The Great Gas Game, Part II

Turkmenistan is not the only source of LNG in Central Asia. Iran has long hoped to marshal its LNG resources but its central problem is the hesitancy of its neighbors to enter into a partnership to develop pipeline infrastructure. This is partially due to the harsh economic sanctions placed upon the Iranian economy on account of its nuclear program. Despite its restrictions in world energy markets, Tehran has been pursuing the construction of the Iran-Pakistan (IP) Pipeline for many years. Originally conceived in the 90’s, the project has put Pakistan between several conflicting interests for easy access to energy, its close relationship with the United States, and rivalry/potential economic value with India. In the beginning phases of the project, Iran had originally sought to include India, Bangladesh, and China in the construction of the pipeline, but all withdrew for various reasons (India because it signed a civilian nuclear deal in 2008 with the US). The route of the pipeline passes through Baluchistan towards Karachi and was supposed to turn northwards towards New Delhi.

With obvious intent, the United States asked Pakistan to abandon the IP pipeline project in early 2010, suggesting that Pakistan’s interests would be better served focusing its attention on the TAPI pipeline project instead. The Pakistani government, understandably torn, received rebukes from Tehran over delays. Last June, Nawaz Sharif attempted to allay fears that the project would be abandoned, stating that the first gas will flow in December of 2014. In a related move to appease US interests, he also recommitted to the completion of the TAPI pipeline as well.

Delays from Pakistan were not the only problems to plague the pipeline’s development, however. In April 2012, it was reported that Saudi Arabia offered to deliver an “aid package” to Pakistan if the country abandoned its cooperation with Iran. Pakistan’s response to these overtures and pressures has been decidedly uneven – with foreign minister Hina Rabbani Khar declaring that Islamabad would finish the project “at any cost.” Development of the pipeline infrastructure has been handled by all non-US affiliated energy giants such as Royal Dutch Shell and Iran’s own National Gas Company. Private consortiums consisting of Shell, BHP Billiton, and Petronas set aside the project due to US opposition. Even Russian energy giant Gazprom set aside its stake in the project to avoid conflict with the US.

However, the most recent news casts doubt that the project will ever be completed. Earlier this month, Pakistan formally told Iran that it should temporarily shelve its pipeline project, due to lack of interest from financial institutions, international oil and gas companies, and support from other countries. Despite the nuclear deal and continued negotiations with Iran, the US has not changed its adamant opposition to the IP pipeline. Tehran has responded furiously, cancelling a $500 million dollar loan to finance the Pakistani side of the project, asserting its lack of funds. Deputy Oil Minister Ali Majedi stated that Tehran will demand compensation if Islamabad fails to take Iranian gas by the end of the year, suggesting the saga of this pipeline is far from over.

NEWS BRIEFS: 

  • Negotiations with Iran on a deal to dismantle or decrease its nuclear facilities continue today in Vienna, as representatives of six countries (US, China, Russia, Britain, France, and Germany) meet with Iranian foreign ministers to discuss a potential détente. So far, analysts and diplomats are skeptical that Iran will be able to keep its promise of displaying progress on the dismantling of its nuclear facilities (particularly the reactor at Arak) by July of this year. Perhaps in anticipation of potential rapprochement between the West and Tehran, European business missions have been visiting Iran, much to the chagrin of the United States.
  • Plans for a railway between Ashgabat and Dushanbe appear to have stalled, as Uzbekistan has denied the use of Soviet-era railways that pass through its territory to its southern neighbor in a bid to prevent its development of the world’s tallest hydropower plant, exacerbating already-tense relations between the two landlocked countries. The railway project originated between leaders of Turkmenistan and Afghanistan, but Tajikistan joined the project in March 2013, expanding the scope. The project has been publically supported by the United States and Asian Development Bank as part of their New Silk Road strategy, unveiled in 2011. It is hoped the improved infrastructure will connect Central Asian countries to South Asian markets. Construction began on June 5, 2013 in Turkmenistan. Tajikistan depends on its trade routes to the north and it is expected that developing its infrastructure to southern markets via Afghanistan will develop very poor economy.
  • Drone strikes are reported more and more frequently in the Federally Administered Tribal Areas of Pakistan and contentious areas of Afghanistan, yet the drone program will face its largest hurdle in the next year as the United States ramps down its presence in Afghanistan. Thus, US defense officials are looking for a new Central Asian air base that can support its ongoing drone war in the region, but with the closure of the Manas Transit Center in Kyrgyzstan later this year and a base in Uzbekistan earlier in 2005, the options are looking to be few and far between. Stars and Stripes reports that there are “contingency plans for alternatives in the North,” but did not name any countries. Last month, however, Major General Michael Nagata, commander of US special operations in Middle East and Central Asia, visited Tajikistan for talks on “issues of bilateral security cooperation.”
  • The devaluation of the Kazakh tenge caused a large bank run yesterday in Almaty and Astana. Apparently fueled by social media on fears that three banks were on the verge of declaring bankruptcy, Large crowds gathered and were dispersed by police, while Kazakh authorities assured their citizenry that their fears were not founded in fact. In related news, Kazakh salaries are up 10% in wake of the devaluation, fueling yet more concerns about a debilitating spiral of inflation. As a member of the Customs Union of Belarus, Russia, and Kazakhstan, the tenge’s devaluation has also negatively affected the economy of Belarus, who reported loses in foreign exchange proceeds and devalued its own currency slightly.
  • The Aral Sea is in danger of disappearing from the face of the earth. In the past 50 years, the Aral Sea has lost 90% of its water volume and its disappearance is puzzling researchers who are studying climate change. Richard Becker of University of Toledo, Ohio reports that roughly half the water lost from the Aral Sea has entirely left the watershed, due to evaporation and agricultural resources. But recent NASA satellite imagery has shown that large amounts of water are still located in the central part of the watershed, leading to hopes that the loss can be reversed somehow.
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One thought on “The Great Gas Game, Part II

  1. Pingback: Crimean airports occupied by Russian troops | Steppe Dispatches

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