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The exportation of natural gas from Iran to India through Pakistan is a venture which may change the face of regional politics in South Asia. It is a study in how economic collaboration possesses the power to engender as well as transform social and political discourse between countries. The Indian government speculated whether Pakistan could guarantee security for the flow of natural gas in the pipeline. Furthermore, Pakistan's collaboration with Iran may foster conflict resolution as well. In the past, Iranian and Pakistani foreign policies have disagreed on the issues of Afghanistan and Shi'a-Sunni conflicts in the region. Thus, trade and the larger experience of economic globalization posesses the ability to exist as mediators in conflicts in the region and between regions.
Natural gas trade between India, Iran, and Pakistan challenges the geopolitical, historical, and strategic realities of the three countries and the general regions of the Mideast and Asia. In this way, the relationship between the pipeline venture and globalization is multidisciplinary. It is not characterized solely by economic factors, even though the current economic realities in Iran, India, and Pakistan do foreshadow the future necessity of economic collaboration. The realities of this case study are representative of the notion that multidisciplinary globalization is changing the face of regional politics and altering the social and political landscape of regions.
NEGOTIATING THE PIPELINE
Holding approximately 9 percent of the world's total reserves, Iran is OPEC's second largest producer of oil (Iran Background Information). Along with oil reserves, Iran contains the world's second largest natural gas reserves "at an estimated 812 trillion cubic feet (Tcf)" (Ibid). While Iranian natural gas consumption is high, the country desperately needs to promote export markets for gas due to its faltering economy and to meet the demands of modernization. To meet these demands, Iran has targeted emerging regional markets like South Asia for natural gas exports.
Iran has proposed the export of natural gas from Iran to India since 1993. Alongside this proposal was the plan to export natural gas to Pakistan as well. The Iranian government proposed the construction of a pipeline from its South Pars fields in the Persian Gulf to Pakistan's major cities of Karachi and Multan and then further onto Delhi, India.
The following map shows the pipeline's main route. Starting from the left side of the map, the pipeline originates in Asaluyeh, Iran on the coast of the Persian Gulf near the Iranian South Pars fields. It travels to Pakistan through Khuzdar, with one section of it going on to Karachi on the Arabian Sea coast, and the main section traveling on to Multan, Pakistan. From Multan, the pipeline travels to Delhi, where it ends. At this point, India is free to consider and negotiate further domestic routing of the pipeline.
In 1995, Pakistan and Iran "signed a preliminary agreement for construction of a $3 billion, 870 mile onshore gas export pipeline linking South Pars with Karachi, Pakistan" (Ibid). This pipeline did not include the additional city of Multan, Pakistan and excluded the transport of gas on into India. Under a new pipeline project proposing to include India, the Pakistani government would be able to “inject its own exportable gas for sale to the international market that is [Delhi] India” or take out gas for domestic purposes in Multan. The pipeline would be 2,670 km long with a 48 inch diameter, and hold $3.2 billion of gas (Alexander's Gas and Oil Connections 2000). Pakistan could earn as much as $500 million in royalties from a transit fee and save $200 million by purchasing cheaper gas from this pipeline project (The Hindustan Times 7 July 2000). Four major companies have expressed interest in constructing the Iran to India natural gas pipeline. They are BHP of Australia, NIGC, Petronas of Malaysia, and French Total, which is already partnerning with Iran in the development of an international pipeline through Turkey (Alexander's Gas and Oil Connections 2000). A consortium consisting of Shell, British Gas, Petronas, and an Iranian business group already existed and “was negotiating how to export gas from South Pars to Pakistan” (Iran Background Information). Also involved is the Iran National Gas Company and the Gas Authority of India Limited (GAIL).
For the pipeline project, the year 1999 was characterized by several meetings between Indian and Iranian government officials which resulted in the formation of delegations and committees to further discuss the feasibility of the pipeline project. In February 1999, Iran signed a preliminary "in-principle" agreement with India, agreeing to the idea of bi-lateral collaboration. However, a tripartite agreement is necessary between India, Iran, and Pakistan for the implementation of the project (The Hindustan Times 7 July 2000).
In April 1999, the Iranian and Indian governments established a bi-lateral task force of business and government officials to look at the economic and industrial feasibility of developing the pipeline. In September 1999, the National Iranian Gas Company sent a two member delegation to hold talks with the Gas Authority of India Limited (GAIL) and the Petroleum Ministry in India to discuss the production of a feasibility report for the pipeline project (The Hindu 24 September 1999).
At the end of 1999, Chief Executive Pervez Musharraf of Pakistan visited Tehran to discuss bilateral relations as well as the pipeline project. The months following Musharraf's visit to Iran were characterized by more diplomatic visits in the region. In March 2000, the Pakistani Secretary of Petroleum visited Iran to formally agree to the pipeline project between the three countries. Iranian government officials visited Islamabad later in April 2000 for the Pakistani government to sign the contract.
The bilateral India-Iran task force met again in July and August to discuss the feasibility, security, and economics of the pipeline project. The purpose of the task force was for the Indian government to achieve some clarity and confidence on these issues. The Pakistani government and Iran already decided on some of the practical logistics of the project, like security for the pipeline in Pakistan, duration of its construction, and pipeline length. The Pakistani energy minister guaranteed in July 2000 to Iran and India that security of the pipeline remains of topmost concern and will be ensured. It was later decided that if the Pakistani government agreed to build the pipeline in the shortest possible time, that being three years, then the Iranian government would increase the transit fee (The Hindustan Times 7 July 2000).
