Iran-Pakistan-China: The oil pipeline NATO doesn't want

From Stratfor:

China, Pakistan: The Drivers Behind a Possible Natural Gas Pipeline

Summary

China has reportedly said that it will join Pakistan and Iran in a proposed natural gas pipeline project if India bows out. While an Iran-Pakistan-India pipeline project was never in the cards, a plan for an Iran-Pakistan-China pipeline actually has some merit.

Analysis

China is ready to join Pakistan and Iran in building a natural gas pipeline, provided that India does not move ahead with its own plans to do so, Pakistan's Daily Times reported Feb. 11, citing unnamed sources. The proposed Iran-Pakistan-India (IPI) pipeline has been on the table for years, and with good reason. It faces so many obstacles that it has almost zero chance of ever being built. A China-Iran pipeline, on the other hand, has potential for a number of reasons.

In order for a natural gas pipeline project to be viable, it requires five key ingredients: a source of natural gas, a consumer, someone willing to pay for developing it, a route that makes sense and someone with the organizational capacity to put it all together. While the IPI pipeline has the first two — Iran has plenty of natural gas reserves, which Pakistan and its neighbors are eager to consume — it lacks the other three.

Pakistan is less than willing to foot the bill for its own energy infrastructure (which has led to a lack of outside investment in Pakistan's energy sector), while India's organizational capabilities in this arena can best be described as schizophrenic. Neither country is willing (or able) to make up for the other's shortcomings. Additionally, it makes very little sense to create a pipeline route that would boost the mutual energy dependence between two states that have nuclear missiles permanently aimed at one other.

China, however, has the cash, capabilities and political will to make a “replacement” Iran-Pakistan pipeline happen. Since China's economic growth — and the resulting need for energy supplies to fuel that growth — is tied to political stability, China has the political will to bring energy projects to fruition. Its deep pockets and organizational experience ensure that China also has the ability to act upon that will. It already has worked its magic on energy projects in Central Asia and has toyed with the idea of building an underwater pipeline from Oman to Pakistan, with energy supplies ultimately to be shipped to China.

China is particularly keen on securing energy supplies that can be shipped over land routes. Supplies shipped over water are much easier for the United States to interrupt, given its uncontested control of the seas. Should U.S.-Chinese tensions ever rise sufficiently, the United States essentially could shut down China without firing a shot, simply by turning off its energy imports. While this is certainly not an immediate threat, land-based supply lines would reduce China's dependence on the goodwill of the U.S. Navy. (It should be noted that the Oman option is a less attractive route than Iran-Pakistan, since it marries the expense of a transcontinental pipeline with the vulnerability of a water route. Oman sits on the “wrong” side of the Gulf of Oman.)

An Iran-Pakistan-China pipeline would not come without its drawbacks, however — the greatest of which stems from Pakistan's internal instability. A pipeline route from Iran to China most likely would enter Pakistan in the southwestern region of Balochistan and pass northward across Punjab into the non-Pashtun (eastern) areas of the North-West Frontier Province through the Federally Administered Northern Areas, and then into Chinese-held areas of Kashmir. This route would avoid the Pashtun areas, where there is a jihadist insurgency under way, but it still would be vulnerable to attacks by tribal ethno-nationalist Baloch insurgents. It should be kept in mind, however, that the Pakistani state has cracked down harder on the Balochis than on the jihadists, which has limited the former to a low-intensity insurgency.

None of this is to say that the Iran-China pipeline will or will not happen. For the moment, it remains merely a rumor. However, amid all the other chatter about potential pipelines, this one actually has some possibility of success.


US plays spoiler in India-Pakistan pipeline accord
By Siddharth Srivastava

NEW DELHI - India's 10-day campaign to tie up a deal on a fresh source of energy has met with resistance from the United States. Reports, confirmed by Foreign Ministry officials in New Delhi, say the US has warned Pakistan of sanctions if it goes ahead with the proposed $4 billion, 2,600-kilometer Iran-Pakistan-India gas pipeline. The US has been seeking democratic reforms in Iran and a clampdown on its nuclear program, which the Iranians maintain is for peaceful purposes.

The latest US threat comes in the wake of a marathon nine-hour meeting between Indian and Iranian officials in Tehran that reiterated both countries' firm commitment toward building the pipeline. Apart from the pipeline issue, India signed a US$22-billion deal to buy liquefied natural gas (LNG) from Iran over 25 years starting 2009. India recently signed a LNG deal with Qatar as well to tide over its energy shortages.

