A blockage in the peace
pipeline By Kaveh L Afrasiabi
A new and potentially serious snag has
emerged with respect to the Iran-Pakistan-India
(IPI) pipeline over Iran's right to periodically
review the gas price. This has caused yet another
delay in the signing of the final agreement and
may prove a lot more troublesome for the so-called
"peace pipeline" than a passing "hiccup", as
described by some officials involved in the
negotiations.
The self-imposed deadline
for reaching a final agreement, June 30, came and
passed, and instead of a successful resolution, the
latest round of negotiations
has been deemed a failure by Indian officials.
Some of them have blamed Tehran for not keeping
with the initial obligations signed in 2005 and
unilaterally changing the terms of the gas
contract.
Follow-up meetings are due in
the next few months, and a top Pakistani official
has expressed optimism that the trilateral deal
will be finalized within that time period. For the
moment, that optimism is not seconded by India,
and the Indian press is rather gloomy about the
much-talked-about and much-anticipated gas deal
that is supposed to go operational in 2011.
Countering New Delhi's criticisms, Iranian
officials have insisted that the draft final
agreement's call for periodic review of gas price
is nothing new and has always been part of their
demand in the marathon negotiations stretching
back to 1994. In addition to price, there are
still "four to five" other issues that have yet to
be resolved, according to Iran's point man in the
negotiations, Hojatullah Ghanimifard, including
the transit fee for Pakistan, location of
delivery, and pipeline security.
Already
some 1,100 kilometers of the 2,600km pipeline that
pass through Iran's territory is about 50% built,
and that certainly is good news. More good news is
that both Pakistan and India have successfully
fought off US pressure to stop the project that
Washington deemed geopolitically beneficial to
Iran.
But broadly speaking, the "external
obstacles" to this project pale in comparison with
the tangible benefits to all three countries, such
as securing a reliable gas supply for
energy-strapped India, bringing much-needed cash
to the Pakistani government, and helping Iran with
its "energy strategy".
Concerning the
latter, it is noteworthy that Iran has some 15.7%
of the world's natural-gas reserves, second only
to Russia, although its current share in the
global gas market is negligible. That's partly as
a result of the lack of adequate (badly needed)
investment in the gas sector and partly due to
existing external obstacles such as the US
sanctions.
Iran's planned export of
natural gas to India is part of a broader,
long-term energy strategy that relies both on
pipelines and the more technologically challenging
liquefied natural gas (LNG) exported to China,
Turkey and Europe. India has already signed a
separate $22 billion LNG deal with Iran.
Iran plans to increase its gas exports
through pipelines to 303.6 million cubic meters
per day (mcm/d) by 2025 from some 13mcm/d in 2006.
Iran's LNG exports are also expected to grow to
18mcm/d by 2025. Therefore, Iran's total natural
gas export will reach around 18 billion cubic
meters (bcm) in 2025, assuming that the pipeline
does not turn into a pipe dream at the end of the
day.
Unofficially, there is a great deal
of grumbling on the part of Iranian officials and
energy experts about the generous discount by Iran
to India - approximately a third below the average
global prices. This is mainly because of two
things. First, India has bargained hard, always
maintaining the position that the gas price should
be based on Iran's consideration of "India's
ability to pay" and not simply market
considerations.
Second, Iran has agreed to
lower the price in light of the perceived
geopolitical dividend of the IPI, in bringing the
subcontinent closer to Iran at a critical time
when the US-led pressure on Iran over the nuclear
row and regional issues is intensifying.
But not all Iranian energy and political
experts agree that Iran must necessarily agree to
such "political prices," to echo a former official
of Iran's Oil Ministry who recently told the
author that India has no viable alternative and
has such a dire energy need that it would be
"shooting itself in the knee if it walked away
from this deal".
Nor is it entirely clear
that the IPI deal would cause any dramatic shift
in New Delhi's foreign policy, notwithstanding
India's vote against Iran at the International
Atomic Energy Agency and the US-India nuclear deal
that, if implemented, would cement the strategic
partnership between Washington and New Delhi.
There is, after all, nearly always a bit of
disjunction or lack of fit between economic and
geostrategic considerations, as can be clearly
seen in the current US-China relations.
As
a result, once we peel away the surface, the price
"hiccup" in the IPI agreement appears to be as
much over Iran's concern about regulating the
price adjustments in the future as over its
present underlying unhappiness and/or hesitations
about the overly generous "special price" of the
IPI pipeline. The longer the delay in the final
agreement, the more that hesitation is likely to
manifest itself. That's all the more reason for
India in particular to act smart about it and not
let this hiccup turn terminal.
In
actuality, we are dealing with not one but two
hiccups, the other touching on the transit fee by
Pakistan, which is to be finalized in a separate
bilateral agreement between Islamabad and New
Delhi. And then there is the issue of pipeline
construction and pipeline security, and some
experts have called for a trilateral consortium.
But for the hitherto hostile India and Pakistan
that is stretching it, and they have preferred
that each country should be responsible for the
section of the pipeline in their territory.
But much like the Baku-Tblisi-Ceyhan and a
host of other pipelines, setting up a consortium
makes sense, and the arguments against it are
fundamentally weak. After all, if Iran is apt to
set up a regional consortium for producing nuclear
fuel, why should it follow a totally dissimilar
path on its energy diplomacy? According to a
high-ranking Iranian oil official, Mohammad
Khaghani, Iran lacks a clear definition of "energy
diplomacy". One way to address this problem is to
apply certain lessons from its nuclear diplomacy.
Kaveh L Afrasiabi, PhD, is the
author of After Khomeini: New Directions in
Iran's Foreign Policy (Westview Press) and
co-author of "Negotiating Iran's Nuclear
Populism", Brown Journal of World Affairs, Volume
XII, Issue 2, Summer 2005, with Mustafa Kibaroglu.
He also wrote "Keeping Iran's nuclear potential
latent", Harvard International Review, and is
author of Iran's Nuclear
Program: Debating Facts Versus Fiction.
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