TRADE AS CATALYST FOR REGIONAL COOPERATION
As meetings amongst the three governments, oil companies, and committees persisted, the pipeline project came to involve a whole host of new issues, ranging from security concerns to meeting the high demands for energy in South Asia. Above all, the issue of regional cooperation emerged as that which has the propensity to initiate the greatest reform. Regional cooperation in the form of India-Pakistan collaboration, alongside India-Iran and Iran-Pakistan collaboration, can potentially influence bilateral relationships between the countries on the key issues and conflicts of Afghanistan, Kashmir, and overall national security.
After meeting with Iranian President Muhammad Khatami in New York in September 2000, Musharraf expressed Pakistan's willingness to participate in the pipeline venture and promoted the idea as an example of regional cooperation. Musharraf stated that the development of the pipeline and natural gas resources in Pakistan are “the country's economic salvation” and will “break an age old dependence on cotton and textiles as Pakistan's main export earners” (Times of India 11 September 2000). Also discussed was the need for evolving a joint strategy towards the resolution of the Afghanistan conflict. Khatami stressed on the need for two things. First, "for removing any existing misunderstandings between Tehran and Islamabad” on the Afghanistan conflict. Second, to evolve a joint strategy towards resolution of the Afghanistan conflict (Times of India 10 September 2000).
Iran and Afghanistan:
Resolution of the Afghanistan conflict within Afghanistan itself as well as between Iran and Pakistan would lead to overall economic benefit in the region. Given the large amounts of natural gas resources in Central Asia and the need to use Afghanistan as a route to transport these resources to other markets like South Asia, oil companies are extremely eager to invest in economic development and collaboration with Afghanistan, Iran, and Pakistan. In the past, however, the issue of Afghanistan has prevented such development. Ahmed Rashid writes in Taliban: Militant Islam, Oil, and Fundamentalism in Central Asia,
On November 7, 2000, and Indian business delegation visited Iran to discuss what India's private sector is willing to offer the Iran-India pipeline project. A. C. Patankar, the principal advisor of the Confederation of Indian Industry which has 4,000 member companies, stated the roles and functions the private sector would like to perform. First, he stated how the objective of the delegation's visit was to explore business opportunities and also to strengthen India-Iran relations (The Times of Central Asia 7 November 2000). Second, he mentioned how dialogue between the two countries experienced a "communication gap." This gap was the "main reason for the low level of trade relations between Iran and India" (Ibid). The Indian point of view defines the pipeline project as a bilateral agreement excluding the third country. Improved trade relations are viewed as methods to ameliorate communication gaps or differences in regional conflicts.
Pakistan and Iran could also begin to resolve their regional conflicts in light of their proposed collaboration on the pipeline project. Disputes between Pakistan and Iran have traditionally focused on Afghanistan as well as tensions between Sunni and Shi'a muslims. As Afghanistan's eastern and western neighbors, Pakistan and Iran have proven detrimental to the Afghan peace process:
So far, the project has been viewed as a catalyst for the promotion of regional cooperation and mediation by only on bilateral levels. For Pakistan, pipeline is not viewed as a partnership with India, but rather as “a bilateral Iran-Pakistan project which, through the Iranian partnership, does involve India” (Zehra 2000). Thus, the Pakistani government views the pipeline project as regional collaboration with Iran and not India. Pakistani promotion of economic collaboration with Iran as an example of regional cooperation indicates a geopolitical shift in both Pakistan and Iran's regional identity, since Pakistan historically has identified with South Asia and Iran with the Mideast and Central Asia regions. This shift shows Pakistan's economic and political alignment with Central Asia and the Mideast more so than with South Asia. Perhaps this is an effort by Pakistan to further distance itself from the role it has acquired in the South Asian regional context. It is a role characterized predominantly by its hostile relationship with a much larger India. Additionally, India's hegemonic presence in areas of trade and economic policies in the region has led most of the other South Asian countries to look outside the region for greater economic collaboration.
In this case, economic collaboration indirectly sows the seeds for a shift in regional politics and perspective. With more economic collaboration between Iran and Pakistan, the states’ previously conflicting positions on Afghanistan transform into common policy objectives which are handled differently. Rather than taking sides in the Afghanistan conflict, both Iran and Pakistan have decided to let “the ground realities determine the flow of the Afghan situation” (Zehra 2000). The pipeline project exemplifies the ushering in of an economic globalization which changes the face of regional politics and, literally, a region. Sharing a 909 km border, Iran and Pakistan realized the necessity of a cooperative relationship and foreign policy which would benefit both countries economically through increased trade (CIA 2000).
In addition to promoting its regional identity with Iran, Pakistan could further its sense of regionalism with Iran by enforcing the notion of the ummah, a transnational identity which does not recognize national borders, to further promote economic collaboration . If this becomes the case, Pakistan will be able to transform a political discourse of regionalism into a communal and religious movement, stating that Iranians and Pakistanis should work together economically because they are already spiritually unified as Muslims. This too will serve to further Pakistan's regional identity away from India, which is both secular and predominantly Hindu. In all practicality, economic collaboration between Iran and Pakistan will not completely erase Pakistan's presence and role in South Asia. It does, however, represent a greater effort made at repairing and reinforcing inter-regional ties. This effort is needed in relations between Iran and Pakistan but is even more so urgently needed in the relationship between India and Pakistan.