Pakistan's newspaper Dawn, as well as The Times of India, quoted officials in Washington saying that the US warned Pakistan of sanctions if it went ahead with the project, disregarding US concerns over Iran's nuclear plan. This is despite Pakistan's Foreign Minister Khurshid M Kasuri making a strong plea in favor of the pipeline given the potential revenue ($700 million in transit fees alone) and the country's need for energy security. Kasuri, who was in the US last week, impressed upon US Secretary of State Condoleezza Rice that Pakistan cannot abandon the project. However, the US believes that given the $1-billion-plus yearly aid that it has been advancing to Pakistan since 2002, the country should fall in line.

It's understood that Rice suggested to Kasuri that Pakistan should look at other options, including a pipeline from Qatar or the central Asian republic of Turkmenistan. Rice reportedly said that even if the US gave up its resistance to the pipeline, powerful groups within the US Congress would ensure that the project is derailed.

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Pipeline: India dare not defy Washington. Pakistan & Iran just did

The signing of the Iran-Pakistan pipeline and the release of Mumbai suspect Saeed on the eve of Richard Holbrooke's visit to Islamabad can be described in one word–Defiance. The signatures thumb their nose at the US sanctions on Iran and the release of the most hated person in Delhi asks India to read between the lines (read the finger between the index finger & second finger). It must have taken the PPPP all the guts it could muster, but the bottom line is that Mr. Gilani has prevailed and the pipeline deal between Tehran and Iran has been signed.

India dare not defy Washington. Pakistan just did.

This is not just a steel pipe running over barren land. This is a rope which ties Iran and Pakistan together in an embrace from which there is no retreat. This is the beginning of putting life into the dormant ECO (Economic Cooperation Organization. This is the resurrection of the RCD (Regional Cooperation for Development).

Iran and and Pakistan have been talking about the pipeline for more than a decade. However it took a personal effort from the Pakistani president and the Iranian leadership to finally push the deal through. From the very beginning, the US has opposed the Iran Pakistan pipeline for two reasons. It wanted the TAPI pipeline, and it it wanted Iran outside the pipeline grid.

In the end Iran and Pakistan won.

For a few hours it was touch and go. For the first time in the history of Tehran-Islamabad relations, the Pakistani ambassador had to face a mild demarche from Tehran. What is curious is the fact that even the demarche did not blame the Pakistani government, it blamed foreign powers staging the attack from Pakistani territory. PM Gilani and President Zardari went into overdrive, arrested every one of the named Jundallah agents and shipped them to Iran. The Pakistanis also sent the elite Pakistani commandos to chase down the Mossad and RAW agents who are supporting Jundullah. Apparently the concrete actions and the general visibility of CIA and the MI6 in Iran told the Iranians who the culprits behind Jundulllah are. The CIA has been spending $450 million to destabilize Iran, fomenting trouble in Iranian Krudistan, the Iranian Azeris, and Khuzistan (aka Arabistan). The apparent cooperation of the BLA, and Jundallah told Tehran reams about the “conspiracy” that is being hatched. The BLA did't do any favors by acknowledging the fact that they and Jundullah have an office in Tel Aviv.

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If India opts out, China may join IPI: Pak

Pakistan has sent a proposal to China asking it to join the $7.5-billion Iran-Pakistan- India (IPI) gas pipeline project if New Delhi pulls out of the venture.     

The Chinese government submitted a preliminary report to the Pakistani government seeking more information on the project.     

The report was submitted after President Pervez Musharraf, on his recent visit to China, asked his Chinese counterpart Hu Jintao to join the project.      

Subsequently, Pakistan sent a proposal asking China to join the project in case India pulls out, the Daily Times quoted a senior petroleum ministry official as saying.       

Pakistan has also asked the Chinese government to conduct a feasibility study for the pipeline project.      

There has been no progress on the project since talks were held between India and Pakistan in Islamabad in April. The Indian government is yet to respond on the issue of the transit fee to be paid to Pakistan for Iranian gas transported across its territory.        

Foreign Minister Shah Mahmood Qureshi, who also holds the petroleum portfolio, is expected to hold talks on the project when he visits India on June 27.        

The petroleum ministry official said that if India pulls out of the project, the additional gas volume of 1.05 billion cubic feet per day would either be consumed by Pakistan or sold to China.       

Iran has no objection to China joining the pipeline project if India pulls out of the venture, the official said.


