China hangs fire on Iran-Pakistan pipeline


Stephen Blank

For over a decade, Iran, Pakistan and India (IPI) have taken pains at negotiating a major pipeline deal whereby Iran would send natural gas from its territory to the region. Yet geopolitical and commercial issues have repeatedly prevented the deal’s fruition despite Tehran’s growing need to diversify gas sales to Asian markets and Asian countries desire to find a stable, reliable source of gas supplies.

In recent years, India’s participation in this project has become more uncertain, which is partly responsible for the long delay that the project has suffered. Iran’s repeated attempts to raise the price of gas, US pressure on India to refrain from participating in the pipeline, external skepticism about Iranian capability to fill the pipeline as it promises, Indian concerns about the overall stability of Pakistan, and in particular, the possibility of terrorism in Pakistan’s Balochistan province through which the pipeline would travel, all contributed to India’s angst.

Iran recently warned India that there is a limit to its patience in waiting for New Delhi to decide. Iran was apparently able to present this ultimatum because it believes that it now has the “China card” in its deck. In early February, Iranian Foreign Minister Manucher Mottaki reportedly said Iran was ready to start the pipeline at any time – even without India – and urged Pakistan not to heed US pressure against the pipeline as China could soon replace India in the deal.

BACKGROUND

Iranian President Mahmud Ahmadinejad and his Pakistani counterpart, Asif Ali Zardari, signed a US$7.5 billion agreement in Tehran on May 23, 2009, to transfer gas from Iran to Pakistan. According to the deal, Iran will initially transfer 30 million cubic meters of gas per day to Pakistan, but will eventually increase the transfer to 60 million cubic meters per day. The pipeline will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 billion cubic meters (bcm) of natural gas per annum, which is expected to be raised later to 55 bcm.

After many months of negotiations, on February 11, 2010, Islamabad and Tehran were able to finalize the agreement on the issues, including the issuance by Pakistan of a “comfort letter” that provided Iran with the assurance that India – or China – could be brought into the project later. The two parties have vowed to sign the formal agreement by March 8 in Ankara, Turkey. The News reported:

Under the comfort letter, the government of Pakistan would allow the third country to import gas through [the] IP [Iran-Pakistan] line in case any country in future comes to join the project, but the permission will be subject to the gas tariff and transit fee to be worked out as per best practices of that time.

CHINESE INTERESTS IN THE IPI PIPELINE

Perhaps the most interesting aspect of Iran’s most recent announcement is that China has yet to comment publicly on the pipeline except that it is studying the Pakistani proposal. That was early in 2008. Chinese Foreign Minister Yang Jiechi said at that time: “We are seriously studying Pakistan’s proposal to participate in the IPI gas pipeline project”.

Pakistan clearly wants China to join the pipeline for many reasons. Islamabad desperately needs the gas that might not come if there is no third party to make the deal profitable to Iran. Second, it would gain much revenue from the transit fees for the gas going to China and benefit considerably from the ensuing construction of infrastructure within Pakistan. Third, it would further solidify its “all-weather” relations with China. Those goals have always been part of Pakistan’s foreign policy and explain not only its interest in the original pipeline plan but also its previous invitations to China to join the project. The prospect of an invitation to China was also used in the past to galvanize India’s decision-making process regarding the pipeline.

Throughout the spring of 2008, former Pakistani president General Pervez Musharraf and his government frequently courted Chinese leaders to join the pipeline project, a pitch that Musharraf also tied to an earlier proposal of establishing a corridor linking Pakistan to China through rail, road and fiber optics. At that time, China promised to consider the proposal and then asked for more information, but did nothing else, leaving the issue in abeyance. Subsequently, Pakistani media reports claimed that China was keen on joining the pipeline and would send a delegation to negotiate the deal, but clearly, nothing came of it.

In 2009, Iran’s ambassador to India, Seyid Mehdi Nabizadeh, told Indian journalists that China was interested in the pipeline, but he too refused to confirm if talks with China were taking place. Based on this precedent, it may be possible that these Pakistani and Iranian gambits were spurious to begin with and its purpose was to pressure India or entice China into joining the pipeline project.

The India Factor: The blend of American and Iranian tensions and the tensions between India and Pakistan in a neo-global order has formed a situation for India to ponder over a final decision. India can neither adopt the decision to implement the Iran-Pakistan-India gas pipeline, nor can she abandon the pipeline because the stakes of energy security and geopolitics are too high for India to be able to afford losing the pipeline.

There is considerable interest among external observers in the pipeline and Chinese officials have sporadically expressed an interest in it. For example, China’s ambassador to India in 2006, Sun Yuxi, said China has no objections to the IPI, while India’s minister for state planning, MV Rajashekaran, also said that once the pipeline is completed it could be extended to China [1]. Gazprom (the Russian gas monopoly) and the Russian government have long since indicated a desire to participate in sending oil and/or gas to the subcontinent through the IPI. Indeed, Gazprom’s man in Tehran, Abubakir Shomuzov, has even advocated extending the IPI pipeline to China to tie Russia, China, India, Pakistan and Iran together in a very big project having major strategic implications as well as a huge number of consumers.