The relationship between Pakistan and India has dominated the face of South Asian politics. It is a relationship marked by political distrust, communal overtones, and land disputes. The countries have fought three wars in the past 52 years (Alexander’s Gas and Oil Connections 2000). Most economic collaboration with India is avoided by Pakistan and other South Asian countries due to India's role as the geographic and economic hegemon in the region. Cooperation is seen by Pakistan and other countries as only strengthening India's economic dominance by securing a regional market for India (Dash 1996). Additionally, the cultural and social ties between India and Pakistan are exceedingly tense with numerous acts of communal violence committed between Muslims and Hindus. One example is the destruction of the Babri Mosque at Ayodhya in 1992 by Hindu fundamentalists. The mosque was built under the authority of the first Mughal emperor of India, Babar, in 1528. Leaders of Hindu fundamentalist political parties and their followers believed that the Hindu god Rama was born at the location of the Babri Mosque. Furthermore, they believed that "Rama's birthplace was destroyed to build the mosque" (Ludden 1). To avenge this destruction, the fundamentalists plan to reconstruct a temple in honor of Rama over the rubble of the Babri Mosque. It is the emergence and recurrence of events of this nature which have plagued the political, economic, and social relationship between India and Pakistan.
Given the tense multidimensional relationship, an agreement on the pipeline project between India and Pakistan would be seen as an historic event. The only other successful bilateral agreement between the two countries pertaining to distribution of resources is the Indus Water Treaty of 1960. After India and Pakistan received independence from the United Kingdom in 1947, the Indus River Basin was divided in half. Initially, "the two nations failed to settle the dispute over distribution of water resources in the basin" and only signed an agreement with the facilitation of the World Bank thirteen years later in 1960 (Nakayama 1996). According to the treaty, Pakistan has access to the flows of the Indus, Kabul, Jhelum, and Chenab rivers while India has rights to the Ravi, Beas, and Sutlej rivers (Khan 2000).
An agreement between India and Pakistan on the pipeline project will be considered historical because it also directly impacts the Kashmir conflict, which has been the major source of friction between the two countries since they both received independence from the British in 1947. While Kashmir is comprised mostly of Muslims, it also includes Hindu and Buddhist populations. For Pakistan, "Kashmir is essential to maintaining national identity. Ceding control of the third of the country it occupies to the Indians would be regarded as a betrayal of Pakistan's historic portrayal of itself as a pan-Islamic homeland" (Rose 95). For India, maintaining control in Kashmir is essential because it is "the key to holding the subcontinent together, especially in this era of increasing ethno-religious nationalism" (Rose 94). There are large numbers of Muslims, Sikhs, and Christians in five Indian states and Sikh separatists in the Indian state of Punjab (Rose 94). The Indian government must consider these realities when debating whether it should agree to a plebiscite amongst the Kashmiri people allowing them to determine their own nationality or to direct bilateral negotiations with Pakistan over the accession and/or succession of parts of Kashmir.
Pakistan and India:
The Pakistan controlled part of Kashmir is known as Azad ("free") Kashmir. The part which is under Indian control is called Occupied Kashmir by Pakistan and known as Jammu and Kashmir in India. They are divided by the "Line of Control" (see Map A). Note the use of language by the Pakistani state to form national discourse and opinion on the Kashmir conflict. The portion under Pakistani control is considered free while the portion under Indian control is termed "occupied." India is viewed as an occupier, the outsider who has come in and usurped land which belongs to another nation. However, which nation does this refer to? Does it refer to the Pakistani nation-state or to the Kashmiri nation as a people not defined by the boundaries between India and Pakistan? In these questions it is evident that the political discourse of Indian occupation of Kashmir has lead to further questions of nationhood and nationality. These questions have affected social discourse between the Indian, Pakistani, and Kashmiri people. A new generation of Pakistani and Indian youth who did not experience the horror of partition of the birth of the Kashmir conflict are well versed in the rhetoric of the respective Indian and Pakistani enemy. Furthermore, Kashmiris living in both Indian and Pakistani Kashmir have found themselves increasingly discontent with both countries policies towards Kashmir and have started calling for more political autonomy from India and Pakistan.
In a case similar to this one, a proposed pipeline project in the European natural gas market has also being labeled "the peace pipeline." The project involved a scheme to ship Egyptian natural gas in liquid form (LNG) to Turkey. Previous to this agreement, there was a plan to supply natural gas to Turkey through Israeli territory. Instead of agreeing to the land route, Egypt opted for the LNG route, providing Turkey with up to 350 billion cubic feet of gas starting in 2000 (Energy Information Administration 2000). "The switch to the LNG scheme demonstrates that LNG is still commercially viable in areas where political issues constrain pipeline development" (Energy Information Administration 2000). This example shows how LNG development may serve as an alternative to collaboration between countries and regions where cooperation proves difficult on account of political conflicts. For India, this is definitely the case. Instead of addressing regional disputes and points of tension with Pakistan, India has considered the alternative option -- to withdraw from collaboration with Pakistan and propose a pipeline which would go through water instead of Pakistani territory.
India and Pakistan have never been successful in negotiating Kashmir. In recent years, the pattern has been that one side says it will negotiate through bilateral talks with the other. The other side rejects the proposal for bilateral talks, stating the Kashmiri people must be included in the peace process. Additionally, the political parties of Kashmir also seek a role in the peace process and state their own positions often independently of both India and Pakistan. The hostile political and social discourse and lack of conflict resolution between India and Pakistan over Kashmir is challenged by the emergence of the pipeline project. The project forces the two countries to reconsider their political discourse and interdependence, especially in light of their energy crises and desperate need for natural gas resources.
