Which is the real pipeline for peace?

Dawn, April 1, 2005
Which is the real pipeline for peace?
By Kamal Siddiqi


American insistence on the international isolation of Iran seems to have become the sticking point in the proposed Iran to India gas pipeline project despite the fact that the project has immense economic and political benefits for the region.

Surprisingly, American concerns come weeks after crossing of what most people saw as the biggest hurdle - making India and Pakistan agree in principle on the project and getting them to start talking about it.

There are some who say that American action and words on peace in the subcontinent remain contradictory. On the one hand, while America promotes dialogue between India and Pakistan and is a strong supporter of the on-going composite dialogue process, it is finalizing deals to sell arms (F-16 and 18) to both countries.

In the same vein, America is opposing the biggest confidence-building measure that Pakistan and India can undertake, which is the Iran to India gas pipeline project.

To be fair, American opposition to the Iran gas pipeline project is not something new. In 1979 the United States imposed sanctions against Iran in response to the seizure of the US embassy by students, marking the beginning of the Iranian hostage crisis.

Since then, Washington has imposed various sanctions against Tehran, accusing the Iranian government of developing nuclear weapons and sponsoring and funding terrorism abroad.

The sanctions block US-based oil companies from operating in Iran, giving the US a strong incentive to generalize the sanctions and block US firms' foreign competitors from operating there as well.

The US administration has been consistent in its policy of trying to economically strangle Iran into submission. While this has not worked, the biggest victims have been companies and entities that have interests in Iran and that do business with the US as well.

These third party companies, mostly European but also including an Australian oil and gas giant, have backed off from doing business with Iran since they do not want to upset their business interests in other parts of the world.

In some instances where they have not shut down operations, these companies have certainly reduced their operations in Iran or have in some way cut back on their involvement there.

The decision of the American government to turn the screws on third party companies comes after American firms protested that they were being put at a disadvantage because of the economic sanctions, Iran gas pipeline project being a case in point.

Keeping in mind the problems faced by international companies, Iran at one point offered Pakistan that it had the expertise to build the gas pipeline up to its borders from the South Paras gas field where it will be sourced.

Iranian diplomatic officials have floated this idea as one possible way to break the deadlock that American sanction may create. The proposal would involve a joint Iran-India-Pakistan consortium with different companies building different portions of the pipeline. But these are modalities that need to be worked out.

No talk on a gas pipeline project to Pakistan and Iran can be complete without mentioning the alternative project proposed by American oil giant, Unocal. This company has some very powerful friends in Washington as well as in different parts of the world. Even Afghan president Hamid Karzai was once a Unocal consultant. Unocal has been working on a proposal to pipe gas all the way from Turkmenistan.

Unocal was instrumental in proposing the Central Asia gas pipeline project in 1995 and in forming the seven-member Cent Gas consortium in October 1997. The consortium was formed to evaluate and, if found feasible, to participate in the future construction of a gas pipeline from Turkmenistan through Afghanistan to natural gas markets in Pakistan and, potentially, in India.

But in 1998, as a result of sharply deteriorating political situation in the region (primarily US cruise missile attacks in Afghanistan), Unocal, which was the lead manager for the Central Asia Gas (Cent Gas) pipeline consortium, suspended all activities involving the proposed pipeline project in Afghanistan.

The Unocal project was equally appealing to Pakistan and India, except that the pipeline would travel through Afghanistan, where the security situation remains volatile and uncertain.

The condition in Afghanistan has not improved much with the change in government in Kabul and there is little likelihood that the writ of the Karzai government would extend to parts through which the proposed pipeline is expected to pass through.

For the Americans, therefore, this is a double predicament. On the one hand, the Iran pipeline would help that country break out of the economic isolation that the US has been carefully building around it, and on the other, this project would be built at the expense of a lucrative American project. Hence the reservations shown by the US.

The question that needs to be asked is whether India and Pakistan are willing to resist American pressures and go ahead with the project. Last week, Prime Minister Shaukat Aziz said that Pakistan had to choose one option by December.

Keeping this in mind, at this stage, India and Pakistan are much closer than before to an agreement on the gas pipeline from Iran. According to India's Petroleum Minister, Mani Shankar Aiyar, who is being credited with overcoming Indian reservations, the project is now set to go ahead.

The plan, according to Aiyar, is for Iran to hammer out two separate agreements with India and Pakistan, thus bypassing the pitfalls of direct negotiations between Delhi and Islamabad. Under this agreement, Pakistan would earn at least 500 million dollars a year in transit fees.

Aiyar is being seen as a man of action in oil and gas circles. One week before making progress on the Iranian project, he persuaded his counterparts in Bangladesh and Burma to agree in principle to a pipeline that would bring Burma's natural gas to India via Bangladesh.

The deal, which could be hammered out by April and the pipeline built within two years, puts an end to years of Bangladeshi prevarication over whether to sell its own gas to India.

Under the agreement, Dhaka can decide whether to feed its own gas into the Burma-India pipeline without triggering the old fear of creating too much of a dependency on India. But there is much difference between the deal being concluded with Bangladesh and Burma on one side and with Iran and Pakistan on the other. While India-Pakistan rivalry has been the biggest obstacle, the fact that America wants to plug its own project and, at the same time, keep out Iran seems to have made things more complicated than what India has bargained for.