Friday, 18 September 2015

TAPI pipeline – is the Iran nuclear deal a threat or an opportunity?

Published in Analytical Articles

By Rohullah Osmani

September 18th, 2015, The CACI Analyst

After several years of uncertainty, a hope for a breakthrough has emerged for a critical energy project in South-Central Asia. On August 6, 2015, the 22nd TAPI Steering Committee approved Turkmenistan’s Turkmengaz as the consortium leader to oversee efforts in constructing, financing and operating the 1,600 kilometer natural gas pipeline. Achieving this milestone suggests a very important development for TAPI. Turkmenistan is taking a firmer lead in the project after talks with a French investor stalled, and also after the recent agreement over Iran’s nuclear program. This suggests Ashgabat is speeding up the project over fears that Iranian gas might flood back on to the market. 

BACKGROUND: The Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, with a projected cost of US$ 10 billion, would transit about 33 billion cubic meters (bcm) of Turkmen gas over a period of three decades. India and Pakistan would each receive 42 percent of the transit and Afghanistan the remaining 16 percent. The gas will be supplied from Turkmenistan’s Galkynysh field through Afghanistan (Herat, Helmand and Kandahar) and Pakistan (Quetta and Multan) to the Indian border town of Fazilka. Since around 700 kilometers of the pipeline will cross through areas in Afghanistan that are traditionally considered to be Taliban strongholds, security issues are still a major challenge for this project. Both Pakistan and Afghanistan, however, have assured the security of the pipeline.

Security for TAPI was also a topic for discussion between Afghanistan’s and Turkmenistan’s Presidents, Ashraf Ghani and Gurbanguly Berdimuhamedov, in Kabul on August 27, 2015. Berdimuhamedov visited Kabul just a few weeks after the TAPI Steering Committee’s endorsement of Turkmengaz to lead the consortium. The increased activity signifies Turkmenistan’s anxiety over the Iranian nuclear deal’s impact on the region, especially the prospect of increased Iranian activity in the region’s energy sector after the sanctions are lifted.

IMPLICATIONS: Despite Turkmenistan’s effort to speed up the construction of the pipeline, the question still remains whether India and Pakistan will prove able to cooperate on this project. Would India–Pakistan’s lack of cooperation benefit Iran enough to motivate other action? Would Pakistan support the Afghan peace process with the Taliban to end the insurgency in Afghanistan as a response to the project’s security challenge?

Foreign sanctions on Iran in recent decades have sidelined the country from global market access and at the same time pushed it closer to key South Asian countries like India and Pakistan. For example, Iran and Pakistan initiated the Iran-Pakistan pipeline, a US$ 7.5 billion project, in March 2013, but the actual construction of this pipeline has yet to move forward due to the U.S. pressure on Pakistan and because of the international sanctions on Tehran. Also, India and Iran signed a US$ 85 million deal for India to use two existing berths at the Chabahar port as multi-purpose terminals. During a recent meeting between Iran’s President Hasan Rouhani and India’s Prime Minister Narendra Modi on the sidelines of the SCO summit in Russia, Iran suggested a larger role for India in the country. Now that sanctions are about to be lifted, economic cooperation between the two countries is set to increase further. The recent visit by Iran’s Foreign Minister to Pakistan and India emphasized the deepening of economic ties between Iran and the two South Asian countries, including restarting work on the stalled Pakistan-Iran gas pipeline, and India’s investment in the strategically critical Iranian port of Chabahar.

The TAPI pipeline is beneficial to all participating countries. For Turkmenistan, it provides a diversification of export routes; after the drastic reduction of Russian gas imports from Turkmenistan, China has become its sole export market. Turkmenistan seeks to avoid excessive economic dependency on China. For Pakistan and India, the project will address energy deficits. And for Afghanistan, in addition to becoming the largest development project in the country, TAPI will bring 16 percent of its total gas supply, which will be essential for industrial enterprises and a source of employment. The successful implementation of the TAPI project could therefore promote positive interactions between Afghanistan and Pakistan and improve relations with India. To the U.S., the project will play a critical role in the region’s economic integration, and by extension serve U.S. political and security objectives. 

Despite the momentous geopolitical impact that the pipeline project will have on the broader Asian continent and the opportunity it represents to improve relations between participating states, some serious obstacles remain. Russia considers TAPI to be a threat to its control over the Central Asian energy market, and for Moscow the implementation of TAPI represents a decrease in its status and influence in the region. According to the Russian embassy in Islamabad, Moscow is now interested in backing the IP pipeline through Gazprom. Russia’s shift from its historical ally India toward Pakistan comes as Delhi and Washington have recently grown closer. China is also promoting the IP pipeline in addition to the China-Pakistan Economic Corridor (CPEC), since it would enable China to receive Iranian oil and natural gas through Iran and Pakistan.

Moreover, while TAPI will enhance India’s and Pakistan’s energy supply, periodic outbursts of violence in the persistent conflict between them threaten to compromise the project. India’s and Pakistan’s previous failure to cooperate in the energy field has resulted in India’s search for alternative routes to avoid Pakistan, particularly through an Iran-Oman-India pipeline. Also, despite TAPI’s economic and geopolitical importance, the Afghan and Pakistani portions of the route are politically unstable and partly under Taliban control, creating major security concerns. Although Afghanistan’s new president has made several attempts to pursue a very different foreign policy than his predecessor, including visits to Pakistan, China and Saudi Arabia to bring the Taliban to the negotiating table, peace talks with the Taliban have yet to deliver positive results. U.S. National Security Advisor Susan Rice discussed security issues with Pakistan during a one-day stop in Islamabad on August 30 after her visit to China, encouraging Pakistan to improve ties with India and Afghanistan, and advance regional peace and stability.  

CONCLUSIONS: The recent TAPI Steering Committee meetings, and particularly the latest meeting in Ashqabat that endorsed Turkmengaz as the consortium leader, have been very positive moves. Modi’s visit to Turkmenistan followed by Berdimuhamedov’s trip to Kabul to discuss economic cooperation, specifically the TAPI project, suggests that the pipeline project is again moving – this time with a firm commitment from all parties including a seller commitment, buyer’s readiness, and a contractor with the right financing. Although an agreement over Iran’s nuclear program has been reached, it will take time for the sanctions to be lifted and for Iranian gas to flood back onto the market. Nevertheless, the Iran deal has created a sense of urgency and a breakthrough for the TAPI project. As Robert Kaplan urges in his book “Monsoon,” “… stabilizing Afghanistan is about more than just the anti-terror war against Al-Qaeda and the Taliban; it is about securing the future prosperity of the whole of Southern Eurasia.” The U.S. needs to play a more active role in the process by engaging participating states like India and Pakistan to cooperate and Pakistan to support a successful Afghan peace process.

AUTHOR’S BIO: Rohullah Osmani is a Visiting Scholar with the Johns Hopkins University’s School of Advanced International Studies (SAIS), and a former Director General in the Afghan Government. 

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