May 8, 2011

Geopolitical Tangle: Pipeline Projects in South Asia

Keeping straight the various proposals for natural gas pipelines in South and Central Asia is no easy task. There are a number of proposals on the table. Herewith a glance, with help from Wikipedia, at the most important projects:

Nabucco is a proposed natural gas pipeline that would run from Erzurum in eastern Turkey to Austria. The southern line in eastern Turkey would be fed by Iraqi gas; the northern line by gas from Azerbaijan and (possibly) Turkmenistan. Supported by the European Union and the United States, it would, if completed, lessen Europe's dependence on Russian natural gas. Preparations began in 2002 and an agreement among Turkey, Bulgaria, Hungry and Austria was signed on July 13, 2009. If all goes according to plan (construction has not yet started), it would come on line in 2017 and have a capacity of 31 billion cubic meters of natural gas per year.

The South Stream is a Russian project to send natural gas under the Black Sea to Bulgaria, bypassing the existing Blue Stream line from Russian to Turkey. From Bulgaria, a northern line would take Russian gas through Serbia and Hungary to Austria (though with possible extensions through Croatia and Slovenia). A southern line would run through Greece, the Ionian Sea, and Italy. It is further advanced than Nabucco, its principal competitor (with completion scheduled in 2015). Though there are many joint ventures associated with the project, the main joint venture is between Gazprom and the Italian energy company Eni. The segment running under the Black Sea (placed to avoid Ukraine's territorial claims) would have a capacity of 63 billion cubic meters of natural gas per year, more than double Nabucco's capacity.

The European commission is attracted to Nabucco, explains the Financial Times, because "it would bring Azeri gas to Europe while skirting Russia and Ukraine, thus helping to ease Europe’s dependence on its biggest supplier and transit country, both of which have proven dangerously unreliable in the past. In Brussels, officials tend to regard South Stream warily as a spoiler devised to thwart Nabucco and extend Russia’s dominance over the European energy market.” The Russians counter that Europe and Russia are interdependent and “that such mutual dependence was at the heart of the peaceful bargain that France and Germany struck when they launched the EU.” The FT judges (May 27, 2011) that “[t]he business case for South Stream certainly seems more appealing at a time when Nabucco is being plagued by doubts about its projected costs and whether its backers can round up enough gas to fill the pipe. Just last month, they announced a one-year delay to the project.”

The Iran-Pakistan-India pipeline (also known as IPI or the Peace Pipeline) runs east from the Pars natural gas field in Iran. It would have a maximum capacity of 55 billion cubic meters of natural gas per year. It is a natural for Pakistan especially, as that country faces chronic power shortages, and Iran and Pakistan signed a deal to complete the pipeline in March 2010 (notably, the deal was signed in the Turkish capital, Ankara).  India signed a preliminary agreement with Iran in 1999, affirmed the idea in 2007, but withdrew in 2009 from discussions on the project (ostensibly over pricing and security issues) after the U.S.-India nuclear deal was finalized in 2008. India insists that the U.S. never told it not to build the pipeline; instead, India is mainly concerned about Pakistan's reliability (supplies could be interrupted in an Indo-Pakistani crisis) and with the security of the route through Baluchistan in southern Pakistan, where it would be vulnerable to insurgent attack. The pipeline on Iranian territory is scheduled to be completed in 2011, the Pakistani section by 2015.  The U.S. has pressed Pakistan to abandon the project, offering instead to support the construction of a liquified natural gas terminal (presumably at Karachi) and the import of electricity from Tajikistan through a corridor in Afghanistan. If the Pakistani line is completed, there would be possible extensions into China as well as India (which has not ruled out further discussions on the subject). Iran also supports the construction of electrical lines alongside the pipeline route and offered to provide subsidized electricity to Pakistan, India, and China.

The Trans-Afghanistan Pipeline (TAP), a.k.a. Turkemistan-Afghanistan-Pakistan-India (TAPI), began to be looked at seriously in the early 1990s, after the collapse of the Soviet Union. A main player was the US company Unocal, which withdrew from the project in 1998. The project was revived after the overthrow of the Taliban and gained the support of the Asian Development Bank in 2005. Development has stalled as the southern part of the line through Afghanistan runs through Taliban-controlled territory, though an intergovernmental agreement among the four countries was signed in late 2010. It would have an initial capacity of 27 billion cubic meters per year, with possible expansion to 33 bcm. It is projected to begin in 2012 and to be completed by 2014, though cost and financing is unclear and the security issues remain as huge obstacles.

