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Pipeline Diplomacy With Iran and Pakistan

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The Obama administration continues to be chagrined with Pakistan and yet has asked Congress for $1 billion in assistance with energy infrastructure projects in the country this past week. How could this be countenanced in times of economic stress and ostensible Pakistani defiance of U.S. demands on counter-terrorism? Secretary of State Hillary Clinton explained before a House Appropriations Subcommittee on Foreign Operations that the requested funds were aimed to assist with a gas pipeline project from Turkmenistan to Pakistan via Afghanistan. The alternative, she feared, was that Pakistan would choose to buy gas from a pipeline being built by Iran with financial support from the Chinese Export-Import Bank.

In her testimony, Secretary Clinton also warned Pakistan that the Iran Sanctions Act could be applied if it went ahead with the project. However, the application of this law is at the discretion of the U.S. authorities since Turkey already has a functioning pipeline with Iran, passing through its conflict-ridden Kurdish region, and yet no sanctions have been applied against this important NATO ally. The Iran-Turkey pipeline also exemplifies how security can be maintained along pipeline corridors in conflict zones. Threatening Pakistan with sanctions over an energy project with Iran will only worsen U.S.-Pakistan relations and make it even more likely that the country will espouse more malevolent partnerships.

For Secretary Clinton to follow such a zero sum game of energy diplomacy is troubling, as it misses an opportunity for improving U.S. relations with both Iran and Pakistan. The energy demand in Pakistan, and further along the pipeline route, in India, is so large that both projects from Turkmenistan (TAPI) and Iran (IPI) could be viable. Both pipelines provide a promising outlook for the entire region if managed properly.

Afghanistan may earn as much as $100 million per year from transit fees from the TAPI pipeline. Despite the high prices for gas Iran is offering to Pakistan, the IPI pipeline could save the country between $652 million and $1.17 billion annually, depending on the price of oil. This is about the same amount as the Kerry-Lugar legislation would deliver in non-military aid each year to Pakistan. Government reports suggest that Pakistan currently has an energy shortfall of between 3000 and 4000 megawatts (MW), while India's shortfall is estimated to be between 15,000 and 20,000 MW. Moving forward with the two pipeline projects could also help improve relations between India and Pakistan which the U.S. should undoubtedly encourage.

The biggest hurdle to the success of either pipeline project is the transit route through Pakistan's troubled Balochistan province where a separatist insurgency has been brewing for many years. Much to the annoyance of Pakistani authorities, this insurgency received some unexpected support from Congressman Dana Rohrabacher of California who is introducing a congressional resolution to support self-determination in the province. The pipeline prospect could provide a way for the US to engage the Baloch nationalists in a constructive way, and put pressure on Pakistan to meet their legitimate demands for economic benefits from such a project.

Instead of using the old divisive game of cold war politics where Pakistan would be forced to choose between the U.S. and its adversary, the Obama administration needs to consider this situation with creative diplomacy. The common cause of energy and the clarity of trade flows can help to literally bridge the divide in this regard and make Iranians and Pakistanis more confident of U.S. sincerity for peace and development in the region.

In this context, the Obama administration might harken back to the previous administration's approach to the matter. During a rare visit to Islamabad in 2006, President George W. Bush remarked that "our beef with Iran is not the pipeline...our beef with Iran is [that] they want to develop a nuclear weapon" and suggested he "understands the need to get natural gas in the region, that's fine." Differentiating between nuclear compliance and regional cooperative projects on energy is essential. The U.S. government has a rare opportunity to deal with its two most intractable problem countries in South Asia -- Iran and Pakistan -- with one master stroke of pipeline diplomacy.