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No. 2139May 30, 2008

This paper, in its entirety, can be found at:

www.heritage.org/Research/AsiaandthePacific/bg2139.cfm

Produced by the Douglas and Sarah AllisonCenter for Foreign Policy Studiesof theKathryn and Shelby Cullom DavisInstitute for International StudiesPublished by The Heritage Foundation214 Massachusetts Avenue, NEWashington, DC 20002–4999(202) 546-4400 • heritage.orgNothing written here is to be construed as necessarily reflectingthe views of The Heritage Foundation or as an attempt toaid or hinder the passage of any bill before Congress.

The Proposed Iran–Pakistan–India Gas Pipeline:An Unacceptable Risk to Regional Security

Ariel Cohen, Ph.D., Lisa Curtis, and Owen Graham

The foreign policies of India and Pakistan aredriven increasingly by energy security. To sustaintheir booming economies and growing populationsamid tight oil and gas markets, Indian and Paki-stani policymakers are turning to energy deals withunsavory regimes, such as Iran’s. At the same time,energy-producing states including Iran and Russiaare attempting to tap new markets, drive up oilprices, and secure their own interests by lockingin demand.In 1993, Pakistan and Iran announced a plan tobuild a gas pipeline, which Iran later proposedextending into India. Dubbed the “peace pipeline,”the Iran–Pakistan–India (IPI) gas pipeline wouldtraverse over 2,775 kilometers (1,724 miles) fromIran’s South Pars gas field in the Persian Gulf through the Pakistani city of Khuzdar, with onebranch going on to Karachi and a second branchextending to Multan and then on to India.This pipeline would give Iran an economic life-line and increase its leverage and influence in South Asia. U.S. policymakers argue that allowing the IPIpipeline to proceed would encourage the Iranianregime to defy the will of the international commu-nity, develop nuclear weapons, and support terror-ism. Furthermore, inadequate investment in Iran’soil and gas industry and increasing domesticdemand could render Iran incapable of supplyingnatural gas through the IPI.

The Energy Chess Game.

Although Iran pos-sesses the second-largest gas reserves in the world,inadequate investment and other deficiencies in itshydrocarbon sector call into question Iran’s abilityto supply gas to Pakistan and India through theIPI pipeline.In addition, 475 miles of the IPI pipeline willrun through the Pakistani province of Baluchistan.This remote region is home to separatist tribes thatemploy private militias that fight over territory andresources—conditions that are hardly conducive tosecure energy transportation.The Kremlin is also seeking to influence Iran tosend its gas east through the IPI instead of westthrough the proposed Nabucco gas pipeline, whichwould undermine Russia’s supplier dominanceover European gas markets. Russia also hopesthat the IPI will undercut plans for the proposedTurkmenistan–Afghanistan–Pakistan–India (TAPI)pipeline. Russia is interested in developing the Rus-sia-proposed north–south energy and trade corri-dor. Both Iran and India have expressed interest inparticipating in this undertaking, which wouldconnect them to Europe by way of Russia.

No. 2139May 30, 2008

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

What the U.S. Should Do.

Constructing pipe-lines is geopolitically and logistically challenging,especially in regions fraught with political tensions,financial sanctions, and unstable transit areas.Given regional security considerations and the con-straints on Iran’s capacity to supply natural gasthrough the IPI pipeline, India and Pakistan wouldbe best served by expanding their liquefied naturalgas (LNG) import capacity and investing in alterna-tive energy technologies and projects, such ashydroelectric power and renewable energy, ratherthan by pursuing the IPI pipeline.To support India and Pakistan in meeting theirrapidly growing energy demand, the U.S. should:

Step up its energy diplomacy to discouragetheir pursuit of the Iran–Pakistan–India pipe-line.

The U.S. should develop a multifacetedstrategy that incorporates diplomacy and eco-nomic policy tools to discourage pursuit of the pipeline.

•Encourage India to increase LNG capacity

andexpand contracts with Australia, Qatar, and otherGulf exporters.

•Support the TAPI gas pipeline through inten-sive diplomacy with the governments of Turk-menistan, Afghanistan, Pakistan, and India

with the understanding that, in view of the situ-ations in southeastern Afghanistan and Bal-uchistan, Pakistan would need to stabilizefurther before the project becomes feasible froma security standpoint.

