Wednesday, February 8, 2012

Pakistan defiant on Iran gas pipeline....India pivots, and pivots again...

Pakistan defiant on Iran gas pipeline....India pivots, and pivots again...LOL
By Syed Fazl-e-Haider

KARACHI - Pakistan on Tuesday gave an unequivocal assurance to Iran for early implementation of the US$7.6 billion Iran-Pakistan (IP) gas pipeline, a week after the toughest warning issued yet by the United States to Islamabad to shelve the project.

Islamabad and Tehran vowed to intensify work on the IP project during a meeting of the Pakistan-Iran bilateral talks, which began in Islamabad this week, led by visiting Iranian International Affairs

Vice President Ali Saeedlou and Pakistan's Finance Minister Hafeez Sheikh.

President Asif Ali Zardari gave an assurance on Tuesday that his country was committed to the early implementation of the project to meet the country's ever growing energy needs during his meeting with the Ali Saeedlou. Washington, which has intensified its efforts for increased economic sanctions against Iran, has serious reservations over the IP project.

Last week, a senior US diplomat reportedly warned Islamabad that any attempt to go ahead with the gas pipeline would be considered as "furthering Iran's nuclear program". The US has also offered to Pakistan alternative sources of energy in the form of imports of liquefied natural gas (LNG) at cheaper rates from Turkmenistan.

During his meeting with Ali Saeedlou, Sheikh assured him of the country's commitment to implementation of multi-billion-dollar gas and electricity import projects.

"Pakistan is fully committed to importing electricity and gas from Iran, and we are working on a fast-track basis to finalize these deals at the earliest," Dawn reported Hafeez Sheikh as saying.

The two sides also discussed ways to enhance banking cooperation and strike a currency swap arrangement to promote bilateral trade. Under the IP deal, the two countries signed in June 2010, Iran will export 21.5 million cubic meters per day of natural gas to Pakistan by the end of 2014.

The IP pipeline has reportedly reached Iran's border, while Pakistan has completed the survey for construction of pipeline on its side.

Last month, US President Barrack Obama signed a US defense funding bill that includes new sanctions on financial institutions dealing with Iran's central bank. The law is expected to have repercussions for Pakistan's plans to import gas from Iran and could make it difficult for the country to implement the IP pipeline project.

"Pakistan will be in for serious trouble if it does not abandon the project," The Express Tribune reported an American diplomat as saying. "Any country, any bank or any financial institution which tries to work with Iran will certainly be slapped with sanctions."

The US is dangling energy-deficient Pakistan both stick and carrot in a move to persuade it to abandon the IP gas pipeline. Washington has offered the country to provide gas at a rate approximately one-third of the price Iranian gas would cost to the country.

American energy companies have increased their gas supply in recent years, causing natural gas prices to fall 5.7% on January 12 to their lowest level in over two years. Iranian gas will cost $12 per million British thermal units (mmbtu) while LNG would cost $18 per mmbtu. The US could help Pakistan buy LNG at $4.5 per mmbtu.

The IP project is seen as an energy lifeline in Pakistan , which at present suffers chronic gas shortages affecting its industry and daily life. Petroleum Minister Asim Hussain has warned that the whole energy system of the country could collapse as the demand and supply gap of gas has reached 2.2 billion cubic feet (bcf). The gas in the system is 3.8 bcf while the demand has shot up to 6 bcf.

The IP project would help generate around 5,000 megawatts of electricity, which is equivalent to present peak shortage of power in the country. Local analysts believe that a land-based pipeline would be one quarter the cost than any other option, while the country could also earn about $200 million to $500 million annually in transit fees if the gas is exported to India or another third country.

Pakistan has settled all issues relating to IP gas pipeline project with the Iranian authorities, including a gas sale and purchase agreement (GSPA) and third-party certification for uninterrupted supply of gas from the source field to Pakistan for 30 years.

Under the IP pipeline construction plan, a 42-inch diameter pipeline would be installed to connect Balochistan, Sindh and Punjab through Khuzdar to Karachi, while the main pipeline would continue toward Multan in Punjab with a joint venture of major gas distributors Sui Northern Gas Pipeline Ltd and Sui Southern Gas Co.

Last month, US Stated Department spokesperson Victoria Nuland expressed concern over the IP project and said the law President Obama signed "forbids dealing with central Iranian banks".

