The Future and Politics of Iran-Pakistan Gas Pipeline

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Context
Also known as the Peace Pipeline, or the IPI (Iran-Pakistan-India) pipeline, is slowly moving towards materialization more than 15 years after it was conceived by the Iranian government. However, India is now no longer part of the originally proposed 2,775-kilometre-long 7.5 billion dollar project to deliver natural gas from Iran to Pakistan and India. While Pakistan has finally signed the accord with Iran to build the pipeline, the project still faces numerous hurdles.

One of the important challenges is the insurgency in the province of Baluchistan, from where the pipeline will pass. The Baluch nationalists have frequently targeted the existing gas pipelines passing thorough their territory and as such the security of the pipeline remains a major issue for the authorities in Islamabad. Besides, the project is strongly opposed by the United States and Saudi Arabia, two countries which hold significant influence over Pakistan. Furthermore, the pipeline also impacts the plans of China and Russia and how they view the security of their energy needs.

Therefore, the Iran-Pakistan Gas Pipeline project cannot be understood in isolation. This is a first article in a series which examines the politics around the project by understanding the plans of other major players, to secure their future needs in the region and beyond.

The dynamics around the politics of the gas-pipelines can be understood by the following three factors:

1. Which countries have the gas and energy reserves?
2. Which countries have the most need for these energy reserves, for future development and ambitions?
3. The intermediate countries whose strategic location relative to these energy reserves increases their leverage vis-à-vis the global and regional powers?

Analysis

Dynamics of the project

The Iranian government — holding around 9 percent of the total proven oil reserves in the world and claiming the second largest gas reserves — came up with the proposal to provide gas to Pakistan in the early Nineties after the discovery of natural gas reserves in South Pars fields in 1988. Pakistan and Iran signed a preliminary agreement in 1995 for the construction of the gas pipeline from the Iranian South Pars gas field to Karachi, Pakistan’s main industrial city and port.

The Iranian authorities later proposed an extension of the pipeline from Pakistan to India, a development which New Delhi welcomed in view of mounting domestic energy shortage in that country. Both India and Pakistan are energy deficient. India, the third-largest Asian economy, can produce only half the gas it needs to generate electricity. On the other hand, Pakistan is also facing an acute energy shortage with the result the practice of electricity load-shedding has become a norm in the country. At the same time, Pakistan’s largest gas reserves at Sui, Baluchistan, are fast depleting.

According to US Department of Energy, Natural Gas consumption accounts for 50% of the Pakistan’s energy use. Only 60 percent of Pakistani household presently have electricity, while only 18 percent have access to pipeline gas for heating. According to energy expert Mukhtar Ahmed’s presentation at the Woodrow Wilson Center, the countries energy demand is expected to increase 250 percent over the next 20 years. To meet the demands of the future the countries electrical generating capacity needs to increase from the present 20.4 gigawatts to 30.6 gigawatts by 2010.

South Pars

277_Iran_Karte_Oil_Gas_Sep_3_2009(1)The South Pars gas field is part of a large gas reserve called South Pars / North Dome field located in the Persian Gulf. It is the world’s largest gas field, shared between Iran and Qatar. This gas field covers an area of 9700 square kilometers, of which 3700 square kilometers (South Pars) is in Iranian territorial waters and 6000 square kilometers (North Dome) is in Qatari territorial waters.

North Pars

In order to monetize North Dome’s vast resources of gas and liquids, Qatar has undertaken ambitious plans for establishment of the world’s biggest LNG (Liquid Natural Gas) and GTL (Gas to liquid) industry. Since 1997, Qatar has been exporting LNG from the North Field. In 2006, Qatar surpassed Indonesia as the world’s largest LNG exporter. Based on the massive gas resources of the field, Qatar is developing the world biggest LNG export facilities.

The Issue of the Pipeline Route

375_625px-Major_ethnic_groups_of_Pakistan_in_1980(2)While Pakistan desperately needs gas from Iran, the insurgency in Pakistani Baluchistan province, through which the proposed pipeline would pass, has become critical to the success of the project. When the IPI proposal was first floated in the mid-Nineties, there was relative calm in Pakistani Baluchistan, which had experienced several insurgencies since it became part of Pakistan in 1947. With the killing of veteran Baluch nationalist leader Nawab Akber Khan Bugti by the Pakistan Army in 2006, however, a widespread insurgency has erupted in the Pakistani Baluchistan, the largest province in size.

