U.S. Stands in the Way of International Pipeline Deal

By Abbas Maleki, MIT Center for International Studies. Posted October 30, 2007.

A major natural gas pipeline that would stretch from the fields of southern Iran to Pakistan and India -- itself a remarkable prospect -- is being planned. But it faces serious hurdles, not least the fierce opposition of the U.S. government.

The history of relations between Persia and the Indian subcontinent is more than 2000 years old. Until 200 years ago, Persian was the language of literature and government in India. After separation of Pakistan from India, Iran faced a dilemma of its relations with these two new states. During the Shah's era, Iran preferred to have close relations with Pakistan, although economic ties with India were not ignored. After the collapse of the Soviet Union and Pakistan's support of hardliners in Afghanistan, Iran found India as a new partner in Asia. India has been slowly but surely forging a comprehensive relationship with Iran on energy and commerce, infrastructure development, and military ties. Iran looks to India as a developed, democratic, and politically lucrative country for cooperation. For instance, some 8,000 Iranian students are studying in India, compared with 2,000 in the United States.

A big market for India, Iran has the world's second largest oil and gas proven reserves, and acts as an important access route for India to Central Asia and Afghanistan. Case in point: India is seeking new routes to reach to Central Asia. One of them is the North-South Corridor, which links India to Russia and all of the former Soviet Union via the Persian Gulf, Iran and Caspian Sea. Iran's considerations are boosting trade, having secure borders, and avoiding "encirclement" by American proxies. At the same time, Iran is opposed to the hegemonic presence of the United States and its troops in the Indian Ocean. India has not been hesitant to play the Iran card to draw concessions from the United States on other matters of bilateral concern. So the pipeline is freighted with more significance than merely the delivery of natural gas.

The Scope of the Proposal

The Iran-Pakistan-India Pipeline (IPI) would run totally 2,670 km (1,660 miles), about 1,115 km (690 miles) in Iran, 705 km (440 miles) in Pakistan and 850 km (530 miles) in India, and the total investment is estimated at $7 billion and may take four to five years to complete. Apart from the fact that the IPI pipeline makes good economic sense, particularly in promoting regional cooperation, it is immensely important to the on-going peace process between India and Pakistan. A number of observers of the India-Pakistan conflict have termed this project as the mother of all confidence-building measures between India and Pakistan and named it the Peace Pipeline.

The project has been dealt a major jolt by the news that New Delhi and Islamabad have rejected the draft final agreement circulated by Iran, which calls for a three-year review cycle on the gas price. Causing yet another delay in the trilateral deal, the pricing dispute will either be resolved by a new round of negotiations or turn into an unbridgeable difference putting the IPI's fate under question marks. Prior to his resignation in early August 2007, Iran's petroleum minister, Kazem Vaziri Hamaneh, had announced that the seventh round of negotiations for the IPI contract would be held in Tehran on July 29, 2007. It did not happen and, what is more, a former Iranian deputy oil minister, Hadi Nejad Hosseinian, has questioned the deal on the ground that it gives a huge discount to India and is some 30 percent below the value of gas sold to Turkey. Another Iranian politician, Akbar Mohtashemipour, from Iran's reformist side, has publicly questioned the wisdom of exporting Iran's gas at a time when the cold regions of Iran face gas shortages. The IPI issue has been moved to Iran's Foreign Ministry, and during the past year and a half, the Iranian negotiation team has changed three times.

Interestingly, the Asian Development Bank has assessed that the deal is feasible. Dan Millison, ADB's senior energy specialist, said that the ADB's assessment was based purely on economic grounds and the rising demand for energy from India and Pakistan.

American Pressure

The U.S. position, however, is not linked to the economic side of the deal. It is driven by strategic politics, by Washington's Iran policy. The United States, which has had adversarial relations with Iran since the 1979 revolution, has been accusing Iran for some years of harboring nuclear-weapon ambitions. The U.S. has been trying to heighten the UN Security Council sanctions under Chapter VII of the UN Charter, and has voiced its opposition to the IPI pipeline as part of that strategy.

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Abbas Maleki is the director of the International Institute for Caspian Studies in Tehran and a senior research fellow at the Belfer Center for Science and International Affairs, Kennedy School of Government, Harvard University. He served as Iran’s deputy foreign minister from 1985 to 1997.