Presumably, such statements – if not plans – are intended to mollify Chinese concerns about the possibility of Russian energy being diverted from it to India. Nevertheless, if one correlates China’s recent maneuvers in Central Asia concerning pipelines with its deals with Iran, it is clear that China is contemplating a pipeline network running from Iran either through Central Asia, or prospectively through Pakistan and/or India to China.

In this context, the IPI pipeline poses several risks and opportunities for Beijing. If India exited the pipeline, that would lessen Iran’s leverage to drive a hard bargain on gas prices. At the same time, as part of the overall strategy to build pipelines from Iran to China, or at least to Gwadar in Balochistan, from where gas or oil could be shipped directly to China, Chinese participation would create a new overland energy link that could complement China’s energy diversification strategy.

Nevertheless, the project also faces several political and logistical difficulties that could scuttle Chinese participation. The pipeline is planned to traverse very difficult terrain in Pakistan’s Gilgit region. That would increase the costs and time required to eventually connect the pipeline to Xinjiang. Moreover, the risks inherent in Pakistan and Iran also pose problems.

The massive investment required to link China to the pipeline would be susceptible to many risks since it falls along a major fault line of political instability; there could be large-scale terrorism in the territory of the pipeline or more generally from a mass civil upheaval in Pakistan. In view of these positive and negative aspects to the deal, some observers suggest that Beijing might just be feigning interest in the IPI pipeline to get a better deal in negotiations with Russia on relatively safer Siberia-China gas pipelines [2].

Certainly the prospect of China obtaining a secure and stable supply of gas from Iran would reduce its need to get that gas from Russia and give it even more leverage over Russia in the current negotiations on gas pipelines from Siberia to China than it already possesses [3].

There is another aspect to this deal. China has recently stuck its neck out for Tehran in its call for continuing negotiations with Iran over its nuclear enrichment programs irrespective of the fact that Tehran is clearly defying the International Atomic Energy Agency and the offers of the six negotiating partners (United States, Great Britain, France, Germany, and Russia). On February 24, 2010, Foreign Ministry spokesman Qin Gang stated that, “China holds that the parties should continue to step up diplomatic efforts in a bid to maintain and promote the process of dialogue and negotiations. China hopes the parties demonstrate more flexibility and create conditions conducive to a comprehensive and proper solution to the Iran nuclear issue through diplomatic means.”

Chinese sources also report that Iran is able to resist the United States because the political situation in Iran is stabilizing. This suggests a more optimistic view of the domestic situation in Iran than might be the case elsewhere. Likewise, it appears that China suspects US motives in the region. High-level visits by US Secretary of Energy Steven Chu to Saudi Arabia and by another high-level Israeli delegation to China aim to wean China away from Iran in return for the United States brokering increased oil exports from Saudi Arabia to China. The Chinese media apparently considers this a trap to get China to renounce its principles for transitory economic gain.

CONCLUSION

At the same time, if China did become a full partner in the IPI pipeline that would offer it another opportunity to build on Beijing’s so-called strategy of building what has been called a “string of pearls” across the Indian Ocean. Chinese officials have publicly stated their desire to turn the Chinese-built Pakistani port of Gwadar into an energy hub. China also has substantial interests in overland transport links in Pakistan through the Karakorum Highway, and participation in the IP pipeline would extend those interests.

Indeed, many observers in New Delhi and Washington view Sino-Pakistani collaborations to build naval facilities and oil refineries at Gwadar as a prelude to the establishment of a Chinese naval base there. Whether this is true or not, if China joins the IPI project, then the odds of China supporting American efforts to isolate Iran would effectively be reduced to zero because it would depend too much on Iranian gas, in addition to its recent oil contracts to antagonize Iran by siding with Washington [4].

While we wait to see how China decides to play this issue, the United States needs to understand that Beijing’s decision to join or stand aloof from this pipeline will have major geopolitical repercussions and comparable geo-economic repercussions across Asia, another sign not only of the integration of south and southwest Asia with East Asia, but also of China’s rising importance as the nexus of the Asian continent.

Dr Stephen Blank is a professor at the Strategic Studies Institute of the US Army War College at Carlisle Barracks, PA. The views expressed here do not represent those of the US Army, Defense Department, or the US Government.
Notes
1. “The Energy Game,” Heartland: Eurasian Review of Geopolitics, November, 2005, http://www.heartland.it 2. Zachary Fillingham, “India, China & the IPI Pipeline,” http://www.geopoliicalmonitor.com, November 5, 2009. 3. Stephen Blank, “Russia’s New Gas Deal With China: Background and Implications,” Northeast Asia Energy Forum, VI, No. 4, Winter, 2009, pp. 16-29. 4. Fillingham, op. cit.

