Friday, August 14, 2015
Pipelineistan — the Iran-Pak-China connection
Iranian Foreign Minister Javad Zarif has just been to Islamabad to talk serious business with Pakistani Prime Minister Nawaz Sharif. And the serious business had to be Pipelineistan – as in what next for the Iran-Pakistan (IP) gas pipeline.
Zarif essentially said that IP is a go – again – as soon as sanctions against Iran start to melt, by late 2015 or early 2016. Iran has already invested $2 billion in the Iranian stretch of IP, and China will finance the Pakistani stretch.
This is a major Pipelinestan gambit, as Asia Times has previously reported. And as a side note, as soon as IP goes online, all those years of incessant harassing by successive Bush and Obama administrations will finally come down to nought.
Even before Zarif hit Pakistan something serious was going on in … Karamay. You may have not heard of Karamay, but this town in Xinjiang is right at the center of the Eurasian action; it has just hosted the 2015 China-Pakistan Economic Corridor Forum.
As we all know, the China-Pakistan Economic Corridor (CPEC) is an absolutely key component, worth $46 billion, of the China-driven New Silk Roads. CPEC will link Kashgar in Xinjiang to the Arabian Sea port of Gwadar via highways (essentially an upgrade of the fabled Karakoram Highway), railways, industrial parks, fiber optic networks and – eventually – a pipeline.
And that pipeline will be no less than an extension up north of IP.
As part of CPEC, for instance, last month TBEA Xinjiang SunOasis — a Chinese company — finished the biggest solar power plant in Pakistan, for $215 million, in only three months.
At Karamay, China and Pakistan signed 20 CPEC-related cooperation agreements. They even issued a Karamay manifesto, stressing the political/economic importance of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. CPEC is the largest China-Pakistan joint project since the construction of the Karakoram highway in 1979. And CPEC is only one among six economic corridors to be developed as part of the New Silk Roads.
Yet the full impact of CPEC will only be noted by the next decade. That’s when the New Silk Road for the bulk of China’s energy imports from the Middle East will be cut short by no less than 12,000 kilometers.
Ashgabat wakes up
Meanwhile, Turkmengaz — Turkmenistan’s national gas company — has taken a 51% stake in a consortium still seeking to build the perennially troubled TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline, a serious competitor to IP if it ever gets built.
That’s a game-changer because the Turkmen will now be in charge of the construction and operation of TAPI Ltd. The cost is a whopping $10 billion (IP will cost three times less); investment to the tune of $4 billion and $6 billion in debt.
Still it all comes back to the same problem; who wants to invest in a steel umbilical cord prone to all sorts of sabotage traversing a war zone — western Afghanistan all the way to Kandahar? In theory, “host countries” should be responsible for TAPI’s security; in the case of Afghanistan, that qualifies as black humor.
For the moment, Turkmengaz can only count on the Manila-based but Japan/US-controlled Asian Development Bank (ADB). That’s not much. The notoriously opaque regime in Ashgabat says it’s seeking other backers — but no one knows where and how.
TAPI is still a pipe dream. Pakistan and India are not seriously considering it viable even in the medium term. So it’s back to IP.
Even after sanctions are lifted, Iran will need to find an ocean of investment — at least $180 billion — to upgrade its energy infrastructure and be able to start exporting natural gas to Europe, in competition with Gazprom.
So Iran’s privileged Pipelineistan play for the near future will be Asia – from Southwest Asia (Iraq and Oman) to South Asia (Pakistan). With China ready to instantly capitalize on every surge of Iran’s natural gas production.