TABLE 1: NATURAL GAS STATISTICS - COUNTRY SPECIFIC (CIA 2000)
|Country||Natural Gas Reserves||Natural Gas Production||Natural Gas Consumption|
|India||22.9 trillion cubic feet (Tcf)||761 Bcf||761 Bcf|
|Iran||812 trillion cubic feet (Tcf)||1.9 Bcf||1.8 Bcf|
|Pakistan||21.6 trillion cubic feet (Tcf)||0.7 Tcf||0.7 Tcf|
The current demand in India for natural gas is nearly 96 million cubic metres per day (mcmd) and only 67 mcmd is available (Dadwal 2000). Pakistan's demand also exceeds its current supply. “Pakistan's demand for natural gas is expected to rise substantially in the next few years, with an increase of roughly 50% by 2006” (Energy Information Administration 2000). Furthermore, the output of 0.7 trillion cubic feet (Tcf) meets only 39% of Pakistan's energy needs (Azhar 2000). Pakistan has only 21.6 Tcf of natural gas reserves, resulting in the production of 0.7 Tcf of natural gas, which is exactly the same as the level of natural gas consumption in the country. India also has this problem with both production and consumption of natural gas at 761 billion cubic feet (Bcf).
Nearly 70 percent of India's natural gas reserves are in the state of Gujarat and the Bombay High Basin. The Indian government has encouraged further exploration of gas rich areas but it will be unable to meet the increasing demand for natural gas and energy in India's near future due to cost and industrialization factors.
Pakistan, as well, attempted to cultivate its natural gas resources in the southern province of Sindh in a natural wildlife preserve, where the “dry and hilly terrain supports many endangered species and a quarter million pastoral people who refuse to give up their way of life” (Forests.Org 1999). When the Sharif government in 1997 invited British Premier Oil to cultivate the land into natural gas fields in hopes of discovering the predicted three million cubic feet of gas, the quarter million pastoral people living there protested, refusing to give up their way of life (Ibid). Presently, the Pakistani government still hopes the development of new natural gas fields would serve to prevent the future energy crisis predicted in the next four years. However, this hope falls short of the reality, considering the environmental concerns expressed by pastoral peoples as well as lack of industrial facilities to implement cultivation efforts.
GLOBALIZATION AND REGIONAL COOPERATION IN THE DEVELOPING WORLD
Because of the demand for energy in South Asia, both Pakistan and India must reevaluate their positions on the Iran-India pipeline project. They must view the project as the emergence of an economic globalization by which regional cooperation could save them from a common future crisis. Historically,
Punjab Finance Minister Shahid Kardar Pakistan spoke in November 2000 on regional cooperation and globalization after announcing that Pakistan attracted $704 million in the past year for investment in the gas and oil sector. He commented that economic and social reforms were desperately needed. He also commented on the current era of economic globalization which many developing countries now face. He said,
PROTECTIONISM & THE NATURAL GAS INDUSTRY IN INDIA
In the case of the Iran to India natural gas pipeline, India proposed the transportation of natural gas in liquid form (LNG), using the coastline along the Arabian Sea. The pipeline would begin in Iran and travel from the South Pars Oil Field in the Persian Gulf through the Arabian Sea, just outside the territorial waters of Pakistan and onto Delhi by way of ports on India's western coast. Pakistan has refused to allow a feasibility study to be conducted by India near its waters on the exclusive economic zone (EEZ). The issue of importance here is the suggestion and development of LNG transportation by the Indian government. The most visible World Trade Organization trade issue pertains to the Indian government's policy proposals towards the importation of natural gas. In its policies dealing with natural gas, India implemented certain restrictions on trade which discriminated against foreign oil companies and foreign natural gas.
While constructing an overland pipeline is the more economically and strategically feasible option, the Indian government considered for a long time the possible transportation of natural gas in liquid form (LNG) by way of LNG carriers. In the 1970s into the 1980s, "LNG became a proven means of supply which was technically reliable and safe and also offered the most economic means of bringing large volumes of gas to markets where delivery by pipeline was impractical" (Tata Energy Research Institute 2000).
In the 1980s, the chairman of the Jawaharlal Nehru Port, Mr. MP Pinto, encouraged the Indian shipping industry to enter the LNG transportation sector due to the looming energy crisis in India and also in an attempt to save the Indian shipping industry (Ibid). LNG was a both a cheaper and safer source of energy in comparison to other energy generating resources. While most natural gas reserves are transmitted by pipelines, the LNG trade developed as a result of the demand for natural gas in far away markets. LNG trade was considered safe and reliable because it offered the most economic means of transporting large volumes of natural gas to markets where pipeline construction was impractical. Current LNG trade is predominant in the Atlantic Basin and the Pacific Rim (Tata Energy Research Institute 2000).
Transporting natural gas in liquid form is possible but it is complicated, being more costly in its initial phases of development and more industrially advanced than the construction of a land based pipeline.
Because the Indian shipping industry's state was so poor, the government considered protecting the "domestic shipping industry and preventing any erosion in domestic tonnage" by requiring domestic shipping companies to acquire LNG carriers (Ibid). Requiring Indian shipping companies to acquire LNG carriers was unsuccessful due to the Indian companies lack of funds and inexperience in handling LNG. In the middle of 1999, a more extensive LNG shipping policy took shape when the government proposed to "make it mandatory for foreign LNG companies to have an Indian partner or Indian participation for transporting LNG into the country" (Ibid). The goal of this proposition was to get Indian companies involved in LNG shipping and in the process receive technical and financial support from foreign companies to do so. Currently, the Gas Authority of India (GAIL) is involved in two LNG ventures with Petronet LNG, "which is setting up two LNG import terminals at Dahej in Gujarat and Kochi in Kerala" (Express India 13 May 1999).
