Tag: natural gas

TAPI’s confused objectives, risky implications

India should not invest in making itself vulnerable to geopolitical blackmail

Kabir Taneja quotes me in an article in the Sunday Guardian on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Here are my views in greater detail.

What is your general consensus on TAPI? Does it benefit India geo-politically?

It is unclear what India’s primary purpose is with respect to the TAPI and the IPI gas pipelines. If it is energy security, then clearly placing an important source of fuel in the hands of a hostile actor like the Pakistani military-jihadi complex defeats the purpose. If it is geopolitics, it raises the question if energy security is being sacrificed at the altar of wishful thinking about potential geopolitical gains.

India would do well to invest in LNG terminals and infrastructure, enabling it to purchase gas from anywhere in the world, including from Iran and Russia. Energy security lies in trying to make the international natural gas market as competitive as possible.

What are your main reservations on the project?

Any project that relies on Pakistan is fundamentally risky.

First, even before the resurgence of the Baloch insurgency, pipelines were routinely targeted in inter-tribal political violence. Now with a full-blown insurgency, the extent of which is unclear, but where Pakistani air power and armour is being employed, the political risk rules out any pipeline investment.

Second, the Pakistani military-jihadi complex has entirely different incentives compared to the the putative Pakistani state. It’s tendency to pursue actions that undermine Pakistan are well-known: it conducted nuclear tests in 1998 despite knowing that this will cripple the economy. More pertinently, it has blocked the transit routes for US & NATO forces since Dec 2011 even at the cost of more than $1.2 billion in coalition support fund payments that it is owed. The transit route business is highly profitable to the army and its business empire. A conservative estimate is that the Pakistani military establishment collected around $360 million in different forms of rent, over the last five years.

This puts paid to the assertion that the Pakistani army will permit transit if it benefits financially. Clearly, its behaviour shows that is not the case. The Pakistani army is likely to use the gas pipelines as leverage against India and Afghanistan, regardless of the economic consequences to itself.

Supporters of TAPI suggest that it will help tame the populations of troubled regions in Afghanistan and Pakistan by creating mass employment. Thoughts?

This is a dubious suggestion. In fact, it would be terrible to impose a “resource curse” on a population wracked by radicalism and violence. What the region needs is investment in human capital and political stability that allows normal economic activity to take off. Putting gas fields and pipelines in regions of turmoil will create political economies that might worsen the conflict by providing more funds to warlords. Unless the fundamental security problem is tackled, gas revenues, like drug revenues, flow into the war chests of militant groups.

Why not just put the IPI pipeline to rest?

It’s a bad idea to interlock India’s energy supplies with Pakistan. Period.

It was a stupid idea right from the start. Of course, it looks a lot more stupid now. Swaminathan Aiyar points out why the IPI gas pipeline project should now be officially declared dead. But you don’t have to read Mr Aiyar’s article at all if you had been reading The Acorn during the halcyon days of the ‘peace process’ when it was unfashionable to point out that ideas such as “creating mutual dependencies” with Pakistan are masochistic and that the risk premium will junk the business case in any case.

After explaining why involving Pakistan in a gas purchase deal with Iran is such a bad idea, Mr Aiyar inexplicably proposes a shallow undersea pipeline with a different architecture. It might be better than the overland pipeline but it still carries the risk of a Pakistan hurting itself to hurt India.

It makes far more sense to invest in LNG. This calls for investing in the technology, processing and domestic distribution infrastructure required to handle the imports. This calls for developing a maritime strategy that ensures that India’s LNG supply routes are secure, around the world. And it calls for foreign policy that ensures that LNG becomes the predominant way to ship the world’s natural gas, and the global market becomes competitive.

Of course all this is tall order. But let’s face it—its better than letting Pakistan hold us by the…you know what.