The pipeline may not be a pipe-dream


If cooperation in transporting the energy resources of Central Asia and the Gulf region is held hostage to conflict between India and Pakistan or instability in Afghanistan, it will adversely affect the future economic growth and individual well-being of Central, South West and South Asia
One can catch a dreaming glimpse of regional cooperation in the report that Iran, India and Pakistan have finally agreed on a pricing formula after years of haggling. Talks on building the Iran-Pakistan-India gas pipeline began in 1994, more than twelve years back. Progress on this multi-billion-dollar project has been held hostage to India-Pakistan tensions. With a thaw in India-Pakistan relations, and flexibility on the part of Iran on the pricing issue, the pipeline may not be a pipe-dream anymore, as some cynics have been commenting.
It is a project of vital importance for these three countries. It will allow Iran to gain access to one of the largest markets for energy resources, while India and Pakistan with their growing economies will have secure and long-term supplies to meet their increasing need.
What are the primary interests and stakes of the regional powers? How would the pipeline build a common future?
Energy, trade and transit routes offer one of the most effective ways of promoting regional cooperation. The Central, Southwest and South Asian regions may see faster integration of their economies with the twin development of trade corridors and energy pipelines transiting through several countries. Energy cooperation would create and deepen intra-state and intra-regional interdependence. It is abundantly clear from the experience of other integrated economies that the more it happens, the more the countries become sensitive to the national interests of their partners. Energy cooperation and mutual interdependence between India and Pakistan would create a better environment for resolving old conflicts and create more avenues of openness.
The proposed gas pipelines from Iran and Turkmenistan will create win-win situation for all the countries involved.
Pakistan has been equally interested in the Turkmenistan pipeline through Afghanistan; there is a possibility that India might also join the project. Since the pulling out of the Unocal in December 1998, Turkmenistan and Pakistan have remained engaged in reviving the pipeline project, but they continue to face tremendous difficulties in raising the capital and attracting partners. Some latent opposition from Iran and Russia, for divergent strategic interests in Afghanistan, also played a key role in derailing the project.
The situation in Afghanistan has qualitatively changed with the tremendous interest of the world powers in its reconstruction as a nation, country and state. Some of them would support the efforts that Afghanistan, Turkmenistan and Pakistan are making in pulling the regional pipeline project out of cold storage.
The proposed gas pipeline from the Daulatabad gas fields in Turkmenistan would create a positive spin-off for Afghanistan’s economy, besides generating jobs and transit fees and developing technical skills. More than these gains, regional cooperation in the energy sector would further deepen the interest of Afghanistan’s neighbours in its stability and peace. Turkmenistan has vast energy resources and has a strategic interest in transporting them to diverse regions and countries. Doing so will raise not only additional revenues for Turkmenistan but also help it obtain a fair price for its energy by beating off dependence on a single route and destination and therefore increasing its bargaining capacity.
India and Pakistan have in the past failed to understand the new dynamics of global energy politics. They don’t realise that the flow of energy resources would continue to take a westward direction. And now, with China becoming a new player in the regional energy game, chances of their direct access to the energy resources of Central Asia would keep shrinking with every pipeline built away from them. Unlike oil, which can be transported in many directions in containers, natural gas has to take fixed routes through pipelines. These can only serve consumers on their route, which, once laid, cannot be changed. The question to ponder is, which way will the pipelines take the natural gas resources of Central Asia and the Persian Gulf regions? If we continue to hesitate, the West and the Orient will take the most of it.
Over the past seventy years, we have witnessed how the game of oil politics has been played. The markets and demand in Western countries, it is argued, justified the highest per capita consumption of this precious and non-renewable resource. Consumption of energy resources is one of the important indicators of the level of development in a country. The less developed countries are free to import energy but the international pricing mechanism is so unfavourable to them, and the gap between personal income of individuals and the cost of energy so wide, that the overwhelming majority of them can only dream of a decent living. With shrinking supplies and increasing demand, the energy costs developing countries incur will be staggering.
It is tragic that disputes, rivalries and confrontations have blinded the leaders of countries in the Central, South West and South Asian regions from pursuing common interests that might have lasting effects on the lives of more than a billion human beings. If cooperation in transporting the energy resources of Central Asia and the Gulf region is held hostage to conflict between India and Pakistan or instability in Afghanistan, it will adversely affect the future economic growth and individual well-being of these three regions. Any one of the three may have the perverse satisfaction of denying the other material benefits, but may not escape equally negative consequences itself.
Pakistan is better endowed in natural gas resources, with a proven capacity of 22 Trillion Cubic Feet (TCF), compared to the very meagre finds of India. And the prospects for more discoveries in traditional and offshore fields are greater for Pakistan than for India. But still, Pakistan with an annual consumption of 0.7 TCF a year, and with a demand increase of about 10 percent a year, will have to import natural gas by around 2010.
India is a vast and growing economic market, which cannot move further upward without injecting itself with higher doses of energy. It will make economic sense for both India and Pakistan to expedite arrangements for the gas pipelines from Turkmenistan, Iran and Qatar. The Indians cannot wish away the fact that Pakistan is an important energy transportation corridor. And Pakistan should use this strategic asset to open up the Indian market for all these countries and benefit itself by reaping transmission fees and cheaper gas prices for its own consumers.
Despite India’s hesitation and vigorous efforts to explore a sea-based solution to the construction of a pipeline from Iran, Pakistan stays committed to allowing this pipeline to cross through its territory. In their vain attempt to keep Pakistan out, the Indians fail to realise that the land-based route will be the most cost effective and secure. It is good that India is on board again. This will send a positive signal to banks and companies that may invest in this project. There are a number of multinationals in the field from the US, Netherlands and Australia that have shown tremendous interest in this and similar projects and are willing to build the pipelines.
While putting life into the Iran-Pakistan-India pipeline, it is important to stake an interest in Turkmenistan-Afghanistan-Pakistan pipeline too, which may serve as a catalyst to rebuild Afghanistan. Indian concerns about the safety of the pipeline and an assured supply through the hostile territory of Pakistan can be addressed through a dialogue and legally binding guarantees. The east-east- pipelines would create integrated regional energy markets and lay the foundations of greater economic interdependence and regional cooperation.
The author is a professor of Political Science at the Lahore University of Management Sciences.