The Iran-Pakistan-India gas pipeline

The Iran-Pakistan-India gas pipeline agreement reached last week is hugely significant for several reasons. It is the most important regional economic co-operation agreement so far in this part of the world, several leaps ahead of the hydro-electric projects that India has done with Nepal and Bhutan. It signals a level of trust between two bickering neighbours that is completely new, and creates a mutual inter-dependence that is qualitatively different from the agreement on sharing Indus waters, reached 47 years ago. It is also an important signal of the continuing independence of Indian foreign and economic policy, since it comprehensively ignores all the warnings from Washington about not doing any deals with Iran—and thus gives an effective reply to critics in the BJP and among the Left parties, who under-estimated both India and Manmohan Singh when they accused him of bartering away an independent foreign policy in return for a few cakes of uranium. What remains to be seen is whether the pipeline deal will make Washington cool off with India to any degree, and reduce its desire to pursue an already problem-ridden civilian nuclear agreement. It is possible that the White House will still want to deal with New Delhi, while elements in the US Congress could become noticeably less friendly. Even if that were to happen, the pipeline deal would remain a triumph of economic diplomacy (including for Iran, for which the deal will be an important signal of regional friendship at a time when Washington has been threatening it with economic isolation).

The amount of gas that Iran will supply to India (an equal quantity will go to Pakistan) is not to be sniffed at, but it is not hugely significant, being barely 40 per cent of what will be available soon from two gas fields that Reliance is developing off the Andhra Pradesh coast. It will also account for barely 15 per cent of the total gas that India will be using some five years from now, and therefore will represent 2-3 per cent of India’s total use of commercial energy at that point. Nor will the gas be cheap, as Iran has driven a hard bargain on price, after which there is the cost of transportation over 2,000 km of difficult terrain, some of it in Pakistan’s troubled Baluchistan province. What is more important, therefore, is the signal that the pipeline deal conveys about future multi-country gas deals in the region. For many years, India has been looking for ways to access the vast quantities of gas available in Central Asia. Some initial thinking on a pipeline through Afghanistan had to be given up because that country is simply too unstable for anyone to think in terms of putting costly and vulnerable assets in the ground. That left Iran as the only viable option. While any larger four-country deal involving one of the Central Asian republics is still very distant, last week’s pipeline agreement raises the chances of future success.

As for Pakistan, the agreement is a measure of how far bilateral relations have come since the Kargil mini-war eight years ago. For a long time, it was Islamabad that was dragging its feet on such a pipeline, seeing it as a huge favour that would be done to energy-deficient India. Later, it was India that cooled off, the assessment being that Pakistan could not be relied upon to maintain uninterrupted supply of gas if bilateral relations hit a trough. Islamabad now sees the economic benefit to Pakistan itself (it will get both gas as well as revenue from the use of the pipeline), plus the political signal of moving India-bound gas through Baluchistan. The mutual calculation now must be that, while relations between the two countries are not what they should be, the gas pipeline will not be disturbed in any circumstance, just as the flow of Indus waters has remained undisturbed despite three rounds of military conflict. Anyone in Washington who looks askance at the pipeline agreement should also look at how this takes Indo-Pak relations away from the focus on the Kashmir dispute.