shyamd wrote:China to invest in Iran-Pakistan gas pipeline
Two stunning developments in China-Iran relationship over the weekend coincide with the rapid atrophying of India’s traditionally close ties with Iran and would draw attention once again to the shift of templates in the geopolitics of the Persian Gulf region, which India regards fondly as its ‘extended neighbourhood’.
First, the construction work on one of the world’s biggest petrochemical complexes for producing urea and ammonium fertiliser began in southern Iran on Saturday. The project is expected to be in completed in about 3 years’ time and would have a whopping production capacity of 4 million tonnes of fertiliser annually. The project involves an investment of 4 billion dollars and, interestingly, China is making 85% of the investment. More important, China is teaming up with the Iranian private sector as its partner in the project. Virtually, it becomes a Chinese-owned fertiliser project in Iran with buyback arrangement. (Iran exports almost half of its petrochemical products.)
Second, China is fast emerging as the front-runner for the construction of the Iran-Pakistan gas pipeline (on the Pakistani side), which is expected to begin by end-2011 soon after the German consultant completes the ‘route survey’. The Pakistan-China joint energy working group is meeting in Beijing on Monday. President Asif Zardari is also visiting China in the coming days. China may consider investing in the Iran-Pakistan gas pipeline project. The construction of the Pakistani side of the pipeline is estimated to cost 1.25 billion dollars, which is not a big amount for China to invest. Pakistan is obliged to complete the project by 2014 as any failure to receive the Iranian gas by that stipulated date will automatically trigger a heavy penalty clause in the agreement.
The big question is whether China will want to follow up a decision to invest in the Iran-Pakistan gas pipeline with an interest to extend the pipeline to China, which Pakistan has been seeking. The factor that ostensibly discouraged India from participating in the project, namely, the security
situation in Baluchistan, doesn’t seem to deter Iran, Pakistan or China. Ironically, Tehran’s preference all through was to extend the pipeline to India rather than to China. But then, it takes two to tango. And in this case, arguably, it takes three to tango — including Uncle Sam.
Cementing the friendship. Will talk about this later when time permits.
Iran is already selling most of its oil/gas to PRC via pipelines through central asia and also via shipping. The whole point of IPI was to diversify away from China for Iran. For India it was a "peace pipeline" which goes on to what I was talking about living in peace and having an interdependent economy with pakistan for the benefit of both our citizens. However, Pak's actions with terror have stopped us from going forward.
Iran says that India's payments can be used to stabilise Balochistan. Well, its not currently in our interest to stabilise Balochistan and also we don't have the power to stabilise Baluch - as the US is calling the shots there.
PRC/Iran/Pak are cementing their alliance with this pipeline to remove the US from the entire region - from Afghanistan to Lebanon. The pipeline is not economically sustainable if it just went to Pak. PRC or India must buy it. India wants the gas, but because of the nuke deal and its direct links to relations with Tehran we can't go for it.
Also, if lets say AfPak falls to the Talebs. Basically, you will see a renewed front in Kashmir and renewed violence and perhaps a Kargil like situation again. So to divert all this, India is taking the war to Af-Pak. So Pak is spread thin and our borders remain SAFER and Kashmir is ok. As long as we open the front from the northern borders against Pak. Pak will be under huge pressure. So to prevent another war being fought we are joining the US/Russia to help stabilise Af-Pak with the Karzai govt.
An Indian presence in Af-Pak is a big no no as we can cut off ALL major oil and gas supply lines to PRC. So PRC can't really go to war with us. At the moment we can cut them off with relative ease because their trade routes go past India. The oil is sitting closer to us. So as an alternate PRC went big with Tehran and used central asian pipelines to get oil. So we need a presence in Central Asia for our own protection. I'll leave the rest left unsaid.
Anyway, why has ISI/IB kidnapping Baloch in Karachi and Balochistan? Because they know the US is gonna come down big on the TSP once Iran/PRC/Pak alliance is formed. So, the cold war has begun. The US/India and Russia are together. GCC is now looking at a pro Iran - Pakistan govt. And Pak was central to their plans of diverging from the US/West. The US is pooing its pants at the prospect of PRC being able to take the oil fields from them. So its pacifying the GCC. The GCC is looking red faced as it relies on Pak for its security. So the question in the GCC decision makers minds are - can I trust Pak after AQK and OBL? Ummmm.... unlikely. So Prince B is jumping on his jet and will be visiting other nations to get some friends.