Baluch nationalists have been demanding political autonomy, while militant organizations have been seeking outright independence. These organizations have been targeting the gas pipelines and power pylons while carrying out targeted killings of non-Baluch people in the province. Incidentally, Baluchistan holds Pakistan’s largest gas reserves and has been meeting the nation’s energy needs since the Sixties. When it comes to jobs, revenue and resources, however, the ethnic Baluch have been discriminated against, helping to fuel the resentment against Islamabad.

The Sea or Coastal route

375_625px-Major_ethnic_groups_of_Pakistan_in_1980(2)By the end August 2009, the Pakistan Ministry of Petroleum and Natural Resources had still not come up with a definite route for the pipeline. One proposal was that it should be built along Pakistan and Iran’s coastline, that is, the Arabian Sea. Although this route would be relatively safe from the attacks of Baluch insurgents, it would be very expensive. In the case of coastal route, the pipeline will travel along the Baluchistan coastal areas of Gwadar and Lasbella districts and from near Karachi it will take off for Multan. The Mekran division, comprising Panjgur, Kech and Gwadar districts, is relatively calmer because the top militant leadership has been either arrested or wiped out by Pakistan’s security forces. These areas, which are more or less settled, are mostly inhabited by Gichkis, Rind and Hoat tribes, which are not as fierce as their cousins in the north.

The Central Land Route

The easiest route, because more economically and strategically feasible, is overland through the center of Baluchistan. This was initially, the preferred route for the pipeline. It was proposed that from the Iranian border, the pipeline would enter Pakistan from somewhere in Kharan, just below the Chagai district where Pakistan had carried out its nuclear tests in 1998. Major Baluch tribes, Sajidi and Bangalzai, inhabit these two districts, which is a Barahavi-Baluch mixed area. Now, however, the Baluchistan Liberation Force (BLF) is operative in Kharan, where it has reportedly set up a camp in the Awaran area.

From Kharan, the pipeline was to enter the Khuzdar district, which is a stronghold of the Mengal tribe, the second largest in Baluchistan and up in arms against the government. Two militant organizations, the Lashkar-e-Baluchistan and the Baluchistan Liberation Army, are reportedly active there.

From Khuzdar, the pipeline was to be laid towards the north so it could reach Sui, the town which is the chief source of gas for Pakistan. Unfortunately, all the adjoining districts, including Kohlu, Bolan, Barkhan and Dera Bugti, are filled with militants. In the Bolan district, the Rind and Mengal tribes co-exist, the Mari tribe lives in Kohlu and Dera Bugti is inhabited by the Bugtis, all of them opposed, in varying degrees, to the federal government. The Bolan district is an extremely difficult mountainous terrain and as such, a safe haven for militants.

In sum, the overland route does not seem to be feasible under the present circumstances.

Geopolitics

277_tapi-vs-ipi(1)In comparison to the technical aspects, geopolitics seems more critical in determining the route and the future of IP Project. As alluded above the future of Iran-Pakistan gas pipeline project cannot be understood in isolation i.e., without comprehension of how this project fits in the scheme of US supported Nabucco Gas Pipeline and the Russian North-South Energy Corridor.

The United States wishes to avoid depending on Russia and Iran in the implementation of the Nabucco Gas Pipeline. On the other hand, Russia’s goal is to keep the Europeans dependent on it to satisfy their energy needs so as to create investment opportunities for its oil and gas companies. Russia intends to maintain its leverage and influence on European politics via energy dependence, which will cause headaches for the US and NATO. Thus Russia fights vigorously any efforts to exclude it from the energy infrastructure of the future. China, aware (like Russia and Iran) of the growing American influence in Central and South Asia, also wants to limit the American role.

In this imbroglio, the pivotal factors are who has the energy reserves, who has the dire need for them, the leverage of intermediate countries, and the relationship of all of them vis-à-vis the US, China, and Russia. Each power promotes the route and infrastructure which best serves its interests. How these pulls and tugs play out on a daily basis closely resembles the tectonic plate shifts of the earth. This dynamic becomes even more complicated, as Iran has the second largest gas reserves in the world (Russia is first) and the second largest oil reserves after Saudi Arabia.

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In the present geopolitical situation, two alternatives are available to get Pakistan and India the energy they need. One of them is Iran-Pakistan Pipeline (IP) and the other Turkmenistan-Afghanistan-Pakistan-India (TAPI). United States favors TAPI as it connects well with the Grand Nabucco Pipeline to get Europe the gas it needs, while also eliminating European dependence on Russia. The Trans-Caspian and South Caucus Gas arteries of the Nabucco Pipeline envision sending Central Asian gas reserves westward towards Europe, via Georgia and Turkey, and bypassing Russia. TAPI also substitutes Iran with Turkmenistan as a source of gas for India and Pakistan.

