RCEM: Views on Energy News

The Chinese project of putting together the Economic Belt of the Silk Road (EBSR) is one of the biggest geopolitical challenges of modern times. The ambitious idea is to create a network of guaranteed transportation corridors between China and Europe, engulfing transit regions into a unique macro-economic system.

China views it as a means to capitalize on its financial, industrial and human potential.  Countries and regional associations along the way of the Silk Road have a stake in harmonizing their differences and achieve a synergic effect through pooling their resources. On the contrary, the United States perceive the Silk Road idea as a big challenge, since the planned trade transit corridors, especially on-shore, will be out of American reach and control.

These transit corridors stipulate new roads and railways with logistic infrastructure and production facilities, and also new oil and gas pipelines, badly needed across these regions.

However, in Central and South Asia, which are on the radar of the Economic Belt of the Silk Road, not only Chinese, but independent pipeline projects are at various stages of readiness. Reviewing these projects will assist in weighing their pros and the contras.

1. The Economic corridor between China and Pakistan, designed to link Western China and the Pakistani port of Gwadar. There are huge Chinese investments aimed to build on the Indian Ocean coast a modern port. It would serve three purposes: assure a short cut for Chinese exports to Europe, guarantee transportation of hydrocarbons from the Middle East to China by-passing US-controlled sea lanes and boost regional development in Western China.

The project is warmly welcomed by Islamabad but watched with suspicion by the US and India.

New Delhi is worried about growing cooperation between China and Pakistan and troubled by the fact that a part of the projected way would pass through the contested Kashmir area.

2. TAPI pipeline, linking Turkmenistan, Afghanistan, Pakistan and India. In December 2015, construction works started near the Turkmen city of Mary. The most optimistic evaluation is that the construction works would take 3 years; the more realistic, formulated by the Indian Energy Ministry, previews a 7 years period.

Financial problems could be overcome. Saudi Arabia and the Islamic Development Bank arranged financial backing in order to place it in contrast with the competing Iranian projects.

The US is politically supporting TAPI, trying to eject Turkmenistan out of the Chinese sphere of influence: if Ashgabat attempts to withdraw from the project, the Americans will raise the issue of the catastrophic human rights records in this Central Asian country. The problem is that Turkmenistan has already sold most of its gas output to China and does not have significant additional volumes for exports.

Beijing might perceive these outside pressure as threatening its interests.

However, the major problem will remain the security environment in Afghanistan and Pakistan. US troops might be put in charge of the pipeline security, which would be a good pretext to stay in Afghanistan indefinitely.

3. Pipeline Iran-Pakistan-India. The idea was first formulated 20 years ago but, so far, remains in an embryonic state due to international sanctions against Iran. Mutual suspicions between the three countries should be also put on the record. The US is also trying to block Iran from the Indian market in order to secure it for American LNG cargoes, and the same policy is pursued by Qatar. On a practical side, the project could remain limited to a single line between Iran and Northern Pakistan, with a possible extension to Gwandar and even to China along the planned corridor. The project is also an evident competitor to TAPI.

4. Pipeline Iran-Oman-India. New Delhi regards this project as acceptable since it bears less geopolitical transit risks. Oman has a huge Shiite community, is very independent on the winds blowing in the Gulf monarchies, but nonetheless has good relations with Iran. Pakistan is excluded as a transit country from this project, so India and Iran can establish direct gas link. There are no big technological challenges and the project has good chances to be implemented. The only question is the timing of the development of the Iranian resource base in the post-sanctions era.

Pipeline projects in this part of the world are developing under close scrutiny of two big uninvolved players.

The US has inherited the regional Big Game played in the XIX century by the British Empire. America’s playbook is focused on maintaining a situation when no regional or global player has a winning position to dominate over others.

The US is supporting TAPI against China and, partially, against Russia. Washington is worried that Pakistan is leaning away from the US toward China. If the idea to build a huge transportation hub in Gwandar is realized, American efforts to create an anti-Chinese coalition in Asia and their control of the Malacca Street will be not enough to block Chinese imports delivered along the sea and land routes.

Iran also remains a strategic foe for the US. Despite the solution of the Iranian nuclear program, the US will continue to contain the ayatollahs and to derail their energy projects.

As to India, Washington is interested in the huge and speedily developing market and would like to reserve it solely for its own hydrocarbon exports, preventing easy access for competitors.

From the geopolitical perspective, the US perceives India in an anti-Chinese equation. For that reason, Americans will try to rupture between New Delhi and Beijing wherever they can, especially within the framework of BRICS and the Shanghai Cooperation Organization (SCO).

Russia faced with western sanctions is playing the “Oriental card” but is wary not to become excessively dependent on the goodwill of China. Yet, Moscow has also stepped into the game with Rostech company ready to launch construction of a gas pipeline from Karachi to Lahore, in Pakistan; Russian companies are also starting to sell LNG to India or pipeline gas through swap deals with Iran.

The main challenge for Russia is not only the US but also the Chinese hegemonic ambitions. These dangers could be mitigated through cooperation mechanisms within SCO, BRICS and also between EBSR and EEU. But the process was only kick-started with an open end.at the e.

All in all, the current assortment of gas transportation projects either on the table or in the initial stage of design illustrate the intense pipeline diplomacy in Asia when geopolitical consideration often outweigh business rationale. 

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About the Author

George Hatziioannou

George is Editor of the "Energy International Risk Assessment" (EIRA) independent monthly newsletter, a specialised on-line publication, originally launched in May 2103 as a digital edition to a wide audience of readers. Together with the eiranews.com website, they focus on risk assessment and the geopolitics of energy in South East Europe, the Middle East, North Africa, and adjacent  regions. A retired diplomat, he has worked for 35 years as a Press Counsellor at the Greek Embassies in Washington DC, London, Moscow, Prague, and the UN Greek Mission  in New York City.



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