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| Sunday, 24 July 2005 |
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Politics of the pipeline by Afzaal Mahmood IN ORDER to move the peace process forward, Pakistan and India must keep up the momentum created by the convergence of views on the Iranian gas pipeline and the Delhi accord of July 13 and work on a framework agreement to be concluded by the end of this year. An Indian delegation will visit Pakistan next month to continue secretary-level talks on the multi-billion gas pipeline project. After the signing of a bilateral agreement between India and Pakistan, it would be converted into a multilateral agreement by including Iran. The two sides have also agreed that once the basic issues pertaining to the project have been satisfactorily resolved by the three countries concerned, they will enter into a 'framework agreement'. In this regard, the Indian side is expected to submit a draft text to the Pakistani side before the next meeting of the joint working group. In order to keep the other options open for their common quest for piped gas, India has been formally invited to a steering committee meeting of the Turkmenistan-Afghanistan-Pakistan gas pipeline project due to be held later this month. The most significant development with regard to the Iranian gas pipeline project is that Islamabad and New Delhi have pledged their commitment to push forward the project despite US objections. During their first structured discussion on the issue held in New Delhi recently, both countries agreed that the gas pipeline project was crucial for their economic growth pegged to move at eight to nine per cent every year. Economic and population growth has resulted in rapid increase in energy demand in South Asia. According to the projected requirements of energy in the year 2025, Pakistan and India will need 500 million units of gas per day. At the moment, Pakistan is self-reliant in gas, but by 2010 it will start experiencing gas shortage as gas production will begin to decline and will go down considerably by 2025 unless new finds are discovered. At the same time, demand for gas in Pakistan is increasing by seven to eight per cent per annum and further delay in the completion of the pipeline projects will create serious supply problems in the country. That is why even the Iran-Pakistan gas pipeline is economically feasible; and Indian inclusion will only increase its viability. During the Iranian oil minister's visit to Islamabad, Pakistan and Iran agreed on July 7 to start construction of the Iran-Pakistan-India (IPI) gas pipeline by April 2006. The two sides decided to invite India for trilateral talks after signing a memorandum of understanding under which Iran would provide to Pakistan a comprehensive data sheet about the price, quality and quantity of the gas it would supply through the IPI. It was also agreed that the project's technical issues would be solved in the remaining 10 months so that Iran could make the final contract to sell its gas by next April. It is estimated that after the initiation of work on the pipeline, the project will take at least three years to complete. The $4 billion gas pipeline would be about 2,670 km long - 1,115 km in Iran, 705 km in Pakistan and 850 km in India. The Pakistani investment in the project would be around $1 billion, an amount which can be raised from the surplus liquidity available with the local banking sector. Pakistan, Iran and India are likely to set up separate consortiums to develop the proposed gas pipeline in their respective territories. Since India's burgeoning industry is desperately looking for natural gas, the cleanest and cheapest fuel, India has shown interest in the Turkmenistan, Iran and Qatar gas pipelines not as alternative options to each other but for multiplying gas supplies. That is why India has expressed interest in participating in the Qatar pipeline project and to attend the steering committee meeting on the Turkmenistan pipeline. At the moment, India produces about 50 per cent of the gas it needs and imports 7.5 million tons of liquefied natural gas a year as its economy guzzles more and more fuel to keep growing. It is not without significance that despite US public opposition, both Pakistan and India have shown their resolve to push forward with the Iranian gas pipeline project. Since India is far better placed than Pakistan to resist American pressure, it is all the more creditable for Islamabad to demonstrate that it can do what is in the national interest even if it has to stand up to Washington and defy its wishes. During his visit last month to the US, Foreign Minister Khurshid Mehmood Kasuri reportedly told US Secretary of State Condoleezza Rice that it would not be possible for Pakistan to abandon the Iranian gas project for a number of reasons. Pakistan would earn up to $600 million a year from the pipeline which is close to about $700 million a year that Islamabad receives from Washington. The gas pipeline will also allow Pakistan to import gas worth about $1 billion every year from Iran by 2010 to meet its domestic and industrial requirements. Also, the pipeline will create a major industrial infrastructure in Pakistan, generating new jobs for the people. And perhaps most importantly, a gas pipeline to India across Pakistan will add a huge economic incentive to the strengthening of bilateral relations between the two neighbours. Responding to Pakistan's concerns, Ms Rice is reported to have urged the Pakistani delegation to look at other options like the pipeline from Qatar or the Central Asian republic of Turkmenistan. But the problem is that bringing gas from Qatar would double the cost while gas reserves in Turkmenistan are still unproven. Moreover, political instability in Afghanistan is another cause for concern that has to be sorted out before a pipeline is routed through that country. According to Ms Rice, who has publicly opposed the Iranian project, bringing Iranian gas to India through Pakistan is against US laws. The Iran and Libya Sanctions Act of 1996, known as ILSA, forbids more than $20 million of investment in Iranian oil and gas projects. The violator can be deprived of US economic assistance and may also face sanctions. Pakistan's argument, however, is that it will not be violating any US law by agreeing to participate in the Iranian gas pipeline because Islamabad will not make any investment in Iran's oil infrastructure, which ILSA forbids. The Iranian side of the project will be financed entirely by Iran and a group of multinational investors that Iran will be required to put together. It may be added that no US president has so far moved to impose penalties under the ILSA since it was enacted in 1996, despite a considerable foreign investment in Iran's oil and gas industry. It is reassuring that Ms Rice has indicated that the United States would not use the threat of sanctions to make India and Pakistan abandon the Iranian gas pipeline. It may also be added that on the eve of Indian prime minister's US visit, the influential American think-tank, the Carnegie Endowment, suggested to the state department that it remove objections to the Iran-Pakistan-India gas pipeline project. There is no question that the Iranian gas pipeline project has created a major foreign policy challenge for the US as it tries to balance its interests in South Asia with its objective to contain Tehran. The Bush administration is faced with a classic foreign policy squeeze - on the one hand, it strongly supports friendly relations between Pakistan and India (which the Iranian gas pipeline will certainly promote) and, on the other, it is openly opposed to the Iranian gas pipeline because it scuttles its efforts to isolate Tehran. US officials view the Iranian gas pipeline, which will deliver Iranian gas to India across Pakistan, as a clever move by Tehran to use its natural resources to gain leverage in South Asia and defeat US designs to keep it isolated. But the fact of the matter is that by opposing the Iranian gas pipeline the US is working against its own stated objective: better relations between Pakistan and India. However, for the project to move forward, Iran needs to be flexible on the issue of price. In view of the larger energy game being played on the world stage, Iran has to demonstrate that it is keen on strategic cooperation with Pakistan and India by supplying gas to the two countries at a reasonable price. The benefits and symbolism of the gas pipeline by far surpass those of any CBM undertaken by Pakistan and India. The pipeline project can serve as a durable CBM by creating strong economic linkages and business partnerships among the three countries in general and between the two South Asian neighbours in particular. The potential for economic and developmental gain from the gas pipeline will help Islamabad and New Delhi reassess their policies and move away from their old mindsets. Economic collaboration between them is bound to have a major impact on the ongoing peace process, leading to the transformation of the composite dialogue and the resolution of bilateral conflicts. (Courtesy: Dawn) |
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