Re: With [India/Pakistan/Iran/China] energy deals, I don't think much money has changed hands yet....
Jun 16, 2005
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.
Reacting to the new US pressure, Iran's Oil Minister Bijan Zanganeh said: "It is unreasonable to prevent India and Pakistan from accessing Iranian gas. Energy markets should be depoliticized. We sell crude oil and LNG. Why can't we be allowed to sell piped gas?" The minister told reporters on the sidelines of the Asia Oil and Gas conference that a decision on the pipeline would be inked within two weeks. But it is easier said than done, given Pakistan's dependence on, as well as proclivity toward, the US.
Striking a more diplomatic note, India's Petroleum Minister Mani Shankar Aiyer, who recently met with Pakistan President Pervez Musharraf on his Pakistan-Iran trip to seal the pipeline deal, said: "We are sensitive to US concerns and trust they are aware of our requirements. It is impossible for India to secure its energy requirements without access to natural gas resources in the extended neighborhood, especially Iran...I hope that even as we work with the US and Iran in the International Atomic Energy Agency (IAEA) to meet international concerns, the US will work with us in securing our vital energy requirements."
There is a lot at stake for Iran, Pakistan and India in this pipeline. Negotiations on the mega pipeline began in 1994, but no headway has been made until last year because of tensions between Pakistan and India, and the project's massive cost. The warming of ties between the two South Asian rivals has now resulted in a renewed focus on building the pipeline. For Iran, which holds the world's largest gas reserves after Russia, India is as important as the European market, which it hopes to access through a pipeline across Turkey. India, which imports nearly 70% of its annual energy needs, has been using ships to ferry LNG.
In the new environment of improved Indo-Pak relations, India feels it can pull off the construction of the pipeline from Iran through Pakistan, which will make the gas transport much easier and cheaper. It is estimated that unless India taps new energy sources, given the rising international price of crude, it will be impossible to grow at the projected 7-8%. So the pipeline is an absolute must.
But even as India and Pakistan have reconciled to a deal that would have been dismissed as impossible even a couple of years ago, the US seems bent on playing spoilsport. The US stand vis-à-vis India has been that it will assist India's long-term energy needs if New Delhi forgoes the proposed gas pipeline. Asia Times Online had earlier reported that Rice, during her visit to India, had made it clear to her Indian counterpart, Foreign Minister Natwar Singh, that if India proceeds with the pipeline it could invite US ire under the Iran-Libya Sanctions Act (ILSA) that empowers President George W Bush to order punitive measures against any international company that invests more than $20 million a year in Iran's energy sector. Rice is now reported to have reiterated the same threat to Pakistan.
The ILSA disallows any move that would aid Iran's economic expansion, as the US considers the country a "safe haven for terrorists". The sanctions provisions apply only to investments in Iran and not to any purchase of oil or gas, thus not affecting the Indo-Iran LNG deal that the two sides just signed.
While India does not want to annoy the US, it favors a de-linking of issues concerning energy security and Iran's supposed nuclear aspirations. "We live in a very complex neighborhood, surrounded by governments and rulers of different orientation - communists, military dictatorships, monarchies...we hope the US understands the difficult choices we have to make for the well-being of our people," India's Ambassador to the US, Ronen Sen. A US official has been quoted as saying that the pipeline issue is a "minor wrinkle" in growing Indo-US relations.
But with Pakistan, it clearly seems more than that for the US. Pakistan Tuesday asserted that the decision whether or not it would allow the pipeline to run through its territory would solely be taken in consideration for its national interest, hinting that external pressures from the US or others wouldn't make any difference. Foreign Office Spokesman Jalil Abbas Jilani said Pakistan is aware of US concerns, but Islamabad's national interest came first. He said the Iranian oil minister would visit Pakistan on June 20-21 at the invitation of his Pakistani counterpart to discuss the project. He also said that during their recent meetings in Islamabad, Pakistani and Indian ministers agreed to set up a joint working group to discuss all aspects of the project, including technical, financial and pricing issues.
Pakistan has of late adopted the policy of welcoming all schemes to transport oil in any shape through pipelines. Two other pipeline projects are being actively discussed in Pakistan. One is for oil to be brought from Sharjah under Persian Gulf waters through a pipeline - US interests seem to have some minor share in the project. The other plan is a major three-country project: hydrocarbons sourced in Turkmenistan carried through a pipeline to Afghanistan and Pakistan's newest port at Gawadar, to be exported to the rest of the world. The company that will set up that pipeline and manage distribution of these hydrocarbons is a composite subsidiary of major US oil corporations, so it is not surprising that Washington is keen that this project succeeds.
When and if this UNOCAL project - intended to transport as many hydrocarbons from Turkmenistan, Uzbekistan, Kyrgyzstan and Kazakhstan as possible - succeeds, the US may have attained its objective of acquiring access to most of the oil from the former Soviet republics in Central Asia, which is considered to be more secure than Middle Eastern oil and does not involve an implicit subsidy to Islamic fanatics. Russia is not involved in UNOCAL, or the new pipeline from Baku to a Turkish port via Georgia.
The pipeline projects illustrate the geopolitical rivalry between the world's hyper-power and the two giants of Asia: Russia and China. Both are trying to win over the rulers of Kazakhstan, Uzbekistan and Kyrgyzstan to their side and to meet their fuel needs on a secure and permanent basis. The US-favored UNOCAL pipeline has to run the gauntlet of a simmering guerrilla war in Afghanistan and an unpredictable law and order situation in Pakistani Balochistan. Even the Iranian pipeline will have to traverse Balochistan, albeit west-to-east. The law and order situation in that region can, however, vastly improve if good governance and political savoir faire can be brought to bear on it. The Afghanistan situation cannot be said to be as amenable to improvement as Pakistan's because the continued presence of foreign troops - vital to the survival of the Karzai regime - is an incitement to rebellion.
The Iranian nuclear crisis casts a long shadow on all the three proposed pipelines: from Iran, Sharjah, and Turkmenistan. The economics of the Sharjah pipeline is likely to knock it out of the running in any case. Any US intervention in Iran would create a situation like 15 or 20 Iraqs. Nothing can be said about the future in that case.
Siddharth Srivastava is a New Delhi-based journalist.
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