India eyes new avenues in Iran

India eyes new avenues in Iran

By Dr. R.K. Pachauri | 1 August, 2015
It is time to revive the Iran-Pakistan-India pipeline project to enhance India’s energy security.

Prime Minister Narendra Modi, during his visit to Central Asia, expressed support for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline for transporting natural gas from Turkmenistan to the three other countries in this arrangement. Given the fact that India's demand for energy would grow substantially with economic growth in the coming years and decades, the import of gas to this country is of crucial importance. This is also part of an essential strategy to ensure that the country moves towards an energy mix with much lower carbon intensity as against, say, rapid growth in the use of coal. It should also be borne in mind that India's coal reserves have been vastly overstated as was brought out by a TERI Policy Brief in 2011. This document stated "A large part of India's coal reserves may not be extractable with current mining technology", and for this and other reasons coal production would soon reach a limit.

It was with a view to enhancing India's energy security that in 1989 this author along with Dr Ali Shams Ardekani, later Deputy Foreign Minister of Iran, came up with an elaborate proposal for import of natural gas from Iran through a pipeline connecting Iran, Pakistan and India (IPI). In 1989, as Chairman of the International Association for Energy Economics, I had organised the Annual International Conference of this body in New Delhi where Dr Ardekani made a presentation on this project. Subsequently, we discussed it with senior political leaders and officials across the entire political spectrum of India. The IPI project was then considered by the Ministry of Petroleum and Natural Gas as well as the Ministry of External Affairs, but it never took off initially because of security concerns related to the pipeline passing through Pakistan, particularly Balochistan. As an alternative, therefore, a study was carried out for import of gas directly from Iran through a subsea pipeline. This proposal was given up because of technical as well as economic reasons.

It was at that stage that Dr Shirin Tahir-Kheli, a distinguished political scientist in the US, and I organised a team consisting of specialists in this region and two Members of Parliament each from India, Nepal and Pakistan. The two political leaders from India were Mani Shankar Aiyar (Congress) and Jaswant Singh (BJP). With this team from three countries an exercise was carried out involving the physical, financial and political aspects of such a project, and assurance of security for India was elaborated on and defined in a draft legal agreement. There are several provisions in a possible contract, which would provide security for India connected with the IPI pipeline and imports of gas as proposed. Firstly, the portion of the pipeline in each country would involve financial investments from that specific country itself, creating a stake by each country in financial success of the project. As far as India is concerned, the inclusion of financial penalties for any disruption of supply in Pakistan could be made large enough to discourage this, and similar penalties could also be imposed by Iran, since cessation of supply would affect their revenues. This would ensure that Pakistan takes every step to prevent any disruption or reduction in supply on its territory. Additionally, a part of the supply to India could be used for power generation, possibly in Rajasthan for dedicated supply to Punjab in Pakistan, which has serious problems in power supply today. Thus, disruption in supply of gas will have a direct impact on the economy of that province and people living there. This would be a powerful disincentive for any reduction or disruption in supply. A rigorous financial and legal model was developed to ensure secure supplies of gas to India.

There are some other important factors that need to be considered in looking at new opportunities in Iran. The IPI pipeline would serve three important purposes.

It would provide security of energy supply for India, and become an important counter to the constraints in supply of coal that we would face to an increasing degree.

It would give us substantial leverage with Iran, a country of 80 million people which would undoubtedly become an important player in the region particularly after the easing of sanctions.

It would open new avenues for cooperation between India and Pakistan and strengthen the hands of the moderates in that country.

In some respects, our opportunities with Pakistan are similar to the opportunities that the US missed in the past with Iran. During President Bill Clinton's time, I held a discussion with the then US Undersecretary of State responsible for this region, and my arguments on why the US should engage Iran more actively in its plans in the Middle East were vehemently opposed by him, citing reasons like the seizure of the US embassy in Tehran after the revolution, Iran's alleged funding of terrorist groups in various places, etc. In retrospect, the US attitude was short-sighted, and if a more constructive approach had been followed, perhaps Iran's efforts at going nuclear may not even have been undertaken. Over time, India has to engage with Pakistan or else not only would Chinese influence in that country grow to create perils for us, but terrorist action would continue to get support from parts of the Pakistani establishment and people themselves. Engagement with Iran would also give us much greater leverage with Israel and Saudi Arabia, and India's influence as a stabilising force would have important implications for the US as well.

The Iranian people generally hold a very favourable opinion of India. Recent surveys have shown almost 70% of Iranians displaying a positive attitude towards India. In the early 1990s, during one of my discussions with the Minister for Petroleum in Iran, Ghulam Aghazadeh, he said, "We have plenty of surplus gas in the southern part of our country. Our policy is to export surpluses to Islamic countries. In that sense India would qualify." That statement came to me as a very pleasant surprise. The reality is that India holds 10-15% of the world's Shia population, and has had historical and cultural links with Iran for centuries. India's initiative to upgrade the port at Chabahar in Iran is a brilliant initiative, which would give us far more secure access to Afghanistan and Central Asia than through the land route via Pakistan. The decision to develop Chabahar was taken by the A.B. Vajpayee government in 2003, and from present indications is now being fast-tracked for implementation.

India is the fourth largest consumer of energy in the world and our demand for all forms of energy would go up in the future. The IPI pipeline would cover a distance of 2,670 kilometres. It was envisaged that the transmission capacity of the pipeline would be 22bcm per year initially, to be expanded subsequently to 55 bcm per year. According to the International Energy Agency (IEA), the South Pars/North-Dome natural gas condensate field in the Persian Gulf is the world's largest gas field, shared between Iran and Qatar. It is estimated to hold 51 trillion cubic metres of in-situ natural gas and some 7.9 billion cubic metres of natural gas condensate. Establishing the pipeline based on reserves in the southern part of Iran would also open up possibilities for ONGC Videsh to bid for the development of hydrocarbon reserves in that country, which, for instance, would include the Farsi hydrocarbon block in that country for which ONGC Videsh has bid already.

It is expected that Prime Minister Narendra Modi will be visiting Iran sometime in the near future, when perhaps he would also include other Sunni dominated countries in the region in a sort of balancing act. It would be important to do all the homework that is required by various government departments and agencies ahead of that visit, including a dialogue with Pakistan, so that when the Prime Minister is in Iran, we could sign a firm agreement to go ahead with the IPI project, which would have a transformative impact on this entire region, enhance energy security for India and pivot the country into a prominent role internationally.

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