less. France had—what else—a sex scandal on its mind.

Less than weeks after the killing in Sarajevo, though, jaunty marching-bands were cheering on soldiers headed into a war that would end in the death of 10 million soldiers and seven million civilians. Europe’s great powers had begun an inexorable march towards the abyss.

Chinese premier Li Keqiang will land in New Delhi on Sunday—bearing a message,  he says, that his country and India “must shake hands… so that together we can raise the standing of Asia in the world”. It’s hard to imagine either he or Prime Minister Manmohan Singh don’t know their not-always-steady hands must guide their nations towards something more important than prestige: the survival of a continent.

Europe in 1913 looked a lot like Asia in 2013. China, like Germany back then, fears its rise is being shackled by the established great powers. In the global system, the United States operates much like imperial Britain, an arbiter of the destiny of nations far from its shores. India, like Russia, is struggling to emerge from backwardness—and views its newly powerful neighbour with deep trepidation. There are competing military modernisation programmes; new geo-strategic alliances; tensions from the East China Sea to the Himalaya and the deserts of Persia.

It’s all by Asian powers seeking to ensure they have the oil and gas they need to fuel the plants which make the power that runs the ovens that bakes their pie. For the past five years, the world has been bracing for an oil revolution—and with it will come great changes in the ways in which the global order is structured. The International Energy Agency predicts that the United States will, for a time, become the world’s largest oil producer by 2017, ahead of current number 1 Russia and number 2 Saudi Arabia, thanks to its massive reserves of shale oil and gas—profitable to drill for at around $80 a barrel. In 2035, it would be net self-sufficient.

This is good news for China and India. Europe will become less dependent on Russian gas, and the United States will seek less oil from its long-standing Persian gulf partners—something there’s already some evidence is happening. There will be more left elsewhere in the world to feed Asia’s new powerhouses.

There is also, however, bad news. Even hardened pessimists agree China’s real Gross Domestic Product will grow at 7% or more for the next decade. Ever since 1980, China’s demand for oil has grown at 12% per year—well ahead of GDP. India’s demands for oil and gas have also been rising sharply. The country’s energy consumption doubled between 1990 and 2011—the decade of liberalization—and will likely grow further. Petroleum now makes up 26% of India’s consumption, behind coal and biomass, but India is already the fourth-largest importer of crude oil and other liquid fuels behind the United States, China and Japan. The IEA predicts, moreover, that a rise of 1.8 billion in the world’s population to 8.6 billion will lead to a rise in global oil demand by more than 10% by 2035. This means high prices will continue.

India and China will struggle as a consequence. For the best part of a century, oil was cheap. In 1859, Edwin Drake and Billy Smith hit oil in Pennsylvania. Following the end of the United States civil war, drilling surged—so much so that the wooden whisky casks used to store the stuff were worth more than the thick, black crude inside. It powered the development of technologies ranging from automobiles and aircraft to fertilizers and plastics. In a very real sense, thus, modern industrial civilisation floats on oil and gas.

Prices stayed under $20 per barrel, in 2013 terms, all the way from the 1870s to the 1970s. In 1973, though, the Oil and Petroleum Exporters Organisation sharply raised oil prices—an act of punishment against the United States for its support to Israel. Though oil prices came down in the mid-1980s, they again began to surge after 9/11—touching around $105 a barrel in 2010.

India and China both fear that volatile energy markets just can’t be trusted to meet their ever-growing demand. China’s state-owned oil companies have thus begun investing across the globe, locking in oil and gas assets as a hedge against potential disruptions. So have Indian entities, though on a smaller scale. This competition makes companies from both countries vulnerable to various kinds of risk—which will force some very expensive military investments.

For China, the risks of the new oil and gas order are enormous. The IEA has underlined “the ongoing shift in the international oil trade towards Asian markets, putting greater focus on the security of strategic routes that link them to the Middle East”. China’s military planners know that 80% of their oil imports come from the Middle-East and Africa—all but 10% of this on foreign-owned tankers headed through the Indian ocean into the Straits of Malacca, into the South China Sea. Though United States or Indian interdiction of this traffic would only come about in a war, militaries must prepare for these outcomes—hence China’s military surge.

India, understanding that the ocean is one of its few points of pressure against China, has begun to grow its own naval capacities. It has enhanced military cooperation with countries like Japan and Vietnam, though avoiding outright systems of military alliance.

The two countries are also mulling out-of-theatre expeditionary warfare capabilities, necessary to defend their oil assets in the Middle-East and Africa when the United States stops playing its global policing role. The next crisis in the Middle-East—a revolution in Saudi Arabia, an Iranian attack on the Persian gulf’s gas and oil fields, a meltdown in the Horn of Africa—may hurt China and India far more than they do the United States or Europe. In 2009, former army chief Deepak Kapoor discussed plans involving the use of large air transport and naval assets. India’s newly-acquired C-130 transport aircraft are a step in this direction. China’s acquisition of an aircraft carrier is, more likely than not, the beginning of wider investment in the expeditionary capacities needed for global intervention.

For decades, the United States was heavily invested in the Middle-East, providing order to the global oil market for free as a result. “Persian oil,” as Franklin D Roosevelt said to a British diplomat in 1944, “is yours. We share the oil of Iraq and Kuwait. As for Saudi Arabian oil, it’s ours”. Now the United States no longer needs Middle-East oil so much, a decline in its military interest is almost certain—witness the primacy of the Pacific in the superpower’s strategic planning, and its dogged refusal to become enmeshed in crisis from Egypt to Syria to Libya.

The best-case scenario is that China and India will find ways to negotiate their competition, find ways to cooperate on energy security and collaboratively find means to police the oil-commons. The two countries could also work together on technological solutions that will end their depending oil—something that, in addition to averting crisis, would have enormous ecological dividends.

Yet, leaders know a worst-case scenario exists, too. The two countries are unlikely to risk existential, all-out war because both possess nuclear weapons—weapons which would make the lives lost in the First World War seem negligible and reduce both to rubble. Yet, there’s plenty of space for hell between peace and nuclear war. China’s increasingly aggressive posture on its territorial disputes in the South China Seas, and its recent stand-off with India at Daulat Beg Oldi, are all evidence that reason doesn’t always guide the course of international affairs.

Alarmist? Sure: but listening to peacocks’ often-false calls of panic, as anyone familiar with Asian jungles will tell you, is a useful way to avoid predators. In 1901, the banker Jan Bloch warned the venerable Royal United Services Institute that offensive warfare could not win a European war—but that once it began, it would end only with the complete exhaustion of one side. He was laughed out of court by the generals at RUSI. “If there is a general war”, the great Prussian leader Otto von Bismarck prophesied in 1888, “it will be over some damn fool thing in the Balkans”. No-one acted seriously to avert that damn fool thing. It’s imperative politicians in Asia not make that same mistake.