December 05, 2014
India, unlike China, has tended to look at energy security through an economic prism rather than from a purely strategic perspective. China has been aggressively making energy deals – be it acquiring assets or negotiating decades-old procurement deals – without seemingly being worried about the cost to its exchequer, and has thereby succeeded in expanding its influence in several regions of the world by tying up its vast energy market with energy-exporting countries.
But is India now looking at energy through the strategic prism? Its recent signing of the TAPI deal is certainly indicative of that. Why else would New Delhi support a project that, despite the hype surrounding the recent activity regarding the deal, has as little chance of implementation as the IPI (Iran-Pakistan-India) project? Further, given that TAPI does not make much commercial sense, why is there so much optimism surrounding it?
The first, and perhaps the most crucial, aspect of the TAPI project is that it has the blessings of the US. Washington is keen to provide South Asian countries with alternatives to Iranian gas in order to starve Tehran of revenues from the IPI and nudge it towards a more pliant position on its nuclear programme, as well as to break Russia’s monopoly over Central Asia’s energy sector.
Secondly, it gives India the opportunity to gain a foothold in the Central Asian energy sector, which it has been seeking for a while. It is notable that during his recent visit to Ashkabad, Petroleum Minister Dharmendra Pradhan talked about expanding energy cooperation beyond TAPI into other projects in the energy sector – upstream, mid-stream as well as downstream. More importantly, with China raising its profile in the region by tying up energy deals with the Central Asian states, India too wants to mark its presence, and TAPI could be the vehicle for its geostrategic goals in the region.
But the question remains: will TAPI actually translate into a viable project?
As of now, only an expression of intent has been established, with no actual breakthrough having taken place, although the setting up of the TAPI Pipeline Company Limited (TPCL) by the four participating countries, viz., Turkmenistan, Afghanistan, Pakistan and India, which will own, finance, construct and operate the 1,800 km pipeline, was hailed as an indication of the viability of the project.
Secondly, a leader for the project has yet to be chosen by the partners, although the process has to be completed before early February 2015. However, given the continuing instability along the route of the pipeline, it remains to be seen whether a company/consortium will take on the high-risk project. No details regarding pricing of the gas have been discussed, which could make or break the project. After all, one of the reasons for the IPI’s failure was the lack of consensus on gas pricing. Moreover, India was reluctant to tie itself to a project where it would be dependent on Pakistan for transporting the gas. Neither of these factors has changed.
Finally, finding an international company that will accept the risk of financing the project will not be easy. For example, Chevron and Total had initially shown interest in leading the consortium in the TAPI project but backed out after Turkmenistan refused to accept the condition of a stake in the gas field that will source the pipeline. Now there are reports that India may propose a Chinese company to lead the consortium on the grounds that the Chinese are already present in Turkmenistan as well as their growing influence in Afghanistan.
However, the fact that China National Petroleum Company (CNPC) has been given access to Turkmenistan's on-shore gas fields, including Galkhynysh, which will supply TAPI, may become a source of a problem. Given that developing Turkmenistan’s fields is cost-intensive, it would entail the use of Chinese capital and may require Ashkabad to borrow money from China to meet its share of the development costs. This would not only place Ashkabad in the danger of becoming a debtor nation to China, but could also affect negotiations on the pricing of gas to China, thus placing China in a dominant position. In turn, this could have repercussions on the price of the gas to be fed into the TAPI project as well.
In fact, Turkmenistan is wary of becoming increasingly dependent on China. As a result, Ashkabad is looking at alternative markets. Apart from TAPI, two other projects are also being negotiated -- the Trans-Caspian pipeline to deliver Turkmen gas to Europe and the Trans-Anatolia (TANAP) project for transporting gas from both Turkmenistan and Azerbaijan to Europe through Turkey. If these projects take off, the more attractive European market will become a priority for Ashkabad.
Nevertheless, from a geostrategic perspective, India should remain engaged with the project, and initiate discussions with Moscow on bringing gas through a pipeline transiting the restive Xinjiang province of China. However, at the same time, India should also actively pursue the Iran option -- though not necessarily the IPI model -- as a more viable option. While Iran is still not out of the sanctions woods, there are signs that over the next few months it may reach a rapprochement with the US. Once that happens, Iran will, in all probability, prefer to pursue the more profitable European market for its gas. While the IPI project may not be acceptable to India due to its relations with Pakistan, the deep sea pipeline project through Oman should be looked at more closely, despite American opposition. After all, if the Modi government can seriously pursue the pipeline option with Moscow despite sanctions being imposed on Russia, the sub-sea pipeline from Iran, either through Oman or Qatar, is far more feasible, both technically and commercially. The window of opportunity with Iran is open for now, but may soon close if kept pending for much longer.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India
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