•Boost bilateral energy dialogues with Indiaand Pakistan.•Expand energy cooperation with India withinthe framework of the Asia–Pacific Partnership

to develop and disseminate technologies thatsupport the development of clean, efficient, andcost-effective energy.

•Continue to pursue U.S.–India civil nuclearcooperation.•Assist Pakistan in building large-scale hydro-electric projects and LNG terminals to meetits growing energy and electricity demand.Conclusion.

Iran’s support of terrorism, hostilepolicies in the Middle East, pursuit of nuclearweapons, and mismanagement of its economymake it a dangerous and unreliable business part-ner and call into question its capacity to supply nat-ural gas to Pakistan and India through the IPI.Potential transit problems in Baluchistan also makethis project inherently risky. As major energy consumers, the U.S. and Indiashare strategic interests in the Persian Gulf andCentral Asia. Building the IPI would be contrary tothese interests, would destabilize the Persian Gulf,and would strengthen Russia’s grip over Central Asia, decreasing both regional and global energysecurity. Accordingly, the U.S. should fully backTAPI to increase India’s and Pakistan’s energy secu-rity and reduce Russia’s leverage in Central Asia.India and Pakistan would benefit from anincrease in LNG contracts and capacity. This wouldalso strengthen India’s ties to the Middle East.Finally, blocking Iran’s overland export option mightalso increase Iran’s interest in promoting stability inthe Strait of Hormuz. The U.S., India, and Pakistanshould expand their energy cooperation to ensuresecurity and economic prosperity in the region.

—Ariel Cohen, Ph.D., is Senior Research Fellow inRussian and Eurasian Studies and InternationalEnergy Security in the Douglas and Sarah Allison Cen-ter for Foreign Policy Studies, a division of the Kathrynand Shelby Cullom Davis Institute for InternationalStudies; Lisa Curtis is Senior Research Fellow for South Asia in the Asian Studies Center; and Owen Grahamis a Research Assistant in the Allison Center at TheHeritage Foundation.

This paper, in its entirety, can be found at:

www.heritage.org/Research/AsiaandthePacific/bg2139.cfm

Produced by the Douglas and Sarah AllisonCenter for Foreign Policy Studiesof theKathryn and Shelby Cullom DavisInstitute for International StudiesPublished by The Heritage Foundation214 Massachusetts Avenue, NEWashington, DC 20002–4999(202) 546-4400 • heritage.orgNothing written here is to be construed as necessarily reflect-ing the views of The Heritage Foundation or as an attemptto aid or hinder the passage of any bill before Congress.

•Indian and Pakistani foreign policies areincreasingly driven by energy security.•Iran, Russia, and other energy-producingstates are trying to tap new markets, drive upoil prices, and lock in demand.•India and Pakistan are negotiating a naturalgas pipeline deal with Iran, but security con-cerns, price haggling, and political uncer-tainty have stalled the deal.•This gas pipeline would give Iran an eco-nomic lifeline and undermine the interna-tional sanctions regime aimed at curbing itsnuclear ambitions and continued support forinternational terrorism.•The U.S. should encourage India and Pakistanto pursue alternatives, such as developingtheir liquefied natural gas capacities andbuilding the Turkmenistan–Afghanistan–Paki-stan–India natural gas pipeline.

Talking Points

No. 2139May 30, 2008

The Proposed Iran–Pakistan–India Gas Pipeline:An Unacceptable Risk to Regional Security

Ariel Cohen, Ph.D., Lisa Curtis, and Owen Graham

This pipeline would give Iran an economic lifelineand increase its leverage and influence in South Asia.U.S. policymakers argue that allowing the IPI pipelineto proceed would encourage the Iranian regime to defythe will of the international community, developnuclear weapons, and support terrorism. Furthermore,inadequate investment in Iran’s oil and gas industryand increasing domestic demand could render Iranincapable of supplying natural gas through the IPI.

Energy Geopolitics and South Asia

India and Pakistan consume 537 million tons of oilequivalent (Mtoe) and 54 Mtoe per year, respec-