The World Trade Organization's Agreement on Trade-Related Investment Measures (TRIMS) recognizes that "no member shall apply any measure that discriminates against foreigners or foreign products" (World Trade Organization). This agreement also applies to "measures which require particular levels of local procurement by an enterprise ('local content requirements')" (Ibid). The rules of this agreement place India within the framework of implementing protectionism. India's attempt to facilitate the domestic LNG industry is only one in the country's many attempts to limit foreign ownership and competition.
While Indian protectionist policies are well known amongst the trade world, recent agreements with the United States and shifts in policy have revealed that India is on its way towards incorporating a more inclusive and foreign friendly framework of trade. "Restrictions on foreign ownership have relaxed" and "tariffs on imported goods have been lowered" and even eliminated in the case of equipment for large scale power generation projects (Energy Information Administration). Furthermore, the United States and India "reached agreement in January 2000 on the removal of 1,400 specific trade barriers to open India to increased U.S. exports" (Ibid). Two of the largest export sectors for India and the U.S., those of oil and gas equipment, were both related to energy. Additionally, the Dabhol power plant, the largest foreign owned business in India, is affiliated with the U.S. firm Enron (Ibid).
It is evident that these changes
in India's governmental policies show greater economic liberalization and
cooperation. Nevertheless, the country still remains politically cautious
to economic liberalization policies. In the case of natural gas imports,
and their transportation by either pipeline or LNG tanker, India is at
a crossroads. It must
- decide which steps to take to augment the condition of its shipping industry and economy,
- decide how best to reap the benefits of this form of economic globalization, and
- consider the best option for its citizens, all of whom will experience severe energy shortages in the coming decade.
The World Trade Organization's policies on local content requirements and foreign firms are directly related to and impact these decisions India must make.
Negotiations on these issues will directly impact the sub-regional political and social discourse of South Asia. Since India-Pakistan relations remain the hegemonic political discourse in South Asia, a shift in the two countries' discourse and relationship has the potential to alter overall political and social discourse within the sub-region. More specifically, possible trade between the governments has the potential to alter sub-regional cultural perspectives the citizens of India and Pakistan have of each other. For other South Asian governments, trade between India and Pakistan may lead them to also participate in greater regional trade.
The focus is inter-regional due to the potential for economic collaboration between Iran, the gateway from Asia into the Mideast, and India and Pakistan, the heart of South Asia. This case connects the economies, foreign policies, and geopolitics of India, Iran, and Pakistan.
The final decision on the pipeline route for natural gas from Iran to India and what role Pakistan plays in that decision will directly impact the development of political and social discourse, foreign policy decisions, security concerns, and regional conflicts like Afghanistan, Kashmir, and sectarian violence.
b. Geographic Site: Mideast; South Asia
c. Geographic Impact: India; Iran; Pakistan (n.b. The geographic impact is both inter-regional and intra-regional.)
b. Indirectly Related to Product: Yes - Pipeline Equipment
c. Not Related to Product: Yes - Conflict Resolution
d. Related to Process: Yes - Pollution; Land
TABLE 2: ECONOMIC INDICATORS
|Country||Economic Aid||External Debt||Inflation Rate||GDP Nominal||GDP Growth Rate||GDP Per Capita|
|India||$2.9 billion (1999)||$98 billion (1999)||6.7% (1999)||$1.805 trillion (1999)||5.5% (1999)||$1,800 (1999)|
|Iran||$116.5 million (1995)||$21.9 billion (1996)||30% (1999)||$347.6 billion (1999)||1% (1999)||$5,300 (1999)|
|Pakistan||$2 billion (1998)||$32 billion (1999)||6% (1999)||$282 billion (1999)||3.1% (1999)||$2,000 (1999)|
Table 3 discusses
natural gas producers worldwide. While Russia, the United States,
and Canada continue to lead the world in natural gas production, Iran will
soon emerge as a leading producer in years to come with its high number
of reserves trillion cubic feet (Tcf). However, it has yet
to cultivate these reserves and implement most of its pipeline projects.
The only regional competition Iran has in this list is that of Uzbekistan
in the northeast, which produces 52,150 Mm3 of natural gas compared to
Iran's 48,300 Mm3.
TABLE 3: NATURAL GAS STATISTICS - GENERAL
|Producers||Mm3||% of World Total|
|United States||538 698||22.6|
|United Kingdom||95 614||4.0|
|Rest of the World||611 426||25.7|
|World||2 378 555||100.0|
In 1995, more comprehensive and financially restrictive sanctions were imposed. These measures prohibited all commercial and financial transactions with Iran. The details of the 1995 sanctions are concerned with foreign investment in Iran. "The bill sanctions foreign companies that provide new investments over $40 million for the development of petroleum resources in Iran" (Ibid). If these companies violate these sanctions, the United States can "impose two out of seven possible sanctions against the violating company" (Ibid). The seven possible sanctions deal with the denial of export licenses, bank assistance, loans, credits, and procurements for the violating company. These sanctions pose serious predicaments for numerous American and international oil companies who are seeking active roles in the development of natural gas reserves in Iran.
For both India and Pakistan, U.S. government credits and guarantees, like OPIC risk insurance and Eximbank financing, were suspended. The United States also opposed further loan assistance to both countries from the World Bank and the International Monetary Fund (IMF) (Energy Information Administration). These specific sanctions were suspended in October 1998. In 1999, additional sanctions, like U.S. bank lending to the Indian government, were also waived.