_________

Source: This article first appeared in The Jamestown Foundation & was cross posted at Geoplotical NWO
Related Posts: 1. Energy security, diplomacy and pipeline corridors…all over EURASIA 2. China wins struggle for Pipelinestan 3. Turkmenistan Gas is now flowing to China Overland 5. BALOCHISTAN is the ULTIMATE PRIZE Part 3 of 3 6. Rebranding the Long War: BALOCHISTAN is the ULTIMATE PRIZE Part 2 of 3 7. Rebranding the Long War: BALOCHISTAN is the ULTIMATE PRIZE Part 1 of 3 8. Washington is Playing a Deeper Game with China

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the ‘Wonders of Pakistan’. The contents of this article too are the sole responsibility of the author(s). WoP will not be responsible or liable for any inaccurate or incorrect statements contained in this post.

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7 CommentsLeave a comment

  1. […] This cup of tea was served by: Wonders of Pakistan […]

  2. I haven’t yet fully developed an opinion on this issue since American media doesn’t present much information on the elements discussed herein but I have been waiting for additional information, such as this post.

    Clearly our machinations in both Iraq and Afghanistan have important implications here. The wars as they’re described and suggested by American media is nothing more then propaganda of the highest order.

    I’ll have to await further information to proffer and educated opinion but I appreciate this information and tend to agree with its conclusions.

    Peace

    • @ Jeff Prager,

      Thanks Jeff. I appreciate you like the contents posted on this blog from time to time. The IP gas pipeline which should already have been in the process of blueprint to implementation stage, could unfortunately not progress because of India’s reservations. I am, however, unable to understand why India tries to delay the matter insofar as IPI benefits all the parties concerned.

      Iran is placed next door to Pakistan and Pakistan next door to India. Both India and Pakistan badly need energy for their developmental needs. If Iran has excess to supply, it gets revenue first of hand and thus this helps everybody involved.

      Indian reservations because of Pakistan are rather not clear except that Washington doesn’t wish this project to proceed. Fact remains, CIA has its own agenda, an agenda which at the moment is trying to bait India through Washington help India turn into a regional super power [as it did in the cold war era by tempting Pakistan through its idea of Pakistan leading the Muslim Umma and fight against the Soviet infidels. Since China in those days was a developing economy therefore, Chinese who too were infidels too, weren’t targeted].

      Now that China is a super power [though China doesn’t claim so] and rivaling US, the USSR has been replaced by China. In the subcontinent, the centuries old British policy of “Divide and Rule” is being used to pit India against Pakistan.
      Either the Indians do not grasp the real objective of the CIA guys or they too are dead sure of becoming a super power who will defeat the Chinese fighting a proxy war on behalf of CIA as did Pakistan against the Soviets in Afghanistan.

      We are reaping the harvest of Islamic megalomania and now its India’s turn of becoming a ‘super power’ at the behest of the American CIA.

  3. Dr. Hashmey,

    Not only do I appreciate your posts but I also truly appreciate your comments and the dialogue I have with you. We seem to have very similar perspectives.

    I don’t have enough information just yet to express an educated opinion about the subject herein. What I can tell you without reservation is that wherever the US government and the CIA are making plans those plans will not benefit the average person and in fact will be dangerous to their lives. These people are criminals on an international scale.

    I can also comment on the subject of the near future of the US; what I anticipate within the coming 25 years.

    I think we’re seeing a serious economic and political breakdown. The economic breakdown as a result of international banking desires and a political breakdown to come as a result of internal dispute and lack of confidence in government stemming from the 9/11 truth movement which simply grows stronger every day. While it hasn’t entered the mainstream just yet, it will soon enough and then civil unrest can’t be far behind. Combined with the civil unrest related to economics and we’re in serious trouble in the not too distant future.

    Never have such a series of events approached the magnitude of those we face internally here today.

    Peace

  4. I dont know the real prespective of both Jeff and Nayer .and also don’t know whether they are on the same horizon but one is very clear that upheavals are there in near future .We have already experienced the thre earthquake in succession including one at all time high 8.8 Rictor . So let the time roll We will have to contribute accordingly to let the peace prevail . Rest only GOD knows.

  5. Dr. Hashmey.

    I’ve always wanted to ask an astute observer of the wars in Afghanistan/Pakistan for an opinion regarding Peter Chamberlains perceptions of events there. He follows these events very closely and of course they are VERY complicated. Perhaps you might be kind enough to read the post linked below and leave a comment for me here?

    http://www.opinion-maker.org/navigation.do?mode=showArticles&id=1380

  6. @ Jeff Prager,

    Thanx Jeff for providing this link to Peter Chamberlin’s post titled”AF-PAK: Arresting Taliban to Cover America’s Ass”. Although I regularly read his online newspaper, the “There are no Sunglasses” weblog, but somehow I missed this particular one on such an important subject. Once I have gone through this paper, I will revert to you.

    Nayyar


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