"We've made absolutely clear over many months now our concern about this deal [the IP agreement] and we will continue to talk to Pakistan about it. Were it to go forward, how it might be impacted - again, this is the kind of conversation that we have to have with Pakistan and that we're starting to have now," Dawn reported Nuland as saying.

Islamabad however renewed its commitment to go with the IP project believing that US sanctions would not affect the project.

The pipeline was originally planned to extend from Pakistan to India in 1993. Pakistan has also been taking up the proposal of involving its closest ally, China, in the IP venture in a bid to deepen ties with Beijing as an alternative to increasingly fragile relations with the United States.

Financing and security of the pipeline are the two major issues confronting Pakistan for implementation of the IP project. The country plans to finalize an engineering and procurement deal for the construction of the IP gas pipeline project with China, which may also provide financing. In 2010, a visiting Pakistani delegation, led by Federal Water and Power Minister Naveed Qamar visited Beijing to seek investment, offering the contract for the IP gas pipeline to China.

Finance Minister Sheikh last month gave approval to the appointment of an Industrial and Commercial Bank of China (ICBC) led-consortium as financial advisor for the IP project.

After India's withdrawal from IP project in 2009, Beijing showed interest in building an Iran-Pakistan-China (IPC) pipeline.

Syed Fazl-e-Haider ( is a development analyst in Pakistan.

India pivots, and pivots again...
By Vijay Prashad

India faces a grave dilemma. It is the fourth-largest consumer of imported oil, and as a growing economy wedded to the carbon civilization, it needs to burn vast amounts of oil to maintain its growth rate.

The oil comes from a variety of sources, but mainly from the Gulf. The top five exporters of crude oil to India in 2011 in order of quantity were Saudi Arabia, Iran, Iraq, Nigeria and the United Arab Emirates. About 10% of India's imports of oil come from Iran.

Contradictory political pressures have put India's government in a serious bind.

As Subordinate ally to the Zioconned United States....
In the early 2000s, the United States wished to sequester India's respectable position within the Global South for its own parochial interests regarding Iran.

Knowing full well that it is energy dependent, India had begun to consider methods of bringing natural gas in from Iran's South Pars fields into Gujarat. Natural gas would be a sensible substitute for crude oil. There were two methods to draw the gas into the country. The first was to convert it into liquefied natural gas (LNG) and ship it to India. But this is an expensive proposition. The second was to run a pipeline from southern Iran through Pakistan into India. This Peace Pipeline would not only be a major boost for India's energy needs, but it would help create a material incentive for peace initiatives in South Asia.

To break the India-Iran ties, the George W Bush administration offered India a simple deal. It would remove sanctions against India that had come into place after India's nuclear tests of 1998. Unable to import certain technologies, India was eager to have these sanctions mitigated or withdrawn.

In exchange, the US would provide India with access to nuclear material from the Nuclear Suppliers Group, and so effectively recognize India as a nuclear power. This was despite the fact that the Indian government's own studies showed that nuclear power at best would only provide for 5% of India's energy needs and so not be a substitute for oil or natural gas.

In return, India would have to vote with the US against Iran in the International Atomic Energy Agency (IAEA).

India's bourgeois political parties went for the deal. In September 2005, India voted to find Iran in "non-compliance" with the safeguard obligations of the nuclear Non-Proliferation Treaty (NPT). What is remarkable here is that India is not a signatory to the NPT, yet it was able to judge Iran's actions based on it. This vote paved the way to move the Iranian case to the UN Security Council.

India voted in the IAEA once more in February 2006 to send the Iranian case to the Security Council. In December 2006, the US Congress ratified the US-India Peaceful Atomic Energy Cooperation Act. Its "Statement of Policy" noted pointedly that India was "to dissuade, isolate, and if necessary, sanction and contain Iran for its efforts to acquire weapons of mass destruction, including a nuclear weapons capability and the capability to enrich uranium or reprocess nuclear fuel and to the means to deliver weapons of mass destruction."

India yoked itself to the US agenda vis-a-vis Iran.

As partner with the Arab NATO and its silent ally...

India is the second-largest trading partner of the Gulf Cooperation Council (GCC) countries. The GCC, the "Arab NATO", was formed in 1981 as a shield against Iran. It has a long antipathy to Iranian assertion in the region, and considers Iran to be its principle adversary (rather than Israel, for instance). Saudi Arabia is the primus inter pares of the GCC. It is the largest seller of crude oil to India (the GCC countries supply India with 45% of its crude oil needs). In 2006, the Indian and the Saudis signed a major deal. [1] While in India, King Abdullah and Indian Prime Minister Manmohan Singh urged Tehran to "remove regional and international doubts about its nuclear weapons program."