PRC is going for this pipeline to cement the alliance between the 3, so they all need each other for money and gas - a long term alliance. US will have to disrupt supply on a regular basis via its non state actors who have received training from a GCC state.
GCC, US, India, Russia are slowly getting together. Russia is a pivot state due to Iran. But Russia wants a safe Af - Pak because of Chechnya - they are already suffering from an unstable AF Pak. Pak is a pivot state because the balls are literally held by GCC and Pak is central to GCC defence.
Its all happening... It will be an interesting time to watch.
As for Iran - India oil payments. Basically the US has authorised India to make the payments. Simple as that. Why do you think Reuters and otherswere interviewing the US treasury officials about OUR payments to Iran. Why did the US allow that? Was it because of Af-Pak - carrot stick policy that the US loves to use? Lets see.... Iran is central to our AfPak strategy so we need Iran on our side. I said many times before, India knows the solution to the payment crisis but is stonewalling on purpose. I think I know which route that we are using to pay Iran. Its because this state doesn't want to be identified.
India needs to talk to Khomeini and MA an understand what their position is on Af Pak.
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A very good article by the Super Atul Aneja
Oil payment row and India-Iran ties
Atul Aneja
The Hindu Green fuel emission control petrol Euro III and IV units of HPCL. File photo
As Indian firms line up behind Saudi Arabia and its Gulf partners, their moves are likely to invite Iran's hostility which could easily spill over into the political realm.
India's ties with Iran need urgent attention as an unresolved row over oil payments threatens to drag the relationship, once described as “strategic,” to a new low.
The problem arose in December 2010 when the Reserve Bank of India, under U.S. pressure, decided to no longer use a clearing mechanism to pay Iran for its crude. Washington and its western allies had exhorted India not to use the Asian Clearing Union (ACU) currency swap system to pay Iran. They argued that this mechanism, established at the initiative of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP) and in operation since 1974, was disconcertingly opaque. Consequently, it was difficult to ascertain whether the money flowing into Iran's coffers was not used to fortify the country's nuclear programme. Faced with these objections, India, according to the Financial Times, began using the German bank, EIH, for making payments. However, this channel broke down in May 2011, after the European Union imposed sanctions on Iran.
Iran is India's core energy partner — its second largest oil supplier. Nearly 12 per cent of India's total demand, around 4,00,000 barrels a day, feeds India's refineries and petrochemical complexes. The Mangalore Refinery and Petrochemicals Ltd (MPCL) is the largest oil importer from Iran. The IOC, BPCL, HPCL and Essar are also major consumers of Iranian crude.
Because of the difficulties over payments, Indian companies have accumulated a debt of nearly $5 billion. With the payment row festering, Iran decided to halt supplies to Indian firms for August. However, as the deadline for the payments neared, both sides scrambled to achieve a breakthrough. On July 31, Iran's Oil Ministry website SHANA reported that the payment row had been settled. India would pay part of the debt “promptly” and the rest would be “gradually settled.” The Ministry's optimism notwithstanding, details of the inner workings of the new mechanism and the prospects of its durability remain far from clear. (Media reports say that India and Iran have finalised the settlement of dues through a Turkish bank arrangement.)
The possible collapse of Iranian supplies will have far greater ramifications than a mere commercial impediment in a buyer-seller relationship. Iran's decision not to supply oil, if implemented, will deliver a serious blow to the evolution of a robust geostrategic relationship between New Delhi and Tehran, of which a highly developed energy partnership has to be the core. Aware of the importance of establishing a strong political relationship, India and Iran, with Pakistan as the third party, had begun negotiations on the Iran-Pakistan-India (IPI) pipeline. Had the pipeline materialised, it would have not only generated obvious economic benefits but also imparted regional stability, premised on mutually beneficial interdependence.
Despite the unrealised potential of the IPI or any of its variants, Iranian officials privately concede that the energy relationship between India and Iran should move on. Before threatening to stop supplies, Iran had begun to show fresh interest in seeking Indian investments in its oil and gas sector. Alive to the recent Indian energy forays in neighbouring Central Asia, Iranians were also considering working with India on a possible fuel swap arrangement in the future. Under this mechanism, Iran could export energy to India from its terminals, in return for an equal amount of oil delivered across the border to Iran, which may have been tapped by Indian firms in Central Asia.
Quite recently, India's induction into the United Nations Security Council as a non-permanent member appeared to have led Tehran, to consider afresh, the need for reinforcing its ties with New Delhi. “We realise that India in the future is likely to play an ever-larger global role, and we want to position ourselves well as this process unfolds,” an Iranian academic in Tehran, who did not wish to be named, recently told this correspondent.
