[A-List] Russian imperialism: India, Iran

["Michael Keaney" <michael.keaney@xxxxxx>]

An economic and political pipeline
By Hooman Peimani
Asia Times, November 20 2002

On November 12, Russia's Gazprom announced its plan to construct an undersea
gas pipeline between Iran and India for exporting Iranian natural gas to
India via Pakistan.

According to the announcement, the Russian company has reached an agreement
in principle with Iran for the project. By signing a note of understanding,
it has also received Pakistan's consent for the passage of the pipeline
through its territorial waters. In addition to transit fees, the Pakistanis
will receive gas from the pipeline. If construction actually begins, the
US$3.2-billion pipeline project will be a major political and economic
achievement for Iran, India and Russia.

Their relations have been growing, especially since the fall of the Soviet
Union, thanks to common interests in South and West Asia and their sharing
the same or similar views on major international issues, including their
opposition to an America-led unipolar international system.

The idea of exporting Iranian gas to Pakistan and to India via Pakistan
emerged in the 1990s. Toward the end of the decade, a significant number of
large and small companies expressed their readiness to take part in such a
project.

For example, in 1998, the Iranian Mostazafan va Janbazan Foundation
announced its plan to cooperate with Shell, British Gas and Petronas to lay
a 1,400 kilometer gas pipeline between Iran's Persian Gulf South Pars gas
field to the port city of Karachi in Pakistan. Royal Dutch Shell also
expressed its interest in the project for connecting this offshore Iranian
gas field to Moritan in India. As well, Australia became a party to a
trilateral project with Iran and India for the export of Iranian gas to
India. In particular, Australian BHP, which expressed its interest in laying
a gas pipeline connecting that gas field to Pakistan and India, conducted a
technical and economic assessment on the proposed project.

However, none of the aforementioned turned into a contract for the actual
construction of a pipeline - which is why the recent Gazprom announcement is
significant. For the first time, a major gas company has actually gone
beyond the expression of interest. It is also important as Gazprom is one of
the three companies developing Iran's South Pars gas field, along with
French Total and Malaysian Petronas, from which India will receive Iranian
gas.

The announcement is also important for its inclusion of Pakistani consent,
without which the construction of the shortest possible pipeline to India
would be simply impossible. The deal inked in Islamabad allows Gazprom to
start exploration and preparations for drafting a feasibility report on the
construction of the gas pipeline, Russian news agency Itar-Tass reported. As
envisaged, the pipeline will be laid at the depth of 150 meters within
Pakistan's Arabian Sea territorial waters to reach India through the
neighboring Indian Ocean. For its domestic consumption, Pakistan will
receive gas through a branch pipeline connecting the main pipeline to
Pakistan.

Despite its major conflicts with India, three factors seem to have convinced
the Pakistanis to give their consent for the project.

First, it will address their need for imported gas from the closest and the
most reliable exporter, ie, neighboring Iran. Despite conflicts of interest
in Afghanistan over the past two decades, many political, economic and
security considerations have encouraged Iran and Pakistan to maintain
peaceful relations. While details of the arrangements are yet to be
released, it is safe to assume that Iran would have offered a reasonable
price for its gas to be sold to Pakistan to make the Pakistanis interested.

Secondly, the lucrative nature of the pipeline project should have sweetened
the deal for the Pakistanis. They will receive unspecified amounts of
transit fees for the passage of gas through their territorial waters. Given
Pakistan's limited financial means and its growing financial needs, an
expected significant amount of annual revenue in transit fees will be of
importance to the Pakistani economy.

Third, a gas pipeline to India via Pakistan could serve to help reduce
tensions and the threat of war between the two neighbors. The pipeline would
give not only Pakistan, but also India, a stake in peaceful relations
between the two countries. Aside from their current propaganda war, neither
side wants nor could afford a full-scale war with the possibility of
escalation into nuclear exchange. However, the removal of such a possibility
requires a reduction of tension in their relations.

Gazprom's announcement was definitely a significant step toward the
construction of the gas pipeline to India, but it is still too early to be
certain about the full implementation of the Iranian-Russian-Pakistani
agreement. According to the Russian company, it will send a delegation to
Iran in the beginning of the coming year to prepare the ground for the
creation of a working team to study the technical and economic aspects of
the pipeline project. However, neither that company nor Iran has yet
specified a date for the actual beginning of its construction. As a result,
it is not yet clear when and if the project will become a reality in the
near future.

Without a doubt, if implemented, the Iranian-Pakistani-Indian pipeline
project would be a very significant development both for its economic
importance and political implications. Being a large and growing Asian
market, India will be a major importer of fossil energy, including natural
gas, in the 21st century. Iran's securing access to that market will end its
current insignificant gas exports to turn it into a major global gas
exporter. The latter will provide the Iranians with long-term large annual
revenues, a necessity for financing their numerous unfinished projects,
estimated at 45,000, and for diversifying their oil-dependent economy.

The deal will also be a major success for Russia, whose oil and gas
companies have sought to turn themselves into major international players.
As Iran has the world's second-largest gas deposit, Russia's involvement in
its export project will certainly grant the Russians who possess the world's
first largest gas reserves a very strong position in the international gas
markets.

If the envisaged gas pipeline is constructed, it will be another step toward
closer cooperation among the three dissatisfied regional powers, India, Iran
and Russia, without regard to the American D'Amato Act, which bans any
foreign investment in the Iranian energy industry over an American-set limit
of $20 million.

Dr Hooman Peimani works as an independent consultant with international
organizations in Geneva and does research in international relations.