For India, a $6 million Greenhouse Gas program was suspended along with $21 million in economic development assistance and housing guarantee authority (United States Department of State). The United States also "revoked licenses for the commercial sale of any item on the U.S. munitions list" and "suspended delivery of previously approved defense articles and services to India" (Ibid).
For Pakistan, the post-nuclear testing sanctions added additional stress to a country already bound by sanctions imposed in 1990 by the Pressler Amendment. This amendment proposed the continuation of military sales and aid based on the following two conditions: (1) "that Pakistan not possess a nuclear explosive device, and (2) that new aid will reduce significantly the risk that Pakistan will possess such a device" (Origins of the Pressler Amendment). As more and more evidence was gathered by the U.S. about Pakistan developing nuclear capabilities, sanctions were imposed in 1990 through this amendment.
The details of these sanctions on both India and Pakistan are concerned with numerous regional and bilateral issues pertaining to domestic policies and security. According to the United States, they have also been imposed to "minimize the damage" in the region to other U.S. interests (United States Department of State). Such sanctions have deeply impacted the economic conditions of both countries.
The sanctions remain in place and directly impact the development of the pipeline project. American and International oil firms want desperately to collaborate with Iran, India, and Pakistan. The United States government, instead of lifting sanctions, continues to encourage international and American companies to build pipelines through routes excluding Iran. It has strongly supported the development and construction of pipelines in Central Asia (see Related Cases).
Iran produced about 2.6 Tcf of natural gas in 1996, marketing 1.3 Tcf of it and produced about 1.9 Tcf of natural gas in 1998 (Energy Information Administration). While South Pars, the largest gas field in Iran, contains much of Iran's unused natural gas, the Aghar and Dalan fields have produced nearly "600 million cubic feet per day (Mmcf/d) respectively" (Ibid).
Overall, oil and petroleum count for 80 percent of Iran's export commodities (Central Intelligence Administration). Iran has an emerging market for its natural gas exports. There are possible ventures including Turkey, Europe, India, Pakistan, South Korea, Taiwan, and coastal China (Ibid). Iran and Turkey signed a $20 billion agreement in 1996 calling for Iran to export natural gas to Turkey over 22 years (Ibid).
TABLE 4: IRAN TRADE STATISTICS
|Exports||Exports Partners||Exports Products||Imports||Imports Partners||Imports Products|
|$12.2 billion (1998)||Japan, Italy, Greece, France, Spain, South Korea||petroleum 80%, carpets, fruits, nuts, hides, iron, steel||$13.8 billion (1998)||Germany, Italy, Japan, UAE, UK, Belgium||machinery, military supplies, metal works, foodstuffs, pharmaceuticals, technical services, refined oil products|
While India's consumption of natural gas has increased in recent years, its resources are severely limited. Domestic gas supply cannot keep pace with domestic gas demand (Energy Information Administration). According to a 1992 projection, the production of gas in the country is expected to maintain an average of 85 mmscmd while the demand is registered at 260 mmscmd ("Natural Gas" 2000). For this reason, the country must import natural gas from the Mideast. "India will have to import most of its gas requirements, either via pipeline or Liquefied Natural Gas (LNG) tanker, making it one of the world's largest gas importers" (Ibid).
Aside from the Iran-India pipeline project, additional possibilities include importing from Bangladesh and Myanmar. India also signed an agreement with Oman in 1994 to import 56.6 mmscmd of natural gas in the time span of ten years (Ibid).
TABLE 5: INDIA TRADE STATISTICS
|Exports||Exports Partners||Exports Products||Imports||Imports Partners||Imports Products|
|$36.3 billion (1999)||US 21%, UK 6%, Germany 6%, Hong Kong 5%, Japan 5%, UAE 4% (1998)||textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures||$50.2 billion (1999)||US 10%, Belgium 7%, UK 6%, Germany 6%, Saudi Arabia 6%, Japan 6% (1998)||crude oil and petroleum products, machinery, gems, fertilizer, chemicals|
With the increase in demand in Asia, and with 32 percent (45,000 bcm) of natural gas reserves in the Middle East, the potential for trade between the two regions is high. The lack of sufficient indigenous gas reserves in Asia also makes trade with the Middle East very crucial. Ultimately, the " volumes of exploitable gas reserves" in Asia and the Middle East " form the basis for greatly expanded intra- and inter-regional trade" (World Bank 2000).
The increase in demand for natural gas is characterized by its overall efficiency, abundance, and existence as a clean burning fuel. The power sector has the potential to become the largest consumer of natural gas in global gas markets and specifically for South Asia. According to the World Bank's "Natural Gas Trade in Asia and the Middle East" position paper, utilization of natural gas in power generation has both economic and environmental benefits.
Compared to using fuel, oil, or coal, natural gas has the following economic benefits:
(1) Least capital cost per unit
power generation capacity:
- natural gas plant: $650/kW
- coal-fired plant: $1,300/kW
- fuel-oil fired plant: $1,000/kW
(2) Higher thermal efficiency:
- natural gas plant: 45 - 50 percent
- coal fired plant: 30 - 35 percent
- fuel-oil fired plant: 30 - 35 percent
(3) Shorter construction period:
- natural gas plant: 2 - 3 years
- coal fired plant: 5 years
- fuel-oil fired plant: 4 years
(World Bank 2000)
The economic challenges in natural gas trade involve locating direct investment and securing financial arrangements for the construction of the pipeline. According to the World Bank, securing financial arrangements for projects in Asia should not be difficult. The real challenges lie in resolving commercial and political conflicts (World Bank 2000). This is exactly the case in the Iran to India natural gas pipeline. While numerous oil companies are interested in constructing and investing in the pipeline, commercial and political conflicts like sanctions and regional politics have proven to be strong challenges.
