Global Policy Forum

By Pepe Escobar

Iranian Foreign Minister Manouchehr Mottaki may have captured all the headlines when he announced that Iran would not use the oil weapon in the event it was slapped with sanctions by the UN Security Council. But in the world of Pipelineistan, the nuclear row waged by the US, the EU-3 (Britain, France and Germany), the United Nations and Iran is just a detail. The heart of Pipelineistan itself has been transposed to Tehran for the International Conference on Energy and Security: Asian Vision, organized by the Institute of International Energy Studies and the Institute for Political and International Studies. There could not be a better place to meet and discuss oil-and-gas geopolitics with an array of scholars and executives from Iran, China, Pakistan, India, Russia, Egypt, Indonesia, Georgia, Venezuela and Germany.

And their overall message is unmistakable: the interdependence of Asia and "Persian Gulf geo-ecopolitics", as an Iranian analyst put it, is now total; the nuclear row should be solved diplomatically in the next few months; and Asian integration has everything to gain from Pipelineistan linking the Persian Gulf, Central Asia, South Asia and China.

It's a gas, gas, gas

The heart of Iran's gas strategy lies in the gigantic South Pars field, responsible in itself for 50% of Iran's and 8% of the world's natural-gas reserves. South Pars is strategically located between Bushehr to the west (where Russia is helping Iran to build its first civilian nuclear power station) and the Persian Gulf port of Bandar Abbas to the east. According to Gholamreza Manouchehrie, chief executive officer of PetroPars Co, South Pars at its full capacity could deliver 28 billion cubic feet of gas a day. But not all of its 19 blocks have been negotiated for exploration. Iranian participation stands at 60%. Join ventures are common; for instance, the liquefied natural gas (LNG) operation is shared at 50% each by the state-owned National Iranian Oil Co (NIOC) and TotalFinaElf.

But much more foreign investment is needed. "We are 10 years behind Qatar," said Manouchehrie, referring to the neighboring gas emirate. "There is cooperation between our experts, but it's still not enough. But we will catch up with them in production by 2012." South Pars' enormous strategic importance is that its production will be exported to Asian countries - after the construction of a pipeline to the Pakistani border and then to India, pumping 150 million cubic meters of gas a day. As for North Pars, it's an independent field, 100 kilometers to the north, and geared for domestic consumption.

Manouchehrie said that "this pipeline controversy has been going on for 10 years. Now it's a compelling geo-economic reality. China also wants to be a beneficiary." Most agree that the pipeline should be finished as soon as possible. For Asia, it's the most feasible and the most cost-effective.

Welcome to IPIL

High-level negotiations between India and Iran started on Tuesday in Tehran. According to Seyyed Alavi, an Iranian oil executive, a final agreement between the three countries (Iran, Pakistan and India) will be reached "by June or July". The tentative schedule is for the pipeline to be concluded in five years and three months. Pakistan needs to build 1,000km of 48-inch pipeline, plus the infrastructure, and India needs to build 600km.

Farshad Tehrani, an Iranian oil executive based in Norway, is in favor of the project being called the Iran-Pakistan-India pipeline (IPIL), a joint venture with a cross-section of ownership. Tehrani finds many reasons for India and Pakistan to switch from oil to gas: they reduce their oil imports; they opt for cleaner fuel; they save foreign currency. For Iran, it's also inevitably about geo-economic power: "Iran is the only country in the world with more than 15 neighbors. Iran wants to be a true regional power - we are in West Asia after all. Besides, all our neighbors can swap gas with Iran as well," said Tehrani.

Maqsud Hassan Nuri, a senior research fellow at Islamabad Policy Research Institute, agrees with all the benefits. But he preferred to single out President George W Bush's recent visit to South Asia, where once again it was clear that "the US does not want stable relations between Iran and India and Pakistan". The Pakistani perspective - shared by Pakistani oil executives in Tehran - is that the ongoing nuclear row could be solved within the International Atomic Energy Agency (IAEA), and not the UN Security Council, which is this week deliberating moves to reprimand Tehran over its nuclear program.

The Pakistanis agree that Iran is a factor of stability in the region. They also agree with Iranian and Egyptian executives that the current standoff won't be frozen in time - just as it did not between India and Pakistan regarding their dispute over Kashmir. As Tehrani, the Iranian oil executive, put it, "In the subsequent months there will be some kind of arrangement whereby the West is satisfied and Iran's legitimate rights will be respected." Nuri added a conditionality: "Nuclear weapons take care of the strategic ego, they don't solve our economic problems. Forty percent of South Asia still lives below the poverty line."

Rafiullah Azmi from the Institute of Islamic Studies in New Delhi stressed that IPIL would reach way beyond South Asia, offering a vital link among the Persian Gulf, Central Asia, South Asia and China, and thus "it goes against the geopolitical game of the US in the Persian Gulf". So basically why is Washington so much against it? "The Americans feel it will help Iran; it will set dangerous precedents for other countries to buy gas from Iran; and it will cement friendly ties between Iran, India and Pakistan," said Azmi.

