Concrete pouring ceremony of nuclear energy projects KANUPP-1 &2 at Karachi, launched during 2013, took place at the end of last week by the PM Nawaz Sharif in the presence of dignitaries from China that is Pakistan’s all-weather friend. With thirty years shelf life of the project extendable to many more years, estimated at US$4.8 billion, will be completed within four years to generate 2200 megawatt electricity to overcome energy shortage of Pakistan within next two years. Civil nuclear deal between the US and India had discriminated Pakistan despite country’s just demand from the US and west to treat Pakistan equally. This is the reason Pakistan exquisitely cherishes China as the all-weather friend.
In addition to CPEC initiations, lifting of the prolonged sanctions on Iran has opened vistas of opportunities for Pakistan, China, Afghanistan and other countries of the region including Russia, as reports on the Joint Comprehensive Plan of Action (JCPOA) agreement between Iran and the P5+, began to ooze out from Vienna on 14 July 2015. Pakistan has welcomed the deal with positive expectations while India has also put out statements corresponding to the occasion but without much jubilation because Mr. Modi’s government has found alternate opportunities in retribution.
Indian which had curtailed engagement with Iran and Russia during the sanctions period will now have to make extra efforts to benefit from the strategic and economic opportunities arising from the potential rapprochement of P5 with Iran. This is particularly true of India, which in the pre-sanctions period was one of Iran’s major partners in energy and security cooperation as Iran was the second-largest supplierof crude oil to India and both countries had convergence on propping up the Northern Alliance in Afghanistan during NATO intervention into Afghanistan. After 2006 US incited sanctions of the UN, India broke all ties especially economic and security engagement with Iran to strap knots of strategic engagement with America that struck most infamous civil nuclear deal. While India continued to import oil from Iran for couple of years but it progressively cut volume under US pressure. This downward spiral in India–Iran relations contrasted with Iran’s dealings with China. As the US and European companies kept away from Iran, China in particular and Pakistan in shape of IP pipeline made strategic investments in Iran, while providing a cushion from UN imposed sanctions. Now, the JCPOA provides an opportunity for both Pakistan and China to further push their CPEC initiatives to increase their cooperation with Iran. With China’s One Belt, One Road (OBOR) strategy in place, China that has already incorporated Pakistan, will take steps to plug Iran into this network through multiple projects such as energy grids, pipelines and highways. Pakistan, which has already been enmeshed into OBOR through the China–Pakistan Economic
Corridor and the Gwadar–Nawabshah pipeline project, stands to gain enormously against current Indian overtures to tame Gulf and other Arab states through American influence. Implementation of these projects and their linkages with OBOR will enable Pakistan to increase its trade with Iran and providing great opportunities to China for investments in Iran. There is full resilience and requisite initiative in Pakistan to seize the opportunities arising from the Iran deal.
For India the economic implications of the Iran deal are also linked to its energy security and connectivity plans.
Such initiatives are closely watched by India and its strategic partners and looking for alternate ways to single out Pakistan and Iran by rushing to Gulf countries such as UAE for investments worth US$ 75 billion. This deal will also benefit India as compared to the Gulf States as India will enable Iran to bring more oil to the market, against the trading of oil by the Gulf States. This strategy is beneficial for India who is the world’s fourth largest energy consumer and is critically dependent on oil imports.
The deal in effect poses great challenges for India. While India continued doing business with Iran during the sanctions regime, it also sought to contain that engagement due to fears of getting caught on the wrong foot with the West. In 2009 India voted against Iranat the IAEA over its uranium enrichment activities. The Iranians were chagrined by this treatment and must be looking for opportunity to pay back in the same coins especially when Indian diplomacy is bringing anti-Iran forces into its strategic partnership. On the other hand Iran now have multiple options for investment from Pakistan, China, Russia, US and a large number of European countries. In these circumstances, Iran should drive a hard bargain on various Issues with India. This is already evident in the case of the Farzad-B gas field, whereby Iran has turned down India’s latest offer to develop the gas field after procrastination by India’s state-owned company, ONGC Vigesh Limited.
The nuclear agreement between the US and Iran as well as the peace talks in Afghanistan are great catalysts that have given a serious boost to the gas highways projects linking Central Asia to the rest of the world via Pakistan. In 20013 the Iran-Pakistan (IP) giant pipeline project between two countries was inaugurated but Pakistan being short of finances was not able to build its portion of the US$7.5 billion primarily due to sanctions that prevented Pakistan from raising capital for the construction of its portion. Iran has already completed its portion of the 1800km long pipeline to connect its gas field South Pars to Nawabshah in Pakistan. As integral part of the CPEC, China has recently launched the project to construct gas pipeline to Nawabshah and upon completion, Pakistan will have to extend the pipeline with only 80km west to join Iran. Meanwhile Russia has expressed interest to support IP in near future. Most recently Pakistan and Russia have also signed a defence agreement for the purchase of Russian combat helicopters primarily to use them against terrorists in tribal areas along Pak-Afghan border.
Russian and Iran’s attitude towards India must be changing in the given environment because Iran, while getting access to over US$100 billion of its assets frozen abroad, is watching Indian maneuvers to tame wealth from the Gulf countries and also working eagerly to sabotage peace talks in Afghanistan. Iran understands that peace in Afghanistan is crucial for development and investments in Iran. For investing in Iran, India will also face strong opposition from Russian, American, European and Chinese Companies, which have comparatively low costs and advanced technologies. On Afghanistan, India will also be left out further as Peace Process initiated by Pakistan and China together, is gaining unprecedented traction. Another major foreign policy challenge for India is itsburgeoning defence ties with Israel that is an avowed opponent of the Iran deal with P5 + 1. JCPOA and CPEC have unveiled new dynamics for the region as Pakistan, China and likeminded will benefit from the initiatives while India will be left behind with fundamental implications for its perceived power growth.