The Trans-Caspian Pipeline is a proposed project that would run along the seafloor of the Caspian Sea and allow 30 billion cubic meters of natural gas to be exported each year from Turkmenistan to Baku in Azerbaijan. From there it would link up to the South Caucasus Pipeline (Baku-Tblisi-Erzurum linking Azerbaijan, Georgia, and Turkey). The capacity of the Trans-Caspian, at 30 bcm per year, is the same as the planned Nabucco pipeline, but it seems improbable that gas from Turkmenistan would entirely edge out Azeri and Iraqi gas. (I have seen no reports on the relative contributions of the three countries.) The proposal has been kicking around for a number of years, but is opposed by Russia and Iran. Those two countries divided the Caspian between them in treaties in 1921 and 1940, but the legal situation was transformed by the breakup of the Soviet Union and the emergence of three new successor states (Azerbaijan, Turkemistan, and Kazakhstan), each of whom claim littoral rights strongly prejudicial to Iran. Turkmenistan voiced strong approval for the project in March 2011 and argues that it could do it with Azerbaijan's consent alone (as opposed to the consent of all five littoral states).

Some initial speculations after this cursory review:

1) Energy development per se--trying to make the bountiful natural gas fields of the Caucasus available to the world's peoples, in order to foster economic development--seems the furthest thing from the mind of U.S. policy. Usually critics of U.S. policy stress that the United States wishes to control these resources for itself, but the real motivation of policy seems to be to injure Iran--and secondarily to injure Russia, if that is not inconsistent with injuring Iran.  

2) Pipeline politics seems another area where U.S. policy, with its focus on the containment of Iran, is seriously at odds with Pakistani interests. The Pakistani energy crisis is bad and getting worse, yet Washington wants Pakistan to embrace schemes for its natural gas imports (LNG terminals) that are much more expensive than the pipeline with Iran. Apart from three billion dollars and lots of drone attacks, I don't  see what Pakistan gets from this relationship. It would make sense for Pakistan to look increasingly to China and away from the United States.

3) Europe has a natural interest in diversifying its natural gas supplies away from Russia, but Europe is divided between proponents of Nabucco and the Russian-sponsored South Stream, giving an edge to the Russians.

4) The proposed TAPI line running through Afghanistan would require, as Luft insists, both financial assistance from the United States as well as U.S. help to secure the line from hostile attacks. Why are we in Afghanistan, you ask? It would seem that one reason is to make sure that India gets its natural gas from the Turkmenistan despots rather than the Iranian despots. Further US commitment to the TAPI line would constitute one more obstacle to securing an exit from Afghanistan.

5) From the Indian perspective, the TAPI line originating in Turkmenistan would be just as vulnerable to Pakistani interference as the line originating in Iran. To avoid these difficulties, India has been exploring an undersea pipeline linking Oman with India that would indirectly bring Iranian gas to India.

6) The Nabucco, Trans-Caspian, and TAPI lines have been under discussion for a decade and still remain but a gleam in the eyes of American geopoliticians; during that same time frame, China conceived and built a 30 bcm per year pipeline linking Turkmenistan with China's own gas network. It also built an oil pipeline from Kazakhstan. 

Hooman Peimani of the National University of Singapore has a good overview of pipeline projects in the Journal of Energy Security. Peimani focuses especially on the TAPI line through Afghanistan, which he sees as plagued by overwhelming security issues.

Peimani also notes that Turkmenistan's gas reserves are seriously overcommitted and would be unlikely to be sufficient to meet demand from China, TAPI, and the projected western route linking the TCP and Nabucco. Turkmenistan also recently inaugurated "the second Turkmen-Iranian gas pipeline (Dolatabad-Sarakhs-Khangiran) in January 2010. [It] provided for increasing its gas exports to Iran from 8 bcm to 20 bcm, to be realized when the second pipeline reaches its maximum capacity. Iran imports gas because, despite having the world’s second largest gas reserves, Iran’s gas consumption (the third largest in the world) outpaces its production (the fourth largest producer in the world) (2008 figure)."  Lending yet further support to this portrait of Turkmenistan overcommitment (though not mentioned by Peimani) is that Turkmenistan has an existing infrastructure feeding into the Russian network. An April 9, 2009 explosion on that line led to Turkmen condemnations of Russia and a rupture of shipments; exploration of projects like the TCP and TAPI is doubtless a Turkmen ploy to outmaneuver the bear. 

Peimani calls pipelines the "white elephants of the infrastructure world" and notes the severe difficulties even relatively well-equipped militaries have in protecting them. Turkey had great difficulty in preventing attacks by the PKK on its infrastructure, and of course the insurgents in Iraq frequently made attacks on energy infrastructure. Pipelines can be built and maintained even in the worst security environments, notes Peimani, but the costs may prove astronomical.

Peimani ascribes India's withdrawal from the IPI line (now just the Iran-Pakistan line) as being due in part to US pressure (denied by the Indian government) as well as to India's confidence that it could develop its own gas reserves. He doesn't mention the vulnerability of a line through Pakistani territory to disruption in a crisis (a weakness for New Dehli of either IPI or TAPI), though this would seem an obvious consideration from India's standpoint. However, he does insist that "many Indians now have second thoughts about the wisdom of their withdrawal from the IPI pipeline given India’s long-term need for large gas imports (piped and LNG) and the undeniable importance of Iran as a long-term regional supplier to India. India’s large investment in the Iranian gas industry (e.g., South Pars) despite American objections reflects this reality."


No comments: