Siddharth Varadarajan

Journalist | Writer | Analyst

Gas fuels warmth in India-Pakistan ties

26 September 2004
The Hindu

Gas fuels warmth in India-Pakistan ties

By Siddharth Varadarajan

NEW DELHI, SEPT. 25. From being a taboo subject as far as the Indian Government was concerned, the proposed Iran-Pakistan-India (IPI) gas pipeline appears to have moved centrestage in the ongoing efforts to give relations between Islamabad and Delhi a new momentum and depth. In Friday’s joint statement read out by the Pakistani President, Pervez Musharraf, after his meeting in New York with the Prime Minister, Manmohan Singh, the pipeline was the only concrete issue — apart from Kashmir — which found mention.

While this does not mean a pipeline deal is imminent, it is indicative of the conceptual leap made by the two sides, particularly India. The erstwhile Vajpayee Government had tended to link the pipeline — which Pakistan has always been keen on — to certain economic concessions it wanted Islamabad to make first. When the UPA Government was elected, however, the External Affairs Minister, Natwar Singh, indicated almost immediately that New Delhi now had an open mind, even if no quid pro quo were forthcoming. Friday’s statement is clearly the product of this new openness.

If the pipeline eventually materialises, it will not only help transform the nature of relations between India and Pakistan but will also have a major impact on the geopolitics of south-west Asia and the future evolution of energy routes in the wider Asian region.

Conference planned

As if anticipating the sudden prioritisation of the pipeline issue, a major conference on “Iranian Gas Export to Pakistan and India” is to be held in New Delhi on December 15-16 — largely on the initiative of the Iranian energy sector — with key players from all three countries set to take part. Among the invitees are the Petroleum Minister, Mani Shankar Aiyar, his Iranian counterpart, Bijan Zanganeh, and Ahmed Waqar, Secretary in the Pakistani Ministry of Petroleum and Natural Resources. Mr. Waqar is slated to make a presentation on “the importance of the Iran-India pipeline project to meeting the gas demand in Pakistan.”

Iran’s massive South Pars gas field, first discovered in 1988, is being jointly developed by the National Iran Oil Corporation, Totalfina Elf and Malaysia’s Petronas. Since the mid-1990s, Teheran has been pushing the concept of the IPI pipeline capable of carrying as much as 2.8 million tonnes of LPG per annum. In the face of Indian resistance to the idea of the pipeline traversing Pakistani territory, the Iranian side has sought to sweeten the proposal by offering to finance 60 per cent of the cost of the $3 billion, 2,600 km-long pipeline.

Consortium proposed

As for the security aspect, Dr. Mohammed Hossein Adeli, Iran’s Deputy Foreign Minister for Economic Affairs, last year proposed the involvement of a consortium of companies from Russia, Malaysia, Europe and even China in the construction and ownership of the Pakistan section as a way of ensuring the non-disruption of supplies by Islamabad. The only wildcard is the restiveness of Baluch tribesmen, who have attacked the Pakistani pipeline network in the past.

For Pakistan, the incentive for the pipeline is obvious: annual transit fees are estimated to be anywhere from $300 million to $800 million. For the past few years, the IPI pipeline has been the only exception Islamabad has made as far as its `Kashmir First’ approach to India is concerned. Curiously, the Pakistan Prime Minister, Shaukat Aziz, recently seemed to suggest the pipeline too could become a hostage to Kashmir. “India will have to deal with the Kashmir issue in an equitable and peaceful manner… so that progress can be made in other areas, including gas pipelines,” he told the Pakistan Observer in an interview on September 13. However, Friday’s joint statement makes it clear Gen. Musharraf has overruled Mr. Aziz.

U.S. pressure on Iran

For Iran, the IPI pipeline is seen as a way of developing markets for its gas and also breaking out of the stranglehold that U.S. sanctions and scare tactics have placed its oil and gas industry in. U.S. pressure recently led to the Tomen Corp. of Japan pulling out of the South Azadegan gas field. And just past week, the U.S. Commerce Department fined a U.S. subsidiary of a Japanese firm, Ebara Corp., for having sold cryogenic pumps for South Pars.

In turn, Iran has sought innovative methods of attracting investment and has been particularly keen to involve Indian companies. At the recent OPEC meeting in Vienna, Teheran suggested ONGC Videsh Ltd. pick up a 20 per cent stake in the Yadevaran oil field in exchange for GAIL and IOC buying a specified amount of South Pars LNG.

China’s deal

The Chinese are also getting involved in Iran’s energy sector. In March this year, Zhuhai Zhenrong Corp. signed a $20-billion deal for the supply of Iranian gas over 25 years. Zhuhai Zhenrong is a subsidiary of China North Industrial Corp (Norinco), a company the U.S. imposed sanctions on last year for supplying components for Iran’s missile programme.

© Copyright 2000 – 2005 The Hindu

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This entry was posted on September 26, 2004 by in Uncategorized.

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