TAPI and IPI: Peace pipelines

By Air Cdre (R) Khalid Iqbal 

Concept of energy security does not have a uniform meaning due to the complexities arising out of regional intricacies and global market dynamics. World Bank defines energy security as ‘the sustainable production and use of energy at reasonable costs to ensure a certain quality of life’. Flow of energy resources across the states’ boundaries does not per se guarantee regional peace unless it is supported by an enabling environment in the overall context. However, if managed in a prudent way, it does become a contributory factor and an enabling tool for achieving and sustaining regional peace. In politico-diplomatic terms, peace is achieved by eliminating and or mitigating the causes of conflicts to bring the possibility of an armed conflict to zero. One could start the process from either way that is: begin with creating interdependencies and proceed to zero conflict state, or follow the reverse path. 

If prudence prevails, interstate flow of energy could cement the bonds of friendship and boost economic cooperation. With India’s withdrawal from the IPI project, at least for the time being, the focus is now on negotiations over TAPI and IP projects. However, perception has it that after consolidating the gains of Agreement 123, India would disregard American pressure and rejoin the project. Though there has been a great deal of optimism generated over the project among the TAPI partners as well as its lead developer, the Asian Development Bank, numerous hurdles continue to haunt. To start with route security is an issue. Pipeline will transit some 730 kilometres through Afghanistan. Due to ongoing insurgency in Afghanistan, concerns over the security of the pipeline remain absorbing. Likewise, there are worries about the sections of TAPI and IPI pipelines passing through Baluchistan, where the law and order situation is not satisfactory. However, we may observe that though domestic gas pipelines through Baluchistan are targeted occasionally, the supply of gas has never been disrupted to the extent to causing a paralysis. 

For security reasons, the Asian Development Bank has proposed alternative TAPI routes. Though governments of Afghanistan and Pakistan are committee toward providing full protection to the pipeline, it would be better to select the most secure route. Yet, another uncertainty is about sustainability of gas supplies from Turkmenistan. Turkmenistan has already signed agreements with Iran and China to increase existing supplies to these markets; similar understanding has also been reached with Gazprom. Therefore questions have arisen over whether it will be able to meet its commitments for TAPI. In addition, Turkmenistan’s gas sector suffers from several constraints, including lack of financial resources and the technical capability to develop new projects. Turkmenistan also lacks adequate pipeline network infrastructure to deliver gas to its markets, and continues to bedependent on Russia’s network for exports to the West. Some experts are of the view that it’s unlikely that it will be able to increase its export volumes substantially over the next 10 years. 

Afghanistan and Pakistan would not only get the required gas but also transit fees for the length of pipeline using their respective territories. It would improve Pakistan’s bargaining position vis-à-vis Iran in negotiating a gas price from the proposed Iran-Pakistan (IP) gas pipeline project, and it would be less dependent on the gas from a single source. TAPI agreement commits the four nations to providing government support, including security for the pipeline. The dark side is that TAPI provides a cover for the Americans to maintain a potent military presence in Afghanistan, though for other strategic reasons. Both India and Pakistan are energy starved countries and need gas sufficiently and urgently from which so ever source it comes. American support implies that TAPI will attract the financiers more promptly. However, overriding American objective to promote TAPI is to ensure that the IPI project is effectively killed. America has a history of bulldozing economically unpopular project in exchange for politico strategic gains. For example, in 2005, despite substantial opposition from within business and political circles in both the United States and the Caspian states, a hugely expensive and logistically challenging pipeline from Baku in Azerbaijan to Ceyhan in Turkey, transiting a fractious Georgia, was built by an 11-member consortium led by British Petroleum, under pressure from the US government. The US government made finances available from government agencies, such as the Overseas Private Investment Corporation (OPIC) and the US Export-Import Development Bank. The objective America was seeking at that time was to provide a route that would circumvent Russian territory and break Moscow’s stranglehold over the European gas market.

The tussle over IPI and TAPI is not a mere economic battle but have far-reaching geopolitical dimensions. IPI and TAPI are symbols of ‘New Great Game’—the main goal of which is gaining control of oil and gas reserves in this region. The US and its allies want Pakistan to abdicate IPI and pursue TAPI alone, India has already done so. Now China and Russia are supporting Pakistan to withstand US pressure for giving up IP. Imported gas price is likely to be around 80 percent of the oil price; hence it will not be affordable by domestic and industrial consumers and could only be used for power generation. Moreover, with oil prices fluctuations, gas prices would also follow the suit adding a factor of uncertainty to our economy. Pakistan is suffering because of overpriced power purchase arrangements reached with IPPs. Despite the generation capacity, we cannot have electricity because it is not affordable. Pakistan should not commit the same folly once again, it should purchase gas at a price at which it is economically viable.

Land has to be reclaimed by the governments for these projects. In Pakistan, there are various means by which land can be acquired. Whatever pattern is followed, the effectees must be satisfied in terms of compensation and as far as possible they should be made perpetual stakeholders through a kind of stipend, so that they have an abiding interest in the safety/security of the infrastructure. An offset amount may also be pre-decided for socioeconomic uplift of the areas through which pipeline is to pass. Subject to no act of disruption, such amount could be payable to local administration annually for financing public welfare projects.

With respect to international dispute settlement, diplomatic means are most commonly used. There is an array of dispute settlement mechanisms available to choose from. Comprehensive dispute settlement mechanisms should be worked out for both the projects, such arrangements must be underwritten by appropriate institutions like the Asia Development bank. IPI and TAPI present a win-win setting for all participants. Hopefully,ways and means would be found to materialize these two projects, which can be rightly termed as peace pipelines.

This is an abridged version of a paper read by Air Cdre (R) Khalid Iqbal at the "4th Oil & Gas Forum" held at Serena Hotel, Islamabad on May 12, 2012. 

Air Cdre (R) Khalid Iqbal is Consultant Policy and Strategic Response, IPRI Islamabad. He is a former assistant chief of air staff of Pakistan Air Force.