According to Ahmed Rashid’s Taliban: Militant Islam, Oil & Fundamentalism in Central Asia (Yale UP, 2000). “by November 1996, Bridas claimed that it had an agreement signed by the Taliban and Dostum—trumping Unocal.”
Now China may play spoiler to TAPI
On June 6 and 8, 2012, on the sidelines of the SCO summit meeting in Beijing, Afghan President Hamid Karzai met with Chinese President Hu Jintao and China National Petroleum Corporation’s (CNPC) head Jiang Jiemin and discussed the proposal along with other issues. According to reports in the Chinese media, CNPC offered to conduct a technical and economic feasibility study for the proposed project on Afghan and Tajik territories. That the route for the proposed pipeline seeks to avoid the troubled Pashtun-dominated areas in Afghanistan—seen as one of the biggest hurdles for the TAPI project —would make it more attractive for the financiers.
While actual volumes of the proposed pipeline were not discussed or disclosed, it was agreed that a memorandum of understanding (MoU) would be signed when a CNPC delegation visits Kabul to discuss the proposal in greater detail, along with oil and gas exploration possibilities in Afghanistan’s Amu Darya basin, for which an agreement was signed between the Afghan Ministry of Mines and CNPC in December 2011. On returning to Kabul, President Karzai reportedly told Wahidullah Shahrani, the Minister of Mines, to prepare a framework agreement on cooperation with the CNPC and to set up a Chinese-Afghan joint working committee on these projects. CNPC and the Turkmen state firm, Turkmennebitgaz, also signed a framework agreement to increase ongoing gas deliveries to China to 65 billion cubic metres (bcm) from the current 30 bcm per annum by 2014. The gas would be sourced from Turkmenistan’s Bagtyyarlyk gas field and possibly from sections of the South Yolotan field. This would, presumably, be the source for the proposed pipeline project as well. Interestingly, the additional Turkmen gas supply to China is expected to commence in 2014, the year TAPI is expected to begin construction.
The timing of the proposal for the new Turkmen-Afghan-China pipeline is intriguing, setting off speculation about whether it was being conceived to stymie TAPI or is part of China’s strategy to guard against any extra-regional influence in Central Asia, including on the region’s energy resources, which, Beijing wants to garner for itself to offset its dependence on the Strait of Malacca. Given that China has already contracted to buy additional gas from Turkmenistan would suggest that the project is motivated by the former consideration. What is important, however, is that the proposed pipeline seeks to exclude both Pakistan and India, hailed as potential markets for Central Asian energy resources. This is not the first time that China has played spoiler in energy projects originating in a Central Asian state. For example, in 2009, when an EU-backed consortium was working on the Nabucco pipeline to reach Turkmen gas reserves from the west as an additional source, CNPC inaugurated the Turkmen-China gas pipeline, thereby jeopardising Nabucco’s viability.
With the possibility of a rival pipeline transiting Afghanistan, several factors will have to be taken into consideration.
First, will the new pipeline be in lieu of TAPI or in addition to TAPI? This would depend on (a) whether Turkmenistan has sufficient gas to supply both the projects as well as additional gas exports to China and (b) whether financiers would back the more hazardous TAPI project.
Second, does the agreement with China signify a reflection of President Karzai’s confidence—or in fact the lack of it—in TAPI, or is this a reflection of the slide in relations between Karzai and the US? Interestingly, at the time when India and Pakistan agreed on the GSPAs for TAPI with Turkmenistan, Afghanistan had only concluded a MoU for co-operation with Turkmenistan in the gas sector, as against a contract, which was deferred ostensibly because negotiations with Afghanistan were continuing on the price of deliveries.
Third, with the US now no longer in a position to support TAPI other than politically, and with President Obama set on withdrawing from Afghanistan in 2014, does Karzai now see TAPI as unviable, despite recent reports of the Taliban’s assurance that it would not sabotage the project?
The only thing that is certain is that President Karzai’s step-back on TAPI will have an impact on the project’s fate. Let us not forget that Afghanistan is central to TAPI, apart from ensuring that it would provide an alternative to Iranian gas. However, ironically, TAPI’s demise could revive IPI. Pakistan, which is facing a severe energy crunch and is therefore reluctant to succumb to US pressure to abandon the Iranian pipeline, is now talking to the Russians as potential financiers of the IPI—now truncated to IP—project. Recently, a minister-level Russian working group was reported to have participated in meetings in Pakistan, with discussions focusing on Russia’s willingness to finance IPI. The Russians have long indicated their interest in developing a gas market in South Asia, and the recent rapprochement between Moscow and Islamabad may well be the opportunity the former has been seeking to re-engage with the subcontinent politically. Moreover, it would upset the US strategy to circumvent any Russian involvement in Central Asian energy geopolitics.
At the same time, the Turkmen-China pipeline could jeopardise Russia’s plans to go ahead with its gas deal with China. With Turkmenistan offering lower-priced gas to China, it provides Beijing the leverage to negotiate better terms with Russia for future gas deliveries. The two countries have been in talks to import 68 billion cubic metres of gas annually for some time. Although an MoU was signed in June 2009, no agreement has followed suit, ostensibly because of differences over pricing. As a result, with the onset of more Turkmen/Central Asian gas flowing to China, Moscow may well lose its hold on the region’s gas.
For India, the China pipeline would end, or at least put on hold indefinitely, plans to import Central Asian gas. Given the large difference in the price of imported gas, whether piped or liquefied, and domestically produced gas, the pricing discrepancy would further add to the government’s gas import bill. With US shale gas now opening up an avenue for low-priced LNG imports, provided India is granted a waiver from US laws on gas imports to non-FTA partners, it would be a better option than complex transcontinental pipeline projects.
Shebonti Ray Dadwal is a IDSA Fellow specialising in energy-related issues