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Sacrifice for a strategic tie?
JAYATI GHOSH
Prime Minister Manmohan Singh's recent statement on the Iran gas pipeline project is unfortunate for the signal it has sent out not only to Washington but also to India's partners in the project.
MOST of the Indian media has seen Prime Minister Manmohan Singh's visit to the United States as a tremendous success, involving the signing of a nuclear deal, which, not only ensure U.S. recognition of India as a nuclear country but also promise supplies for the country's nuclear power programme. The deal has also been presented as one without obvious strings, and with no quid pro quo in terms major concessions by India.
Yet surely, it was no accident that within a couple of days, the Prime Minister at a press conference in Washington proceeded to throw cold water on plans for a major gas pipeline from Iran to India, which had been vigorously opposed by the U.S. The project is something that has been talked about for several years because of its clear advantages to all the countries concerned in the region. The current state of negotiations reflects the meticulous and imaginative diplomatic efforts not only by our Petroleum Minister Mani Shankar Aiyar, but also his counterparts in Iran and Pakistan, all of whom had withstood sustained pressure from the U.S. for more than a year.
Yet quite suddenly, and that too soon after meeting George W. Bush, Manmohan Singh announced to some prominent newspaper editors in the U.S., that the gas pipeline project is fraught with risks, and that in the circumstances it will be difficult to find an international consortium to underwrite the costs. Obviously, no one serious about the project would announce to potential investors that this is risky and problematic, so these comments are tantamount to killing the project at this stage.
In any case, the concerns expressed are not new, and indeed have already been considered and mostly addressed by those planning the project. So, the voicing of these concerns in such a place and at such a time by the Prime Minister suggests that the real motivation may not be his sudden realisation of these problems, but perhaps, the result of the new "understanding" between the U.S. and Indian governments.
This is, of course, depressing in itself because the gas pipeline is too important and potentially beneficial for the country to be abandoned in such an irresponsible manner. If this is a sign that other national interests are to be sacrificed to ensure our good standing with the U.S. government, then there is even greater cause for alarm.
THE U.S. administration has made no secret of its unhappiness with the project. U.S. Secretary of State, Condoleezza Rice, has been vehement in her opposition to and concerns about this project, which formed an important element of her discussions when she visited the region recently. To India, she offered the alternative of U.S. providing nuclear fuel to meet its energy needs. To Pakistan, she offered the threat of sanctions if the project went through. With Iran, she was more openly aggressive, indirectly threatening "regime change" of the kind that the U.S. has now made its foreign policy specialty.
It is worth taking some time to look at the details of this project, which has simultaneously excited so many hopes and fears in different parts of the world. Iran is not only the second largest producer of oil in the Organisation of Petroleum Exporting Countries (OPEC) but also holds the world's second largest reserves of natural gas. Ever since more natural gas reserves were discovered in the South Pars field in 1988, Iran has been increasing efforts to promote the exports of natural gas, especially to neighbours like India and Pakistan, where domestic demand far exceeds domestic supply.
Pakistan and Iran signed a preliminary agreement as early as 1995, for constructing a natural gas pipeline from South Pars to Karachi. This pipeline did not include the city of Multan and excluded the further transport of gas into India. The current pipeline project proposes to include India, using Multan as a transit point. The pipeline would be 2,670 km long with a 48-inch diameter, and hold approximately $3.2 billion of gas.
Iran would have an assured export market for its natural gas from the South Pars field. It is estimated that Pakistan could earn as much as $500 million in royalties from a transit fee and save $200 million annually, by purchasing cheaper gas from this pipeline project. India, of course, would benefit because of the assured supplies at prices substantially lower than the international market and much less than it is paying at the moment. All three countries would benefit from increased employment for construction and maintenance of the pipeline.
There are many reasons for the increasing focus on natural gas - its overall efficiency, abundance, and the fact that it is a clean burning fuel. The main environmental benefit of using natural gas is that in switching from high-carbon coal to low-carbon natural gas, the output of carbon dioxide is reduced. This reduces the effect of global warming of which carbon dioxide is a major source, and is especially important for India, where coal constitutes 70 per cent of the major fuels utilised for power generation. So the power sector has the potential to become the largest consumer of natural gas, not only in global gas markets, but also in India.
In fact, India's requirement for import of natural gas is going to be increasing in the foreseeable future. In January, the government signed a massive $40 billion deal with Iran to import 1.2 million metric tonnes of Liquefied Natural Gas (LNG) by sea for the next 25 years. The gas pipeline would dramatically reduce costs of such gas for India.
UNTIL the Prime Minister's comments, there has been no dearth of international investors expressing interest in this project. These include four major companies: BHP of Australia, NIGC, Petronas of Malaysia, and French Total (which is already developing an international pipeline from Iran through Turkey). In addition, a consortium consisting of Shell, British Gas, Petronas, and an Iranian business group has been negotiating how to export gas from South Pars to Pakistan. The Iran National Gas Company and the Gas Authority of India Limited (GAIL) have also been involved in negotiations. Recently, even China's National Petroleum Corporation offered to assist in the project, bringing its expertise and experience in the construction of oil and gas field surface engineering, petroleum projects and long-distance pipelines.
The arguments against the pipeline typically emphasise non-economic considerations, primarily the dependence on Pakistan, issues of safety, security and potential instability. Yet these ignore the positive role that can be (and historically has been) played by economic linkages, including through trade, which create much greater incentives for countries to resolve issues more amicably and with less threat of violence. The much-discussed "peace pipeline" involving the export of LNG by pipeline from Egypt to Turkey is a case in point.
In this particular case, the very large potential for economic and developmental gain from natural gas may well encourage the governments of India, Pakistan and Iran to reassess their roles and policies in regional conflicts, including not only Kashmir but also Afghanistan and other national security issues.
But even if the most optimistic outcome does not occur, the evidence across the world suggests that countries sharing pipelines usually attach tremendous importance to ensuring that they are safe, secure and not interfered with, whatever other conflicts they may be involved in.
Clearly, India will have so many benefits from this project that it cannot be abandoned simply because the U.S. government does not like it. Washington's desire to be in effective control of the world's energy supplies is the dominant reason for this opposition, whatever other reasons it may trot out. Allowing the U.S. to dominate in this manner is certainly not in India's interests. In any case, the offer of nuclear fuel as an alternative is paltry compensation, since nuclear energy currently meets less than 4 per cent of the country's total energy requirement.
But the Prime Minister's statement was unfortunate not only for the signal it has sent out to Washington (where, of course, it was intended to please) but also to our potential partners in this project and indeed to the rest of the world. The message appears to be that from now on the Indian government will value its strategic relationship with this imperial power so much that it may well sacrifice anything that threatens it, no matter how beneficial it is for the country and others in the developing world. It is to be hoped - not only for the Indian people but also for the very future of this government itself - that such a message is not true. -- "Rest and relaxation rocket to my brain" [Talking Heads]