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An economic and political
pipeline
By Hooman Peimani
On
November 12, Russia's Gazprom announced its plan to
construct an undersea gas pipeline between Iran and
India for exporting Iranian natural gas to India via
Pakistan.
According to the announcement, the
Russian company has reached an agreement in principle
with Iran for the project. By signing a note of
understanding, it has also received Pakistan's consent
for the passage of the pipeline through its territorial
waters. In addition to transit fees, the Pakistanis will
receive gas from the pipeline. If construction actually
begins, the US$3.2-billion pipeline project will be a
major political and economic achievement for Iran, India
and Russia.
Their relations have been growing,
especially since the fall of the Soviet Union, thanks to
common interests in South and West Asia and their
sharing the same or similar views on major international
issues, including their opposition to an America-led
unipolar international system.
The idea of
exporting Iranian gas to Pakistan and to India via
Pakistan emerged in the 1990s. Toward the end of the
decade, a significant number of large and small
companies expressed their readiness to take part in such
a project.
For example, in 1998, the Iranian
Mostazafan va Janbazan Foundation announced its plan to
cooperate with Shell, British Gas and Petronas to lay a
1,400 kilometer gas pipeline between Iran's Persian Gulf
South Pars gas field to the port city of Karachi in
Pakistan. Royal Dutch Shell also expressed its interest
in the project for connecting this offshore Iranian gas
field to Moritan in India. As well, Australia became a
party to a trilateral project with Iran and India for
the export of Iranian gas to India. In particular,
Australian BHP, which expressed its interest in laying a
gas pipeline connecting that gas field to Pakistan and
India, conducted a technical and economic assessment on
the proposed project.
However, none of the
aforementioned turned into a contract for the actual
construction of a pipeline - which is why the recent
Gazprom announcement is significant. For the first time,
a major gas company has actually gone beyond the
expression of interest. It is also important as Gazprom
is one of the three companies developing Iran's South
Pars gas field, along with French Total and Malaysian
Petronas, from which India will receive Iranian gas.
The announcement is also important for its
inclusion of Pakistani consent, without which the
construction of the shortest possible pipeline to India
would be simply impossible. The deal inked in Islamabad
allows Gazprom to start exploration and preparations for
drafting a feasibility report on the construction of the
gas pipeline, Russian news agency Itar-Tass reported. As
envisaged, the pipeline will be laid at the depth of 150
meters within Pakistan's Arabian Sea territorial waters
to reach India through the neighboring Indian Ocean. For
its domestic consumption, Pakistan will receive gas
through a branch pipeline connecting the main pipeline
to Pakistan.
Despite its major conflicts with
India, three factors seem to have convinced the
Pakistanis to give their consent for the project.
First, it will address their need for imported
gas from the closest and the most reliable exporter, ie,
neighboring Iran. Despite conflicts of interest in
Afghanistan over the past two decades, many political,
economic and security considerations have encouraged
Iran and Pakistan to maintain peaceful relations. While
details of the arrangements are yet to be released, it
is safe to assume that Iran would have offered a
reasonable price for its gas to be sold to Pakistan to
make the Pakistanis interested.
Secondly, the
lucrative nature of the pipeline project should have
sweetened the deal for the Pakistanis. They will receive
unspecified amounts of transit fees for the passage of
gas through their territorial waters. Given Pakistan's
limited financial means and its growing financial needs,
an expected significant amount of annual revenue in
transit fees will be of importance to the Pakistani
economy.
Third, a gas pipeline to India via
Pakistan could serve to help reduce tensions and the
threat of war between the two neighbors. The pipeline
would give not only Pakistan, but also India, a stake in
peaceful relations between the two countries. Aside from
their current propaganda war, neither side wants nor
could afford a full-scale war with the possibility of
escalation into nuclear exchange. However, the removal
of such a possibility requires a reduction of tension in
their relations.
Gazprom's announcement was
definitely a significant step toward the construction of
the gas pipeline to India, but it is still too early to
be certain about the full implementation of the
Iranian-Russian-Pakistani agreement. According to the
Russian company, it will send a delegation to Iran in
the beginning of the coming year to prepare the ground
for the creation of a working team to study the
technical and economic aspects of the pipeline project.
However, neither that company nor Iran has yet specified
a date for the actual beginning of its construction. As
a result, it is not yet clear when and if the project
will become a reality in the near future.
Without a doubt, if implemented, the
Iranian-Pakistani-Indian pipeline project would be a
very significant development both for its economic
importance and political implications. Being a large and
growing Asian market, India will be a major importer of
fossil energy, including natural gas, in the 21st
century. Iran's securing access to that market will end
its current insignificant gas exports to turn it into a
major global gas exporter. The latter will provide the
Iranians with long-term large annual revenues, a
necessity for financing their numerous unfinished
projects, estimated at 45,000, and for diversifying
their oil-dependent economy.
The deal will also
be a major success for Russia, whose oil and gas
companies have sought to turn themselves into major
international players. As Iran has the world's
second-largest gas deposit, Russia's involvement in its
export project will certainly grant the Russians who
possess the world's first largest gas reserves a very
strong position in the international gas markets.
If the envisaged gas pipeline is constructed, it
will be another step toward closer cooperation among the
three dissatisfied regional powers, India, Iran and
Russia, without regard to the American D'Amato Act,
which bans any foreign investment in the Iranian energy
industry over an American-set limit of $20 million.
Dr Hooman Peimani works as an
independent consultant with international organizations
in Geneva and does research in international
relations.
(©2002 Asia Times Online Co Ltd.
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