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It’s the gas, gas, gas!

India has to play the Great Game adroitly to make both the Tap and Iranian pipelines a reality, writes N Chandra Mohan.

india Updated: May 04, 2008 23:53 IST
N Chandra Mohan

India’s gas diplomacy has entered a new phase. It is now full-fledgedly participating in two pipeline projects that call for great skills necessary for the 21st century version of the Great Game. India has become a member of the US-backed Turkmenistan-Afghanistan-Pakistan (Tap) pipeline project. Iran’s President Mahmoud Ahmadinejad’s brief trip to India has also kindled the hope that the $7 billion, 2,135 km pipeline linking Iranian gas fields with the energy-hungry economies of Pakistan and India is not a mere pipedream.

During the 19th century, the vast steppes, barren mountains and deserts of Central Asia witnessed a struggle for control between imperial Britain and Tsarist Russia. After the break-up of the Soviet Union, this hostile terrain is again the venue of Great Game machinations. The dramatis personae are different, as the US has replaced Britain. The stakes are different as well. It is not imperial ambition — or the ‘war on terror’ — but control over oil and gas in these volatile territories that mark the Great Game Version 2.

There is a new twist to the game as Iran, Turkey and China are also in the fray for the spoils of Central Asia’s oil and gas. The world’s biggest untapped fossil fuel reserves lie in the Caspian Sea region comprising Azerbaijan, Kazakhstan and Turkmenistan. Proven reserves range from 17.2 billion to 49.3 billion barrels of oil a day — close to Qatar’s reserves at the low end and the US’s reserves at the high end. Turkmenistan alone has proven gas reserves of
71 trillion cubic feet, according to the US Department of Energy.

The US, for its part, wants to neutralise Russia’s dominance and contain Iran’s influence in land-locked Central Asia. It seeks to evacuate oil and gas from countries like Azerbaijan westwards through routes that bypass Russia or Iran. A case in point is the Baku-Tblisi-Ceyhan pipeline that is already up and running. The other major project is the Tap pipeline that the US company, Unocal, planned to build but gave up due to civil war in Afghanistan and lawlessness in Pakistan. India is now wading into this terrain.

The new entrants, however, have their own plans to ensure that the Caspian’s oil and gas flows eastwards. The booming economy of China seeks to tap these hydrocarbon fields through the 1,300 km pipeline from Atasu in eastern Kazakhstan to Alashanku in the western province of Xinjiang. This eastwards flow of Caspian oil and gas is bound to raise the premium for these supplies in the US. India, too, is deepening its stakes in the Caspian with its decision to participate in the Tap pipeline proposal.

The big question is whether India can swiftly ensure that its burgeoning requirement for natural gas is met by making the Tap project — the 1,680 km pipeline that will deliver gas from the Dauletabad field in Turkmenistan to Fazilka on the Indo-Pakistan border by 2015 — work to its advantage. Admittedly, there are a lot of geopolitical risks associated with this project. There is also a need for third party certification of gas reserves in Turkmenistan as it has contracted to supply huge quantities to others, including Russia.

But India’s Great Game skills will be tested as China has a headstart in Turkmenistan. Two years ago, leaders of both nations signed a deal whereby a 4,859 km pipeline will be built transporting 30 billion cubic metres of gas every year for 30 years from Turkmenistan to China. Although the buzz is that the former may have oversold its reserves to clinch the deal, the point is that Turkmenistan has other options if India chooses to vacillate due to the security implications of the Tap pipeline project.

Basically, India’s concerns are that the Tap pipeline passes through the badlands of Afghanistan — Taliban country — and Pakistan. But to safeguard the pipeline, there is no option but to break bread with these forces, as Unocal and its rival, Bridas of Argentina, were forced to do in the mid-1990s. Then, both these rivals pulled out all stops to use their Saudi connections to intercede on their behalf with the Taliban. Washington aggressively lobbied for Unocal with both Afghani and Pakistani officials.

Then, as well as now, the challenge stemmed from the fact, as journalist and author Ahmed Rashid puts it, that “for centuries, wily Afghani tribesmen have been experts at playing off one Great Game power against the other, taking money and arms from both, but committing to neither. Still they play, but this time their target is the oil companies, and those governments who seek to control the oil pipelines of Central Asia”. Dealing with corrupt dictators and warlords to make the Tap pipeline work is par for the course.

The Iran pipeline project has been bedevilled by similar concerns India has over the Tap project. For starters, the ongoing insurgency in Balochistan has cast a shadow over this proposal. Given these risks — including the hardy perennial of US opposition, ongoing Indo-Pak tensions and controversies over pricing and transit fees — India never really had the heart till now to make this pipeline a reality. But Ahmadinejad’s visit seems to have infused fresh hopes that it is on.

India’s belated commitment to the Iranian gas pipeline has, of course, a lot to do with the China factor. Fed up with India’s lack of interest, Pakistan’s President Pervez Musharraf had suggested to Beijing to join up with the pipeline extending to China through the Karakoram highway. A swift-footed Beijing, of course, stands ever ready to trump a trundling New Delhi. But to its credit, India has now convinced itself that the project is doable and eminently worth pursuing.

In all fairness, however, the China factor must not be overblown. In fact, it was India, when Mani Shankar Aiyar was Petroleum Minister, which contemplated extending the Iran-Pakistan-India pipeline to China’s Yunnan province. Considering the close relationship between Pakistan and China, the feeling was that disrupting gas supplies was unlikely when the ultimate beneficiary is a close ally. But China didn’t take this seriously as its interests were better served by a pipeline from Sittwe in Myanmar to Yunnan.

Nevertheless, the fact remains that the Iran gas pipeline would have become a reality with or without India. The latter, therefore, cannot afford to endlessly debate whether the pricing of gas or the transit fee is right. The time for dithering is over as the global market for natural gas has dramatically changed with oil at $120 a barrel. The balance of power has shifted to the supplier who has the upper hand in deciding the right of frequent reviews of price ceilings. This project must be seized by India as it is in India’s interests.

So India has to play the Great Game adroitly to make both the Tap and Iranian pipelines a reality. To make amends for past lapses, it needs to look no farther than its failure to clinch the Myanmar pipeline project that went in China’s favour. Three years ago, it also failed to acquire the assets of PetroKazakhstan, a Canada-based exploration firm with oilfields in Kazakhstan, which went to China despite a higher bid. India simply cannot afford to be flat-footed to further its energy interests in Central Asia.