Asian Oil Pipeline

A major natural gas pipeline that would stretch from the fields of southern Iran to Pakistan and India — itself a remarkable prospect — is being planned. But it faces serious hurdles, not least the fierce opposition of the U.S. government.
The history of relations between Persia and the Indian subcontinent is more than 2000 years old. Until 200 years ago, Persian was the language of literature and government in India. After separation of Pakistan from India, Iran faced a dilemma of its relations with these two new states. During the Shah's era, Iran preferred to have close relations with Pakistan, although economic ties with India were not ignored. After the collapse of the Soviet Union and Pakistan's support of hardliners in Afghanistan, Iran found India as a new partner in Asia. India has been slowly but surely forging a comprehensive relationship with Iran on energy and commerce, infrastructure development, and military ties. Iran looks to India as a developed, democratic, and politically lucrative country for cooperation. For instance, some 8,000 Iranian students are studying in India, compared with 2,000 in the United States.

A big market for India, Iran has the world's second largest oil and gas proven reserves, and acts as an important access route for India to Central Asia and Afghanistan. Case in point: India is seeking new routes to reach to Central Asia. One of them is the North-South Corridor, which links India to Russia and all of the former Soviet Union via the Persian Gulf, Iran and Caspian Sea. Iran's considerations are boosting trade, having secure borders, and avoiding "encirclement" by American proxies. At the same time, Iran is opposed to the hegemonic presence of the United States and its troops in the Indian Ocean. India has not been hesitant to play the Iran card to draw concessions from the United States on other matters of bilateral concern. So the pipeline is freighted with more significance than merely the delivery of natural gas. Not much has been heard about the Iran-Pakistan-India (IPI) pipeline for some time, but that all changed on the sidelines of a regional summit that brought together Iranian President Mahmud Ahmadinejad and Pakistani President Asif Ali Zardari in Tehran on May 24.

But there are some major obstacles to overcome before any Iranian gas actually crosses the border into Pakistan -- and even more before that gas can be routed to India.

The first major question is where the money will come from.

The first leg of the plan is to build a 2,100-kilometer long pipeline from Iran's South Pars gas field into Pakistan -- at an estimated $7.5 billion. The next step would be to build a 600-kilometer extension that would go on to India.

But while a rival gas-pipeline project -- the Turkmenistan-Afghanistan-Pakistan-India (TAPI) -- is supported by the Asian Development Bank, the IPI does not have any backing from international financial institutions. Furthermore, TAPI is not as vulnerable to the financial or political opposition that IPI could experience due to the involvement of Iran, whose nuclear program has made it a pariah in the international community.

Complicating matters for both projects is that they are to be routed through Baluchistan. Considering that Baluch nationalists have already blown up domestic gas pipelines on the Pakistani side of the border in their fight for greater autonomy from Islamabad, their stance on a new pipeline from Iran (or Afghanistan) could be easily guessed.

As Ahmadinejad and Zardari watched representatives of their respective countries' gas companies ink the deal, the two presidents managed to avoid addressing such difficult questions. Ahmadinejad and Zardari hailed the plan to build a "pipeline of peace," with Zardari pointing to the significance of the signing of the agreement after some 10 years of talks.

Pakistani adviser on petroleum and natural resources Asim Hussain said Pakistan and Iran would sign a formal agreement on the pipeline project within 15 days in a third country. Hussain did not say which country, but given India's longtime interest in the project, it is assumed that it is the "third country."

That leads to more uncertainty, considering New Delhi's difficult relations with Islamabad. Pakistan, however, has made clear it would build the pipeline with Iran even if India opts out of the project. Iranian and Pakistani officials have said construction of the new pipeline could start within three to four years and be finished some five years later.

Mike - the MBA blogger