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A renewed battle for resources

Shamil Shams
July 22, 2015

Iran's nuclear deal has allowed South Asian nations to reset their trade and defense ties with Tehran. But the situation is also intensifying the fight for resources in the region. DW analyzes the changing dynamics.

Iranians work on a section of a pipeline (on with are sticked Iranian and Pakistanese national flags) after the project was launched during a ceremony with presidents of Iran and Pakistan on March 11, 2013 in the Iranian border city of Chah Bahar (Photo: ATTA KENARE/AFP/Getty Images)
Image: Getty Images

Pakistan's Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi recently said that work on the pending Iran-Pakistan-India (IPI) gas pipeline project would resume in the wake of Iran's nuclear deal with the world powers. Pakistan, which has been facing an acute energy crisis for many years, plans to use funds provided by China to complete its part of the project which had been interrupted due to the international sanctions on Tehran.

The imminent removal of economic sanctions on Iran will clear the way for Islamabad to pursue the gas pipeline for eventually importing up to $2.5 billion (2.3 billion euros) worth of Iranian gas annually, according to Abbasi.

"Pakistan has been trying to overcome its energy crisis by importing gas from Iran but sanctions on Iran had hampered the work on the project," Abbasi was quoted by Radio Pakistan as saying following the landmark Iranian deal in Vienna on July 14.

But Rajiv Biswas, Asia-Pacific Chief Economist at the analytics firm IHS, believes that while the economic benefits of an IPI pipeline are significant for both India and Pakistan, "the geopolitical reality is that the prospects for the project are heavily impacted by political risk, due to the vulnerability of the pipeline to regular terrorist attacks that could make the pipeline highly unreliable as a gas supply source."

Chabahar port (Photo: dpa +++(c) dpa - Bildfunk+++)
India will have a sea-land access not only to landlocked Afghanistan, but also to other Central Asian states through ChabaharImage: picture-alliance/dpa

It also remains unclear whether India would continue to be part of the project. Indo-Pakistani ties have deteriorated since Narendra Modi, a Hindu nationalist politician, came to power last year. The two South Asian rivals continue to trade gunfire across their Kashmir border, and officials on both sides have accused each other of creating unrest in their countries.

India bypasses Pakistan

The Iranian deal has presented new opportunities for New Delhi, which can now bypass Pakistan in dealing with Iran and Afghanistan and expand its economic influence to Central Asia. In a sign of increasing strategic cooperation, India reached an agreement with Tehran on May 7 to develop the Chabahar port in Southeast Iran. The project is expected to increase trade and economic engagement between the two countries. Although India and Iran originally agreed to develop the project in 2003, both nations failed to make much progress on this front due to Western sanctions on Iran linked to its controversial nuclear program.

"The Iranian government has invited India to play a key role in investing in the development of the Chabahar port. The development of this port project is being given a high priority by the Indian government, as it also will help to improve road access for Indian trade with Afghanistan as well as providing a key access port for the International North-South Transport Corridor planned for freight transport between Russia, Iran, and India," Biswas told DW.

Iran has also opened up a new road which links Afghanistan with Chabahar. Experts say this would undermine Pakistan's role as the sole transit hub to landlocked Afghanistan and Central Asia. Islamabad would thus lose a major portion of its transit business to Iran and India.

Chabahar Port provides Afghanistan closer access to the Indian Ocean than Pakistan's Karachi port. Recently, the authorities in Kabul sealed a tripartite trade agreement with Iran and India on using the Chabahar port as an alternative route, which is "expected to jack up bilateral trade from $700-800 million to $3 billion" according to the Pakistani media.

"The main reason India wants to develop Chabahar is to allow itself easier access to Afghanistan but also to Central Asia - an energy-rich region that is very appealing to energy-starved India. Pakistan refuses to let India use its territory for transit to and from Afghanistan, so India sees Iran as the next-best option," Michael Kugelman, a South Asia expert at the Washington-based Woodrow Wilson Center, told DW.

Biswas, however, says the Chabahar agreement would probably not affect Iran's ties to Pakistan. "Iran and Pakistan have planned to build a gas pipeline which will help to meet Pakistan's severe shortage of gas supply. This Iran-Pakistan gas pipeline is likely to be completed quickly once international economic sanctions on Iran are lifted," underlined Biswas.

Intensifying regional rivalry

In 2010, Pakistan also signed an agreement with Turkmenistan, Afghanistan and India to construct a 1700 kilometer-long TAPI gas pipeline. The pipeline aims to transport 30 billion cubic meters of gas annually from Turkmenistan. Passing through Afghanistan and Pakistan, it will end in India.

Afghanistan is supposed to benefit the most from this transnational pipeline, since it will receive a lucrative amount of transit fees. Besides, Pakistan's energy crisis is deepening day by day, and Islamabad has been looking for various options to secure its energy needs. During his recent visit to Turkmenistan, Indian Prime Minister Modi also spoke about the importance of Turkmenistan gas for India.

Iran's President Hassan Rouhani, (L) and Indian Prime Minister Narendra Modiin during their meeting in Ufa, the capital of Bashkortostan republic, Russia, 09 July 2015 (Photo: EPA/BRICS / SCO PHOTOHOST / RIA NOVOST)
India's exports to Iran have almost doubled over the past two years to $4 billionImage: picture-alliance/EPA/Ria Novosti

"Finding a supply route for imports of Turkmenistan gas continues to be of considerable interest to India. However, like the IPI pipeline project, the vulnerability of the TAPI pipeline to terrorist attacks remains a key vulnerability for the project. Instead, the Iran nuclear deal with the P5+1 powers opens up the possibility of a new gas pipeline route for India via Iran to access Turkmenistan gas," said Biswas.

As India and Afghanistan get closer to Iran, Pakistan strengthens its ties with China. In April, Chinese President Xi Jinping signed 51 accords to inaugurate the China-Pakistan Economic Corridor (CPEC), which will create a network of roads, railways and pipelines linking China's restive west to the Arabian Sea through Pakistan. The deals are also expected to boost Pakistan's underperforming economy and generate employment opportunities in the country.

"Pakistan's role in the region has been given a tremendous boost by the large infrastructure investment commitments made by China, with Pakistan's Gwadar port likely to play a growing role for Chinese freight transport via the Arabian Sea," he added.

Experts fear that with Iran opening up to the Western world, particularly the US, and the South Asian countries like India and Afghanistan willing to expand ties with Tehran, the Indo-Pakistani regional rivalry will only continue to intensify.

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