ANAHEIM HILLS, California — An energy tsunami formed due to a number of multi-billion dollar energy deals in oil and gas involving Iran, India, Russia and China has been unleashed in Asia, with great economic and political implications for the United States in particular and our global society in general.
India’s just concluded $40 billion deal with Iran is a good starting point to examine and understand this Tsunami. India will not only import natural gas from Iran over a twenty-five-year period but will now hold a 20 percent stake in Iran’s biggest onshore oilfield, Yadavaran.
Iran holds 30 percent of its oilfield while China, which operates Yadavaran, will retain its existing 50 percent share along with participation in projects such as exploration and drilling. Officials in New Delhi have confirmed that India is considering investing $2 billion for a stake in the main production unit of Russia’s troubled YUKOS. Russia recently offered a 20 percent stake to China as well. If India and China both buy into YUKOS, the new ties among Iran, China, Russia and India may etch new realities in Asia. It will also put to rest speculation on the inevitability of a Sino-Indian rivalry in the race for energy.
China and Iran’s $100 billion deal signed last March is likely to increase by another $50 billion to $100 billion, bringing the total close to $200 billion, when a similar oil agreement, currently being negotiated, is inked. The relationship has grown out of China’s soaring energy needs and Iran’s growing appetite for consumer goods. An oil exporter until 1993, China now produces only for domestic use. Its proven oil reserves could be depleted in 14 years, oil analysts say, so the country is aggressively trying to secure future suppliers. Iran is now China’s second-largest source of imported oil.
Islam has historically been a link between these two ancient civilizations. It made its way to China via Persia — present-day Iran. Many Chinese Muslims pray in Persian, not Arabic. Their everyday language is Turkic, but their alphabet is Persian. Iran and China also share concerns over radical Sunni Muslims. Most Iranians follow the Shiite strain of Islam. China has more than 20 million Muslims, and Beijing has been facing Muslim unrest in some of its western cities. The dissidents receive support from Islamic groups in Afghanistan and the countries of former Soviet Central Asia — a region that straddles both Iran and China.
Last October China’s ambassador to India proposed cooperation between the two countries in the energy sector. An agreement on such cooperation could be reached during Prime Minister Wen Jiabao’s visit to Delhi in March. China has a similar agreement with Pakistan. Iran’s biggest foreign agreement prior to this gas agreement with China was a long-term $25 billion gas deal with Turkey, which has encountered snags, principally over the price.
Earlier this month India hosted the first-ever round table of Asian oil ministers from the Persian Gulf, China and Southeast Asia. The idea of a common platform for Asia’s oil-consuming and oil-producing countries was floated. Iran’s Oil Minister Bijan Namdar Zanghaneh proposed the creation of an Asian Bank for Energy Development to finance energy projects in Asia (like the proposed Iran-Pakistan-India gas pipeline). From Iran’s perspective, the Indian initiative on regional cooperation melds with its own policy of shifting its oil and gas trade to the Asian region so as to reduce its market dependence on the West.
The Iran-India gas deal also opens the door for the long-standing Iran-Pakistan-India gas-pipeline project. India initially signed a memorandum of understanding with Iran in 1993 for a 2,670-kilometer pipeline, with more than 700km passing through Pakistani territory. The Iran-China deal will undoubtedly give fresh impetus to New Delhi to follow Beijing’s lead and ensure that the pipeline becomes a reality. An Iranian delegation will be in Delhi next month to initiate negotiations for the delivery of Iranian natural gas to India by pipeline.
Pakistan’s concerns about the pipeline project remains unclear, but reports suggest Washington is pressuring Islamabad to prevent it from entering into an energy deal with Iran. An Iran-Pakistan-India gas-pipeline project at this time would hamper US attempts to isolate Iran regionally. The project, should it materialize, would also stifle any prospects for the revival of the trans-Afghan pipeline project.
For the United States the Iran-China energy cooperation, the Iran-India deal and the Iran-Russia possibilities should be an ominous sign of emerging new trends with broad political implications in an area it considers vital to its national interests. American ability to pressure Iran and other nations on their nuclear programs and support for extremist groups will be reduced, thus making all of us a little less safe.
However as they say in China: “They may sleep in the same bed, but they dream different dreams.” These countries may have common interests sufficient to induce them to enter into large-scale energy agreements, but not all of the political interests coincide as closely as their current economic interests.
Muazzam Gill is a news analyst and vice-president of the American Leadership Institute.