Heritage Foundation Leadership for America

The foreign policies of India and Pakistan are driven increasingly by energy security. To sustain their booming economies and growing populations amid tight oil and gas markets, Indian and Paki­stani policymakers are turning to energy deals with unsavory regimes, such as Iran's. At the same time, energy-producing states including Iran and Russia are attempting to tap new markets, drive up oil prices, and secure their own interests by locking in demand.

In 1993, Pakistan and Iran announced a plan to build a gas pipeline, which Iran later proposed extending into India. Dubbed the "peace pipeline," the Iran–Pakistan–India (IPI) gas pipeline would traverse over 2,775 kilometers (1,724 miles) from Iran's South Pars gas field in the Persian Gulf through the Pakistani city of Khuzdar, with one branch going on to Karachi and a second branch extending to Multan and then on to India.

This pipeline would give Iran an economic life­line and increase its leverage and influence in South Asia. U.S. policymakers argue that allowing the IPI pipeline to proceed would encourage the Iranian regime to defy the will of the international commu­nity, develop nuclear weapons, and support terror­ism. Furthermore, inadequate investment in Iran's oil and gas industry and increasing domestic demand could render Iran incapable of supplying natural gas through the IPI.

The Energy Chess Game. Although Iran pos­sesses the second-largest gas reserves in the world, inadequate investment and other deficiencies in its hydrocarbon sector call into question Iran's ability to supply gas to Pakistan and India through the IPI pipeline.

In addition, 475 miles of the IPI pipeline will run through the Pakistani province of Baluchistan. This remote region is home to separatist tribes that employ private militias that fight over territory and resources—conditions that are hardly conducive to secure energy transportation.

The Kremlin is also seeking to influence Iran to send its gas east through the IPI instead of west through the proposed Nabucco gas pipeline, which would undermine Russia's supplier dominance over European gas markets. Russia also hopes that the IPI will undercut plans for the proposed Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline. Russia is interested in developing the Rus­sia-proposed north–south energy and trade corri­dor. Both Iran and India have expressed interest in participating in this undertaking, which would connect them to Europe by way of Russia.

China views Iran as an important node in its energy security and in its strategy to develop more overland energy transport routes to reduce its dependence on U.S.-dominated sea-lanes.

What the U.S. Should Do. Constructing pipe­lines is geopolitically and logistically challenging, especially in regions fraught with political tensions, financial sanctions, and unstable transit areas. Given regional security considerations and the con­straints on Iran's capacity to supply natural gas through the IPI pipeline, India and Pakistan would be best served by expanding their liquefied natural gas (LNG) import capacity and investing in alterna­tive energy technologies and projects, such as hydroelectric power and renewable energy, rather than by pursuing the IPI pipeline.

To support India and Pakistan in meeting their rapidly growing energy demand, the U.S. should:

• Step up its energy diplomacy to discourage their pursuit of the Iran–Pakistan–India pipe­line. The U.S. should develop a multifaceted strategy that incorporates diplomacy and eco­nomic policy tools to discourage pursuit of the pipeline.
• Encourage India to increase LNG capacity and expand contracts with Australia, Qatar, and other Gulf exporters.
• Support the TAPI gas pipeline through inten­sive diplomacy with the governments of Turk­menistan, Afghanistan, Pakistan, and India with the understanding that, in view of the situ­ations in southeastern Afghanistan and Bal­uchistan, Pakistan would need to stabilize further before the project becomes feasible from a security standpoint.
• Boost bilateral energy dialogues with India and Pakistan.
• Expand energy cooperation with India within the framework of the Asia–Pacific Partnership to develop and disseminate technologies that support the development of clean, efficient, and cost-effective energy.
• Continue to pursue U.S.–India civil nuclear cooperation.
• Assist Pakistan in building large-scale hydro­electric projects and LNG terminals to meet its growing energy and electricity demand.

Conclusion. Iran's support of terrorism, hostile policies in the Middle East, pursuit of nuclear weapons, and mismanagement of its economy make it a dangerous and unreliable business part­ner and call into question its capacity to supply nat­ural gas to Pakistan and India through the IPI. Potential transit problems in Baluchistan also make this project inherently risky.

As major energy consumers, the U.S. and India share strategic interests in the Persian Gulf and Central Asia. Building the IPI would be contrary to these interests, would destabilize the Persian Gulf, and would strengthen Russia's grip over Central Asia, decreasing both regional and global energy security. Accordingly, the U.S. should fully back TAPI to increase India's and Pakistan's energy secu­rity and reduce Russia's leverage in Central Asia.

India and Pakistan would benefit from an increase in LNG contracts and capacity. This would also strengthen India's ties to the Middle East. Finally, blocking Iran's overland export option might also increase Iran's interest in promoting stability in the Strait of Hormuz. The U.S., India, and Pakistan should expand their energy cooperation to ensure security and economic prosperity in the region.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Cen­ter for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies; Lisa Curtis is Senior Research Fellow for South Asia in the Asian Studies Center; and Owen Graham is a Research Assistant in the Allison Center at The Heritage Foundation.