Apart from energy, there are two key elements that define the relationship. One of them is trans-continental transit. Iran's port of Bandar Abbas is the starting point of the north-south corridor which can ferry goods northwards towards the Caspian, and further into Russia and Europe. But, more critically, India needs Iran to physically access Afghanistan. It can do so from the Iranian port of Chabahar, from where a land corridor extends northwards before entering Afghanistan. For reasons of geography, Iran is central to India's Afghan policy.
The importance of Iran to fulfil India's aspirations in Afghanistan is bound to heighten as NATO, most likely without imparting much stability, begins to pull out of the country, in accordance with a three-year time table. In a likely political vacuum, there will be demands on India, Iran, its Central Asian neighbourhood and possibly Russia to play a proactive role in Afghanistan. That would, however, require a powerful vision and strategic cooperation, including intelligence sharing and political coordination at an unprecedented level, for which serious preparations have to begin right away. In fact, with western forces stepping out, in a manner not very different from the Soviet withdrawal from the country in 1989, India may find it necessary to initiate the evolution of a regional mechanism, where neither Pakistan nor China is left out, so that Afghanistan — a country prone to multiple influences — has a realistic chance to rebuild.
However, the manner in which the oil payments row is being handled suggests that New Delhi, far from strengthening ties with Tehran from a larger regional perspective, might have, after considerable deliberations and probably in line with the thinking in Washington, decided to scale down its ties with Iran. Alternatively, India-Iran ties, of which Afghanistan is a key component, might have become the victim of governmental drift, reflecting complete liberation from a larger strategic vision that should otherwise inform a vibrant relationship between the two countries.
It is, therefore, disappointing that India, instead of quickly arriving at a new payment agreement with Iran and defusing a major crisis, has apparently decided to place heavier reliance on Saudi Arabia as an alternative fuel supplier.
Reuters has quoted K. Murali, HPCL's head of refineries and international trade, as saying that the company has sought an additional supply of one million barrels in August from Saudi Aramco.
India's greater reliance on Saudi Arabia may not be temporary, confined to warding off its current difficulties with Iran. Indian refiners may already be restructuring their procurements by probing alternative suppliers, especially Saudi Arabia and its Gulf allies, to offset their dependence on Iran. In its annual report, MRPL has noted that given “the enhanced level of sanctions on Iran in future, [and] the non-resolution of the current payment crisis, the availability of Iranian crude may be difficult.”
As Indian firms appear to line up behind Saudi Arabia and its Arab Gulf partners, their moves are likely to invite Iran's hostility, which could easily spill over into the political realm. The decision to increase dependence on Saudi Arabia and reduce procurements from Iran is particularly ill-timed because of the rapid escalation recently of a Cold War between the two countries. Since the advent of the Arab Spring — the expression for the rising tide of pro-democracy movements since January that are sweeping across West Asia and North Africa — relations between Riyadh and Tehran have turned nasty. Saudi Arabia's decision in March to send troops into neighbouring Bahrain to quell, what was described by Riyadh as a pro-Iran Shia uprising, has added a sharp emotive edge to the Saudi-Iran rivalry. Iran's foes have also accused Tehran of fomenting the rise of the so-called “Shia crescent” in the region — a mythical Iran-led Shia alliance that allegedly is trying to foist a sectarian anti-Sunni agenda in the region.
By siding with the Arab petro-monarchies to meet its energy requirements, India has, inadvertently or otherwise, forced itself into the throes of the Saudi-Iran Cold War. For many influential Iranians, India's move would be seen as taking sides — a deliberate decision to join the anti-Iran camp led by the United States and its regional allies, chiefly Saudi Arabia. In highly politicised Iran, which is particularly on edge after the onset of the Arab Spring, this is combustible material, which can rapidly inflame public passions against India and eventually lead to the undermining of New Delhi's core interests in Afghanistan, compulsorily channelled through Iran.
Amid the fluidity of the Arab Spring and its accompanying firmament, India needs to navigate skilfully to establish parallel and independent relations with both Saudi Arabia, the world's largest oil producer, and Iran, its strategic partner, for the protection of its interests in Afghanistan and, later, in energy-rich Iraq, where Tehran's influence runs deep. But a balanced and vibrant relationship with the two regional giants will become possible only if India assesses its difficulties with Iran not as an isolated technical issue but as one which can define the contours of its influence in the region.