Tehrani said that "it goes back to [former US president] Bill Clinton, when he said that you're free to buy energy from anywhere, as long as it's not from Iran". Azmi stressed that India was creating "a multitude of options" for its energy needs - from nuclear to gas. Nuclear power in 2010 will attend to no more than 10% of India's requirements. He recalled what Prime Minister Manmohan Singh recently told the Indian parliament: "We are not part of any push towards regime change in the region." Azmi is convinced "geo-economics will triumph over geopolitics".

No tapping

The Trans-Afghan Pipeline (TAP) has disappeared from view - obliterated by the Taliban resurgence - but the project remains in the cards, although the realistic prospects are grim, according to Seyed Shah Bukhari of the Institute of Strategic Studies in Islamabad. An agreement among Turkmenistan, Afghanistan and Pakistan was signed last month. India is an observer. The US is very much in favor. But besides the chaos in Afghanistan, it is the reliability of Turkmenistan that is in question.

Turkmenistan has signed multiple contracts, especially with Russia and Ukraine, but there's no guarantee it will be able to supply all of its customers. Bukhari stressed that both India and Pakistan may need more than two pipelines for their needs. That would mean IPIL, TAP and another US$2.7 billion project from Qatar via Oman to Pakistan and then India. Tamine Adeebfar, an analyst at the Caspian Energy Politics in Brussels, expected the Middle East to supply energy to East Asia for nearly a century. There's total interdependence now, but everything "needs to be anticipated and planned now". This is dawning on the Iranians.

Iranian oil executives Alavi and Tehrani make two important points - both of them related to the urgency of foreign and local direct investment in its gas industry. Iran still cannot compete with Russia in exporting gas to Europe - one of its priorities for the 21st century. And incredible as it may seem, Iran still imports gas from Turkmenistan - even though it holds the second-largest gas reserves in the world.

Ahmed al-Najar, of Al-Ahram Institute for Strategic and Political Studies in Cairo, prefers to puncture the myth that oil prices are related to the Organization of Petroleum Exporting Countries. World demand for oil grew from 76.6 million barrels a day in 2004 to 83.3 million in 2005. In China, it grew from 4.7 million barrels a day in 2001 to 6.7 million in 2005. But in the US it grew only from 24 million barrels a day in 2001 to 25.6 million in 2005.

So the growth in demand is basically from Asia. Al-Najar said that "supply now exceeds demand by 2 million barrels a day. There's plenty of oil, all the time." So who's profiting? "Big oil companies. They receive from 25-40% of what they discover. This is related to the American oil strategy, which is biased towards the American oil companies."

Vulnerable China

The interdependence of the Persian Gulf and Asia anyway is more than enshrined. World demand for natural gas will triple from now to 2020. By 2025, Asia will import 80% of its total oil needs, and 80% of this total will be from the Gulf. Chinese executives such as Liu Guochen of Sinochem Corp, based in Amman, admit that China imports energy from unstable areas, and is worried about US hegemony over the flow of energy resources.

So China is frantically diversifying, said Iranian scholar Masoud khavan-Kazemi of Razi University, "in its investments, pursuing territorial claims and building up strategic oil reserves". He foresees Asia facing "great imbalances"; the potential for conflict in the Persian Gulf, Russia, Central Asia and the Caspian; insecurity suffered by China, India and Japan in relation to the US presence in Asia; and the Chinese sense of vulnerability as China and the US are de facto strategic rivals.

Akhavan-Kazemi pointed out that the US was pursuing three key objectives. The first two may be shared by many Asians: guaranteeing the energy flows from Asia to international markets; and trying to stop Russian hegemony. But a crucial factor - which the Russians are keen to point out - is that Iran, India and Pakistan are now observers at the Shanghai Cooperation Organization (SCO). And "the SCO would be able to protect pipelines going in all directions", said a Russian oil executive.

As for the third US objective - preventing Iran from exporting its gas - definitely it is not shared by anyone. Akhavan-Kazemi emphasized that "despite the American military hegemony in the Persian Gulf, its political hegemony is in doubt". In the corridors of the conference, most of the oil and gas executives and scholars agreed that the way the game is played today in Pipelineistan, everything is politicized. "When Bush tells India, 'You don't need to import gas from Iran,' that's totally illogical," said a Georgian scholar based in Bologna. "The [alleged Iranian] bomb is a pretext," said an Iranian oil executive based in London. "The Americans don't want Iran to develop, and that's equally true of China and Venezuela. We need to talk about security through knowledge."

Pipelineistan actors are actively discussing the possibility of limited US strikes against, for instance, the Bushehr plant, as was implied by a recent belligerent statement of the US ambassador to the UN, John Bolton. But the general consensus is that an agreement of sorts will be reached in the next few months - with no UN sanctions against Iran. Asia does not want an Iran battered by the West; Iran, after all, is part of West Asia. Manochehr Mohammadi, Iran's deputy foreign minister, may have spoken for all of Asia when he said, "Any sanctions will badly reflect more on our immediate neighbors than on ourselves."