Energy politics in South Asia

by Tanvir Ahmad Khan

Pakistan's newly installed government claims that the state of the national economy inherited by it is far more unsatisfactory than commonly perceived. It is now authoritatively known that the GDP growth rate is slated to come down from 7.5 % to 6.6 %.
There are other areas such as agriculture, manufacturing and poverty alleviation where estimates of progress publicised by the erstwhile administration are said to have been deliberately exaggerated for political purposes.

For the common man, the economic uncertainties are dramatised every day by high food prices, frequent power outages and growing unemployment. An all too visible energy crunch lies at the heart of Pakistan's unfolding economic crisis. In fact, its deleterious effects in various sectors have become obvious probably a trifle earlier than expected because of a rapid increase in demand.
It is a problem that all the states of South Asia face in a setting where for reasons that vary from case to case actual achievement in developing power has lagged behind national planning. A common denominator of national strategies has been a publicly acknowledged realisation that robust exploitation of indigenous resources will have to be supplemented by trans-national energy imports to reach an optimum level of energy security.

This is an important dimension of the total profile, as such cooperation does not seem to follow simple laws of economics and appears to be vulnerable to intra-regional and extra-regional political pressures. Energy seems to have a built-in dialectic.
On the one hand, there is unprecedented recognition of the salience of international energy flows while, on the other, the quest for energy generates relentless competition, desire for hegemonic control of resources and politics of denying easy access to international political rivals.

"Concessional" imports
It is estimated that by 2015 Pakistan's demand for oil will increase to 31 mm toe (ton of oil equivalent) and for gas to 57 mm toe, even if energy obtained from hydel sources and coal is virtually doubled. Domestic production meets only 18 % of its oil consumption. Its proven oil reserves are about 28.8 mm barrels though the natural gas reserves are more substantial.
For considerable periods of time the strain on the economy was ameliorated by "concessional" imports from the Middle East. Even now Saudi Arabia is helping the new government in coping with the adverse impact of a phenomenal increase in oil prices.

India has emerged as a major consumer of energy and energy security is vital to the nation maintaining the current high rates of GDP growth. India's consumption of oil is expected to grow from the 2005 level of 2.5 mm bpd to about 3.1 mm bpd by 2010.
Both India and Pakistan have ambitious plans for augmenting domestic power generation through a mix of development strategies but they also pursue strong diplomatic initiatives to import energy from outside sources. Both countries look towards the Middle East, Central Asia and Iran for potential suppliers. India has in place plans for greater cooperation with Nepal and Bhutan for electric power and with Myanmar for a gas pipeline traversing Bangladesh.

Turkmenistan has been a favourite focus for large scale import of gas through a pipeline to be built across Afghanistan. Potentially, Tajikistan and Kyrgyzstan can export substantial quantities of electricity to Pakistan and India through Afghanistan.
The Central Asian dream solution, however, has remained a hostage to three decades of turmoil in that strategic land bridge between South Asia and Central Asia. Meanwhile, things have not stood still in Central Asia with Russia, China and the West aggressively competing for energy pipelines from there.

Another dream solution was the proposed Iran-Pakistan-India (IPI) pipeline which was also favoured for creating a positive inter-dependence between India and Pakistan. Its future remains uncertain because of entrenched American opposition to it.
In the Pakistani perception, New Delhi has become lukewarm towards this project because of the need to maintain a congenial environment for negotiating what may be an historic agreement between India and the United States on collaboration on civil uses of nuclear energy. India, it is felt, may not have given up this option but is reluctant to pursue it pro-actively. Apart from the American factor, there are unresolved issues of pricing in the IPI gas pipeline.

Pakistan and Iran periodically talk about implementing the Iran gas project even if India pulls out of it. There is some talk of China stepping in. It is difficult to assume that Pakistan-Iran relations are strong enough to withstand external pressures in this regard.
In fact, there is deep anxiety in Pakistan about dangers of Iran-US relations worsening during the remaining tenure of President George W. Bush despite some evidence of their intermittent dialogue on the security situation in Iraq. On their part, the Iranians feel that they have a commodity that does not lack competitive buyers in the international market and that they do not have to offer extraordinary concessions to India and Pakistan.

India needs energy security to sustain its GDP growth, an essential component of its effort to emerge as a global player. Pakistan pursues it to prevent an impending downturn in its economy. It is hobbled by the fact that internal domestic frictions prevented President Pervez Musharraf's government from making any significant headway in the planned mega hydel power projects.
Without either country wanting it, the Great Game being played in the Gulf and the Caspian Basin affects their plans. Because of the uncertainty about Iran, there is renewed interest in the Gulf-South Asia pipeline and in liquefied gas from Qatar. The two sub-continental states will resume their "composite dialogue" in May. There are reassuring signs that they may address economic cooperation more comprehensively in the days to come.

Cooperation in importing energy from outside South Asia and sharing intra-regional grids may figure in future talks.
The exponential increase in Asian energy requirements offers India and Pakistan a chance to play a pivotal role in creating a sustainable Asian energy system.

Tanvir Ahmad Khan is a former ambassador and foreign secretary of Pakistan.