US needs to reconsider opposition to IPI pipeline

Among the more daring recommendations in a new report by the Pakistan Policy Working Group, a bipartisan group of American experts on US-Pakistan relations, is that the United States should eventually reconsider its opposition to a proposed Iran-Pakistan-India (IPI) pipeline project.
The suggestion, aimed at building peace between India and Pakistan, is well hedged. The report says the project is one that could ultimately be very significant not just for Pakistan, but also for Iran and India. The story says that Iran sees energy-hungry India as one of the most promising markets for its huge natural gas reserves.

The report argues that US pressure on Pakistan to end alleged support for the Taliban in Afghanistan must be combined with diplomatic efforts to build peace and economic ties across the region so that Pakistan stops feeling its security is threatened. The long-term aim, it says, would be to ensure that Pakistan no longer sees a need to use Islamist militants as proxies against its much bigger neighbour, India.
India has long accused Pakistan of sponsoring militants fighting in Kashmir and of backing the Taliban to counter Indian influence in Afghanistan. Although Pakistan denies this, the view is promulgated in the United States, but with the caveat that only by reducing tensions between Pakistan and India can Pakistan be persuaded to drop its dependence on militants.

"To encourage better ties and more robust economic linkages between India and Pakistan, the US should eventually reconsider its opposition to the proposed Iran-Pakistan-India (IPI) pipeline project," the report says. It says that the pipeline could help to stabilize the region over the longer term by providing Pakistan and India with a mutual economic interest.
This could be a sign of things to come, heralding a much more sophisticated approach to US foreign policy. And after years of oil and gas being seen as a cause for war, they can now become a reason for peace, as Iran has always stressed.

Analysts believe that the project is nearing implementation. Iran and Pakistan initiated a Gas Sales Purchase Agreement earlier this year. India and Pakistan have also resolved all bilateral issues including transit fee which saw New Delhi boycotting IPI pipeline talks for about a year.
India has more or less agreed to give Pakistan a transit fee of $ 200 mm per year, which is equivalent to $ 0.60 per mm Btu for allowing passage of the pipeline through that country. India and Pakistan finally agreed in February 2007 to pay Iran $ 4.93 per mm Btu ($ 4.67/GJ) but some details relating to price adjustment remained open to further negotiation. There was a breakthrough in the talks in April 2008 when Iranian President Mahmoud Ahmadinejad visited Pakistan and India.

According to the project proposal, the pipeline will begin from Iran's Assalouyeh Energy Zone in the south and stretch over 1,100 km through Iran. In Pakistan, it will pass through Baluchistan and Sindh but officials now say the route may be changed if China agrees to the project.
The gas will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 bn cm of natural gas per annum, which is expected to be later raised to 55 bn cm. It is expected to cost $ 7.4 bn.

According to Indian ministry sources, the IPI gas pipeline is quite crucial for New Delhi as after signing of the agreement, 60 mm cmpd of gas is expected to be supplied in phase-I, which will be shared equally between India and Pakistan. In phase-II, 90 mm cmpd of gas will be supplied to India and Pakistan. So far six meetings of the trilateral joint working group (JWG) of the participating countries have been held with the last meeting being held in New Delhi on June 28-29, 2007.
India, Asia's third-largest economy, can produce only half the gas it needs to generate electricity, causing blackouts and curbing economic growth. Demand may more than double to 400 mm cmpd by 2025 if the economy grows at the projected rate of 7 to 8 % a year, according to the Indian oil ministry.

Iran plans to start exporting gas to Pakistan in 2011. Iran has completed half the pipeline, which can carry 110 mm cm of gas a day, National Iranian Gas Company (NIOC) said in April.
India uses about 108 mm cm of gas a day, according to a BP report.