The main environmental benefit of using natural gas is that in switching from high-carbon coal to low-carbon natural gas, the output of carbon dioxide is reduced. This in effect contributes to reducing the effect of global warming since carbon dioxide is a major source of global warming (World Bank 2000). This environmental reality affects India directly, where coal is 70.3 percent of the major fuel utilized for power generation (Ibid). This high dependence on coal creates adverse environmental effects for India.
Knowing India's high dependency on coal and the potential adverse environmental effects makes the necessity for natural gas trade in the region even more significant. Not only that, but evaluation of clean energy and environmental issues is needed. Both India and the United States have been involved in forming better collaboration with each another on such issues.
In March 2000, India and the United
States signed the "U.S.-India Joint Statement on Energy and Environment
Cooperation" which directly addressed issues of global warming, renewable
energy sources, and the energy power sector. This statement speaks to the
argument made in this paper that India must reevaluate its energy and environmental
agenda. The statement focuses on the development of multilateral cooperation
between India and the United States in
Not only this, but the two countries have also agreed to expand and explore " for commercial development and cooperation in clean energy" (World Bank 2000).
In looking at the points of this statement, it is possible that the United States would encourage any potential venture involving a pipeline pumping natural gas into India. However, the Iran-Libya Sanctions Act of 1996 (see impact of trade restriction section), which restricts foreign companies from investing over $40 million for the development of petroleum resources in Iran as well as buying oil equipment from Iran, hinders development and support of the Iran-India pipeline project from the United States government. The inevitable result is a clash of American foreign policy with intra-regional initiatives taken on by Iran and India. While the United States wants to promote trade and environmental issues with India, it remains firm in its goal to isolate Iran from the international community.
Initiatives to promote environmental development and clean energy between India and the United States conflict with the foreign policy between the United States and Iran. This situation exemplifies the linkages between environment, trade, and foreign policy. The irony is that India's energy industry desperately needs the natural gas resources Iran is offering. Thus, the Iran to India natural gas pipeline has great implications and complications for regional and foreign policy transformation.
The benefits of using natural gas for the energy sector are equally as beneficial for Pakistan as they are for India. Nearly half (49 percent) of Pakistan's energy consumption is residential, with the industrial sector attributed with the next highest level of consumption at 33.5 percent (Energy Information Administration 2000). Oil makes up 43.5 percent of energy consumption and natural gas 38.3 percent.
Hydroelectric power is the main source of renewable energy for domestic use. It generates 40% of all electricity in the country (Energy Information Administration). Most of this hydroelectric power is generated in northern Pakistan. "Difficulty of access and the high cost of transmission to the populous south make development of this potential a distant prospect" (Energy Information Administration 2000).
While India has high utilization and supply of coal reserves, Pakistan lacks lower coal reserves. This, unlike the case in India, keeps the carbon intensity in the country low (Energy Information Administration 2000). Nevertheless, carbon levels are high due to emissions from vehicles. In 1998, Pakistan's carbon intensity was 0.47 metric tons of carbon/thousand$1990. This is comparable to India at 0.57 and the United States at 0.21 (Energy Information Administration 2000).
Aside from the level of carbon emissions,
numerous additional factors contribute to the deteriorating condition of
Pakistan's environment. Ongoing deforestation, industrial runoff, factory
and vehicle emissions continue to adversely affect the environment. In
the past two decades, the government passed environmental ordinances and
treaties to further address these issues. The Pakistan Environmental Protection
Ordinance of 1983 established three main goals for environmental protection
efforts. These goals are:
Sub-categories of these goals included:
In relation to the India-Iran pipeline, these issues are highly significant. Like India, Pakistan must meet the demands of its domestic energy consumption. As stated earlier, hydroelectric energy as the main domestic energy source is difficult to develop due to its distance from the majority of Pakistan's population. To solve this problem, Pakistan is turning to solar power "in order to provide electricity to rural areas that would otherwise not have electricity in the foreseeable future (because they are either too remote and/or too expensive to connect to the national grid)" (Energy Information Administration 2000).
If Pakistan, like India, turns also to natural gas as a new source of renewable energy for its domestic market, then it may be able to resolve the conditions of lack of access to rural communities. The pipeline would be traveling from Iran from the southwestern portion of Pakistan towards Multan, an urban city located in the heart of the Punjab province. The land between the southwestern Pakistani-Iranian border and Multan is predominantly a desert and dry area populated by tribal communities living in villages. It is proposed that the pipeline will be opened for domestic use in Multan. However, the fact that it travels through remote rural areas where renewable energy is in demand, prospects for extending the pipeline into a domestic network providing natural gas to village populations exists.
Thus, the proposed pipeline has the potential to promote renewable resource development/deployment and improve energy efficiency. Both of these potential results are major sub-categories of the Pakistan Environmental Protection Ordinance of 1983. Also related to environmental issues are social and cultural issues. The development of the pipeline interacts with trade, government policies, regionalism, and globalization. At the heart of this discussion is the question of how the shifts and changes of all of these factors contribute to transformation and interaction with social and cultural factors.
