India, Pakistan dig in over pipeline

Posted in Asia | 15-Jul-05 | Author: Siddharth Srivastava| Source: Asia Times

Indian Petroleum Minister Mani Shankar Aiyar (right) with Pakistan's Petroleum Secretary Ahmed Waqar before a meeting in New Delhi.
NEW DELHI - Despite US reservations on the issue and the threat of sanctions, India and Pakistan are pushing ahead with their plans for a 1,600-mile Iran-Pakistan-India gas pipeline. In another indication that India, and more curiously, Pakistan will stick to the agenda, a two-day meeting of a joint working group of the two countries that ended this Wednesday has set a timetable for the pipeline.

The US recently warned its traditional ally Pakistan of sanctions if it went ahead with the project. Washington would rather see the South Asian countries obtain resources from countries closer to its sphere of interest, and isolate Iran, which it suspects of developing nuclear weapons. The US has issued similar warnings to India. Both Delhi and Islamabad have been trying to persuade the US to change its mind, without success.

Reacting to US reservations, Pakistan Oil Secretary Ahmed Waqar, who was in New Delhi, said, "Our president and prime minister have stated on a number of occasions that we would take a decision on what our public interest would demand."

Waqar said Pakistan would start experiencing a shortage of gas by 2010, thus it wants to ensure that the "proposed" pipeline takes off much before that . "The ADB [Asian Development Bank] has stated that an Iran-Pakistan pipeline is feasible, but the economics improve if India joins," he added.

As a major step toward fructifying the US$8 billion (the estimate revised from the earlier $4 billion figure) pipeline project, both countries have decided to appoint financial consultants by September 15. Indian Petroleum Secretary S C Tripathi said the two sides had broad agreement on the composition of the gas, technical standards and techno-economic considerations that will make the project cost-effective for both countries.

The consultants will submit their report by the end of November, when Petroleum Minister Mani Shankar Aiyer will travel to Pakistan to ink an agreement on the project. The two countries want it to get off the ground by early 2006 - it will take five years to construct. Last month, Aiyer met his Pakistani counterpart Amanullah Jadoon and Iranian Oil Minister Bijan Namdar Zanganeh, following which the US made its displeasure on the project more apparent.

By inking such a detailed agreement against US wishes, India and Pakistan have signaled what experts have been talking about for a while, that the geopolitics of South Asia vis-a-vis the US, which were about wheat in the 1960s and 1970s and the movement of intellectuals in the 1990s, are now about controlling the transportation and consumption of energy, more specifically natural gas.

While the US stresses the threat to global security of Iran's supposed nuclear weapons program, buttressed in some way by the defeat of liberal voices in the recent Iranian presidential elections, the real story, as well as conflict of interest, lies elsewhere.

It's a gas
A global oil crisis is brewing with India, China and US identified as the future powerhouses guzzling more oil than they can possibly produce or import. Oil prices have sky-rocketed to over $60 a barrel, with petrol and diesel prices undergoing frequent rounds of increases across Asia. The rise in prices, however, is expected to reduce demand only in the short term.

It is estimated that by 2025, today's global demand for 84 billion barrels of oil per day will have grown to 121-130 billion barrels a day. The US is the world's largest energy consumer. US demand for oil is about 21 million barrels per day, compared with 7.4 million barrels projected this year for China, according to the US Energy Department. India's oil consumption was 2.2 million barrels in 2003 and is projected to grow to 2.8 million by 2010, according to the department. No amount of digging domestic resources in Alaska will yield the US requirements. US Energy Secretary Sam Bodman said recently that it would take years to close the gap between increasing world oil consumption and the ability of oil producers to meet that demand.

It is in this context that natural gas has emerged as a more environmentally sound, cheaper and easily available substitute to oil. Compared to oil at over $50-55 a barrel, an equivalent amount of gas costs only in the region of $20. Experts predict that gas, which was once considered a wasteful by-product of oil exploration, will turn into the number one fossil fuel.

The problem, however, is that the US, India and China, more specifically the first two, as well as Japan and the European Union countries, are all situated at some distance from major reserves of gas in countries such as Iran, Qatar, Yemen, Russia, Central Asia, Nigeria, Angola and Venezuela. Then there is the added problem of these nations facing unstable political situations. Gas will have to be carried through disturbed and often dangerous physical and political regions.

China and India want to quickly tie up with these gas-producing countries, with the US trying to balance growing Asian demand with its own rising requirements. India has already signed a $22-billion deal to buy liquefied natural gas, or LNG, from Iran over a period of 25 years starting in 2009, after protracted negotiations. India recently signed a LNG deal with Qatar to tide over its energy shortages.

Over the past month, scores of Indian officials, including the deputy chairman of the Planning Commission and, curiously, India's national security advisor, have been involved in conveying India's position to the US. This includes ending the linkage of Iran's nuclear program with needs of energy security. But the US has been playing tough. Indian Prime Minister Manmohan Singh travels to the US in a few days to meet President George W Bush. This issue will certainly be on the agenda.

Bush recently said that the US would encourage China and India to turn into more efficient users of oil. "It's in our economic interest and our national interest to help countries like India and China become more efficient users of oil. That would help take the pressure off global oil supply, take the pressure off prices here at home," he said. But such diplomatic tones will likely disappear when nations across the world fight over gas.

One immediate casualty could be the US firmly shutting the door on any hopes that India had of becoming a part of the UN Security Council. Even as India and Pakistan discussed the pipeline, US representative Shirin Tahir-Kheli told the UN General Assembly that the Bush administration did not think any proposal, including its own formula to expand the Security Council, should be voted "at this stage". It may be recalled that Washington recently sent signals to India that it might support Delhi's bid.

Siddharth Srivastava is a New Delhi-based journalist.