China to invest in Iran-Pakistan gas pipeline

Two stunning developments in China-Iran relationship over the weekend coincide with the rapid atrophying of India’s traditionally close ties with Iran and would draw attention once again to the shift of templates in the geopolitics of the Persian Gulf region, which India regards fondly as its ‘extended neighbourhood’.

First, the construction work on one of the world’s biggest petrochemical complexes for producing urea and ammonium fertiliser began in southern Iran on Saturday. The project is expected to be in completed in about 3 years’ time and would have a whopping production capacity of 4 million tonnes of fertiliser annually. The project involves an investment of 4 billion dollars and, interestingly, China is making 85% of the investment. More important, China is teaming up with the Iranian private sector as its partner in the project. Virtually, it becomes a Chinese-owned fertiliser project in Iran with buyback arrangement. (Iran exports almost half of its petrochemical products.)

Second, China is fast emerging as the front-runner for the construction of the Iran-Pakistan gas pipeline (on the Pakistani side), which is expected to begin by end-2011 soon after the German consultant completes the ‘route survey’. The Pakistan-China joint energy working group is meeting in Beijing on Monday. President Asif Zardari is also visiting China in the coming days. China may consider investing in the Iran-Pakistan gas pipeline project. The construction of the Pakistani side of the pipeline is estimated to cost 1.25 billion dollars, which is not a big amount for China to invest. Pakistan is obliged to complete the project by 2014 as any failure to receive the Iranian gas by that stipulated date will automatically trigger a heavy penalty clause in the agreement.

The big question is whether China will want to follow up a decision to invest in the Iran-Pakistan gas pipeline with an interest to extend the pipeline to China, which Pakistan has been seeking. The factor that ostensibly discouraged India from participating in the project, namely, the security
situation in Baluchistan, doesn’t seem to deter Iran, Pakistan or China. Ironically, Tehran’s preference all through was to extend the pipeline to India rather than to China. But then, it takes two to tango. And in this case, arguably, it takes three to tango — including Uncle Sam.

Source: Indian Punchline