On the other hand, IP pipeline is favored by China and Russia. In April 2008, Iranian President Mahmoud Ahmedinejad declared that his country would welcome Chinese participation in the IP project. He was echoing President Musharraf’s proposal that the pipeline could be extended to China if India backed out of the project. The proposal to carry gas to China through the mighty Karakoram mountain range is not technically viable, however. Analysts believe that the offers extended to the Chinese by Presidents Ahemdinejad and Musharraf were intended to exert pressure on India, which was seeking a way out of the project. India is building a strategic relationship with the US and relations with Iran are becoming increasingly strained.

Meanwhile, China is also competing with Russia and US for Central Asian gas reserves. China has completed the Kazakistan-Iran Oil Pipeline project and has signed a deal with Turkmenistan, offering it $3 billion dollars to build the South Yolotan Natural Gas Field, which is believed to be among the five largest natural gas fields in the world. China’s huge cash reserves have helped to fill the recent vacuum in Russian and Turkmenistan relations. China will obtain the gas from South Yolotan via Uzbekistan and Kazakistan.

Interestingly, there is also resistance within Iran to the IP pipeline. As Tehran increasingly faces energy shortages, some Iranian experts are questioning the feasibility of the project, wondering whether the estimates of gas in the South Pars Field are accurate. In 2008, there were riots in Tehran in reaction to petrol shortages, an ironic development for a country that boasts ownership of the second largest oil reserves in the world. Iran’s oil infrastructure is aging and desperately needs technical assistance in order to upgrade.

China is providing the support Iran needs by investing heavily in reviving its aging oil infrastructure. Iran also needs Chinese help to develop its gas production in the north and south Pars Gas Fields. In 2007, China signed a $2 billion contract with Sinopac to develop Iran’s huge Yadavran oil field, while in February 2008, China’s Off-Shore Oil Company is reported to have signed a $16 billion contract to develop Iran’s North Pars Gas Field. Under the terms of this agreement, Iran will export LNG from the field to China. Furthermore, Russia announced in 2008 that it will explore the huge Iranian Azadegan-North Oil Field, among others.

Acting Pakistan Minister of Petroleum and Natural Resources Asim Hussain confirmed in June 2009 that the US and Saudi Arabia were strongly opposed to the IP Gas Pipeline project. While he did not elaborate, the US opposition to the Peace Pipeline has been known for quite some time now. Washington sees the IP pipeline as a breakthrough for Iran, which has been facing international curbs on account of its nuclear program and obscurantist policies. The Americans are also concerned that the pipeline could bring Islamabad and Tehran closer.

As for the Saudis, the traditional supplier of oil to Pakistan, the pipeline could mean greater Pakistani dependence on Tehran and its influence on Pakistan’s policies. The future of the IP Project also gets impacted by the dynamics of the Shiite-Sunni competitions of the Islamic world. Other than Zulfiqar Ali Bhutto, none of the Pakistani leaders have been able to maintain cordial relations with Iran, Saudi Arabia and Turkey simultaneously.

In August 2009, the US Special Envoy for Afghanistan and Pakistan, Richard Holbrooke, visited Islamabad and proposed offering improved thermal generation as a way to end electricity blackouts in Pakistani cities. Furthermore, to fulfill Pakistan’s energy needs, the Unites States wants to assist Pakistan build its capacity to use LNG, alternative energy resources and hydroelectric projects. This is in contrast to the civil nuclear energy deal the US offered India, of which US firms would be the main beneficiaries. Moreover, as pointed out earlier, by supporting the LNG infrastructure, Pakistan will probably link up better with Qatar, which is fast becoming the world largest exporter of LNG.

The construction of the Peace Pipeline is likely to begin sometime in 2010, when Pakistan makes a final decision on the route. If all goes well, it should be completed within three years. The future of the project is dependent not only on factors like the insurgency in Baluchistan and the growing uncertainty in Pakistan over the fortunes of the ruling Pakistan People’s Party, but also on the tussles of the regional and global players over energy reserves, which are much needed to maintain and increase their global influence. Like the conflict in Georgia last year, insurgencies in Afghanistan and Baluchistan are not immune from the politics of the global energy needs.

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