THE ISLAMIST PERSPECTIVE
Through the eyes of individuals participating in Islamist movements in Iran and Pakistan, the involvement of western companies in economic development may be perceived as neo-imperialistic or an extension of the legacy of western exploitation of the east. Also, these political religious movements may associate western involvement with ideas of secularism. This too may conflict with forces within the regions trying to implement national infrastructures for the application of interpretations of Islamic law. Because of these factors, Islamists may not view economic and natural resource development by western forces as the most viable solution to economic deterioration, lack of sustainable development, and the looming energy crisis in South Asia. They are more concerned with (1) the preservation of Islamic values and traditions based on their own interpretations, and (2) the rejection of any elements of western culture and society which could possibly be seen as threats to "Islamic" traditions in the region.
Furthermore, Islamic fundamentalism historically existed as a backlash to imperialist capitalist policies of the west on Muslim countries. It attacked capitalism "as a radical anti-imperialist movement and as a project for recasting state and society" (Stallings 61). The rise of many fundamentalist movements in Muslim countries emerged as "a result of the failures of the secular Left" and in hopes of becoming secular modernizing states (Stallings 61).
This historical reality is ironically posited against the recent developments of the past decade, when various western oil firms competed against with each other for contracts to build oil and natural gas pipelines from Central Asia through Afghanistan and into South Asia by courting the governing Islamist Taliban regime in Afghanistan. One example of this courtship was when the Argentinean oil company Bridas' chairperson Carlos Bulgheroni, in his "impeccable blue blazer with gold buttons, a yellow silk tie, and Italian loafers" met with Mullah Muhammad Hassan, the Governor of Kandahar and member of Taliban (Rashid 6) . This was just one of many secret courtships to negotiate potential pipeline routes through Afghanistan.
One can certainly imagine the meeting of the two divergent forces of Bulgheroni and Mullah Hassan: one representing the strict, shari'a based, and aggressive world of the Taliban, and the other representing the complete opposite of western capitalism, consumption, and materialism. The mere fact that these two individuals, representing two entirely different worlds, interacted with one another is evidence enough of the intersection of trade and culture and its impact on interaction between groups around the world. This example has the potential to duplicate itself in Pakistan as well, where Taliban-influenced philosophies exist and where anti-imperialist movements thrive in the form of Islamist political parties.
THE PRESENCE OF INDIGENOUS COMMUNITIES
Another example where culture may experience transformation by way of economic development is in the actual construction of the pipeline and the route it follows. These two issues deal directly the environment and people of indigenous communities. Traveling from Iran and into Pakistan, the pipeline project would encounter various tribal communities in the rural areas of Baluchistan, where a large part of the pipeline will be constructed. From a socio-cultural perspective, a wide variety of conflicts may emerge from this encounter.
First, the construction of such a lengthy pipeline will employ large amounts of local labor. While this will provide temporary employment for many of Pakistan's rural poor, it may also interfere with domestic labor dynamics. For example, the province of Baluchistan has experienced a constant influx of Afghan refugees for the past 20 years due to Afghanistan's ongoing civil war. These refugees, poor and illiterate, are top choice over Pakistani laborers for local businesses as cheap labor. They will work for less wages than Pakistani laborers. As a result, increased tensions exist between the Afghan laborer who is seeking refuge and stability in neighboring Pakistan and the Baluch laborer who is trying to feed his/her family while living on a meager wage. Both groups seek to benefit from potential pipeline construction in their regions. However, the question we need to ask is which group will be privileged enough to be seen as the cheaper form of labor?
While physical construction of the pipeline will require large amounts of unskilled labor, other technical aspects of pipeline implementation will require skilled and educated workers with backgrounds in science and technology. These workers may be recruited from both abroad and within the country of construction. Due to increased focus on careers and education in science and technology in recent decades in both India and Pakistan, employment of skilled workers will bring much needed jobs to an educated middle class.
Second, since the pipeline will travel through rural areas in Pakistan, it will encounter areas of land controlled by feudal landlords or tribes. The Pakistani government may choose to pay off these groups by unofficially granting them access to the natural gas resources and/or some form of control over the pipeline. Another option is that the government may officially purchase the land from these groups. Either way, such options can alter or come into conflict with the socio-cultural mindsets of tribal communities. For example, a certain tribe may have an historical, political, or familial tie to the land. Also, distribution of more land to one family may grant them more political power than a family that has less land. The selling of land by certain groups may disrupt the political structures of tribal communities.
Lastly, the development, construction, and continued use of the pipeline may transform the lifestyles of indigenous rural communities in both Pakistan and India. In Pakistan, there is already discontent over proposed cultivation of natural gas reserves in the Kirthar Wildlife National Park in the southern province of Sindh. Alongside international environmental groups, the Sindh Wildlife Department and indigenous people living in the area protested gas exploration in the park. Gas exploration will not only damage the natural environment of the park but may impact the lifestyles of indigenous peoples. The cultivation of natural gas reserves could transform and displace the agricultural economy of rural communities, replacing it with a situation where cheap labor is required for construction of the pipeline and other industrial purposes. The call for cheap labor will inevitably result in the migration of workers from other rural communities to places where pipeline construction and industrialization are occurring. This, in effect, will result in dramatic shifts in the local economies of rural communities. They may no longer be able to depend on agricultural production and labor if there is a shift in the employment prospects in nearby locales. Construction and industrialization are not negative forces in the context of development, especially in poor countries. It is important, however, for governments and companies to accurately and fairly assess the cost of such activity on indigenous rural communities.
The pipeline will provide much needed natural gas to rural communities in both India and Pakistan. Families living in villages who used animal waste for fuel purposes will be able to use natural gas on small portable stoves. For developing rural areas, households can shift from using expensive forms of energy, like coal, oil, and wood, to natural gas which is more economical and environment friendly. Rural communities will be able to continue in their progress towards development by providing cheaper and more sources of energy.