The silent ally of the Arab NATO is Israel. Regardless of its open declarations of support for the Palestinians, the GCC is reluctant to do anything to ruffle the feathers of Tel Aviv, which would of course irritate the GCC's main partner, the United States. This opened the door for a strengthening of the India-Israel ties that germinated up in the 1990s and have flourished in the past few years. India now imports over US$5 billion of Israeli arms, making India its largest arms customer. [2]

As leading figure in the BRICS formation
Since 2003, India has been a central player in the creation of a new international formation of the "locomotives of the South": first as India-Brazil-South Africa (IBSA, 2003) and then as Brazil-Russia-India-China-South Africa (BRICS, 2009). The BRICS bloc is a serious challenge to Atlantic hegemony, mainly on the economic plane but increasingly in the political domain as well. On Libya, the BRICS countries articulated a common platform but their challenge fell apart at UN Resolution 1973 (when South Africa voted for the resolution on the urging of President Obama). On Syria, Russia and China exercised their Security Council veto while the others voted for the resolution. Political unity is not yet on the cards. This is a major limitation of the BRICS platform.

On Iran, the BRICS are more cautious. There is no appetite for war, or even for a limited military strike. There is even less appreciation for the sanctions regime set up by the Atlantic powers. These economic sanctions do not run through the UN, which means they are not legally binding. The US has been trying to force those who trade with Iran to stop doing so on pain of being sanctioned by the US in turn. It is hard for the US to muscle the Chinese, who have the upper hand as far as economic transactions are concerned. US Treasury Secretary Timothy Geithner rushed off in mid-January to Beijing and Tokyo, eager to get these East Asian states to honor the punitive US sanctions regime. China is plainly not interested. It supports the UN resolutions against Iran, but refuses to adhere to the much more rigorous European and US sanctions regime. China buys a fifth of Iran's oil. It cannot afford to isolate the country. Nor can India and Japan. For them, their energy needs trump the parochial political imperatives of the Atlantic powers and the GCC.

When the US and the EU announced their new sanctions regime, the BRICS states took umbrage. The Chinese have already increased their purchases of African oil. India and China considered paying for the Iranian oil via gold rather than dollars. The Indians buy their oil via the Turkish bank, Halkbank, whose manager, Suleyman Aslan, pledged to continue its work with its customers. After hasty negotiations, the Indians and the Iranians agreed on February 7 to trade oil for a payment mechanism that includes Indian rupees (for 45% of the crude) and other methods for the remainder. Iran's banks will open accounts in India to settle payments. This might be a way around the US sanctions that now target Iran's central bank. India's Finance Minister Pranab Mukherjee was uncharacteristically bold in late January, "We will not decrease imports from Iran. Iran is an important country for India despite US and European sanctions on Iran."

India is in a political bind. Its ruling class favors a close assignation with the United States, but this is not a practical alliance. The US demands far too much, including the subordination of India's own interests to the US agenda. Close relations with China are imperative, as is the creation of a healthy foundation of communication in South Asia with Pakistan and Iran to build trust not only for these countries but also for Afghanistan, which is too often at the mercy of Indian, Iranian and Pakistani games.

Currently, the economic needs of China and India will trump any attempt to fully strangle Iran's economy. The attack on the rial has already had catastrophic effects for inflation inside Iran. But if oil exports cease, it will bring Iran's economy to a stop. India is not acting here out of the principles of non-alignment or for the creation of a South-led alternative to the Atlantic bloc. Nonetheless, India's objective interest is a sufficient spur to timidly cross swords with the parochial interests of the Atlantic powers, who seem to want to gallop to war with Iran.

Pressure on India is on, and so are the inducements to substitute Iranian oil with oil from Iraq and Libya. India's ambassador to the United States, Nirupama Rao, has been suggesting that Iranian exports to India have decreased over the past two years. This would mean that India might be open to a new entente, not to depart from the nuclear shadows this time but to be liberated by the United States from its oil dependence on Iran. This is not propitious for the consolidation of a BRICS bloc.

It's Love! India and Saudi Arabia Embrace, Counterpunch, March 1, 2010.
India's Reckless Road to Washington, Counterpunch, Dec 23, 2008.

Vijay Prashad is Professor and Director of International Studies at Trinity College, Hartford, United States.

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