Iran-Pakistan Pipeline: Iran's New Economic Lifeline

While the world's eyes are focused on Iran and Pakistan, little attention has been paid to the two countries' recent decision to move ahead with their plans to connect their economies via a 1,300-mile natural gas pipeline  to export some 150 million cubic meters of Iran's South Pars field gas to Pakistan per day. The 25-year deal which was signed in the sidelines of a regional summit that brought together Iranian President Mahmud Ahmadinejad and Pakistani President Asif Ali Zardari in Tehran on May 24 may seem like a standard energy project. It isn't. This deal could have profound implications for the geopolitics of energy in the 21-century, for the future of south Asia as well as for America's ability to check Iran's hegemony in the Persian Gulf.

For both Iran and Pakistan the pipeline project would be highly beneficial. Iran sees in the pipeline not only an economic lifeline at a time when the US and its European allies are trying to weaken it economically but also an opportunity, should the pipeline be extended to either India or China, to create an unbreakable long term political and economic dependence of billions of Chinese and Indian customers on its gas. Pakistan, for its part, views the pipeline as the solution to its energy security challenge. Pakistan's domestic gas production is falling and its import dependence is growing by leaps and bounds. By connecting itself with the world's second largest gas reserve, Pakistan would guarantee reliable supply for decades to come. If the pipeline were to be extended to India it could also be an instrument for stability in the often tense Pakistan-India relations. Under any scenario of pipeline expansion which makes Pakistan a transit state Islamabad stands to gain from transit fees hundreds of millions of dollars every year.

Implications for the great powers

For the Obama administration the signing of the pipeline deal is a diplomatic setback which could undermine its policy of weakening Iran economically. Unlike the Bush Administration which was free to vocally oppose the project, including some unequivocal statements in opposition to the project by Secretary of State Condoleezza Rice, the Obama team chose to remain mute on the issue be it in order to facilitate rapprochement with Tehran or due to its reluctance to burden US-Pakistan relations at a volatile time when the Taliban is at Islamabad's gate. Should the worst happen and a Taliban style regime take over Pakistan, the economies of the world's most radical Shiite state and that of what could be the world's most radical Sunni state would be connected to each other for decades to come like conjoined twins.

While for America the pipeline is an anathema, for Russia it is an opportunity. For several months now, Moscow has been concerned that Iranian gas might compete with Russian exports on the European market. A constituency within the European Union that seeks to lessen its dependence on Russia has been advocating the construction of the Nabucco pipeline to pump Caspian Sea gas to Europe which would bypass Russia. It is therefore in Russia's interest to derail the Nabucco project by diverting Iran's gas away from Europe and locking it to the Asian market which for Russia is secondary (80% of Gazprom's export profits come from the Western European market). To this end Gazprom is keen to participate in the Iran-Pakistan pipeline project. "We are ready to join the project as soon as we receive an offer," Russia's deputy energy minister Anatoly Yankovsky said. This makes the Iran-Pakistan pipeline an irresolvable bone of contention between Washington and Moscow. While for the US the pipeline is a net geopolitical loss, for Russia it is another way to perpetuate its stranglehold over Europe. China also stands to potentially gain from the pipeline. Iranian gas will flow to the Balochistan province port of Gwadar, built with Chinese financing, in the Arabian Sea from where the gas could either be shipped to China either as LNG or run through a proposed pipeline going north, also financed by China, along the south-north Karakoram Highway, the highest paved international road in the world, connecting China's Xinjiang region with Pakistan's northern areas across the Karakoram mountain range.

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And a related news item:

China opens a major gas pipeline from Central Asia

The opening of a major natural gas pipeline linking Turkmenistan to western China is another sign of rivalry among the major powers seeking domination of the energy-rich region of Central Asia.

The presidents of China, Turkmenistan, Kazakhstan and Uzbekistan attended the opening ceremony of the 1,833-kilometre pipeline on December 14. Natural gas will be pumped from the Saman-Depe field in eastern Turkmenistan via Kazakhstan and Uzbekistan to the western Chinese province of Xinjiang, then through China's main west-east pipeline to end users in 14 Chinese provinces and cities. When fully functional in 2012-13, the pipeline will deliver 40 billion cubic metres of gas annually—equal to over half China's current gas consumption (77.8 billion cubic meters in 2008).

At the ceremony, Chinese President Hu Jintao described the pipeline as “another platform for collaboration and cooperation” between China and Central Asia. In return for access to the region's huge energy reserves, China is building infrastructure and providing cheap loans to the Central Asian republics. Beijing's broader aim is to bring the region within its own political and strategic orbit.

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