Energy pipelines carry more than oil or natural gas. They are powerful conduits for economic and political influence. In Pakistan, increasing demand for energy has caught the attention of several possible suppliers eager for the country’s business and fealty. Saudi Arabia, for example, has promised to sell Islamabad $3 billion worth of crude oil on a deferred payment plan as part of an investment deal. It’s a competitive offer for Pakistan, whose precarious finances mean the country needs all the credit it can get. But it’s hardly the only energy arrangement Islamabad is entertaining, and in the realm of natural gas, the kingdom may well be outbid. Iran and Russia have proposed building an offshore pipeline to accommodate Pakistan’s surging demand for natural gas. The three parties signed a preliminary agreement on the pipeline – which would run 1,724 miles (2,775 kilometers) from Iran to India by way of Pakistan – in September. And just like that, Saudi Arabia seemed cut out of Pakistan’s natural gas market.
The kingdom, however, has found another way into the Pakistani market: Turkmenistan. Riyadh recently announced that it would allocate more funds to build the Central Asian state’s portion of the Turkmenistan-Afghanistan-Pakistan-India, or TAPI, natural gas pipeline. The investment is Saudi Arabia’s latest move to check Iran’s influence in Pakistan and the surrounding region, but it could also put Russia on the defensive.
Too Promising to Pass Up
For Iran and Saudi Arabia alike, Pakistan represents an opportunity. It is the second-most populous majority-Muslim country (like Iran, Pakistan is an Islamic republic) and the only nuclear power in the Muslim world. It would be a valuable ally for either country, and it recently offered to mediate between them to try to resolve Yemen’s civil war. On the energy front, Pakistan is no less promising. Its rapidly growing market adds about half a million customers a year. To keep up with that demand, the government plans to more than triple its annual imports of liquefied natural gas to 37 billion cubic meters by 2030. Though Saudi Arabia is not a natural gas producer itself and has smaller reserves compared with Iran, it can’t afford to miss out on the rising demand for natural gas and LNG in Pakistan.
That’s where Turkmenistan comes in. The country has both ample natural gas reserves and serious problems with export and distribution. For most of their post-Soviet history, Russia was Turkmenistan’s largest natural gas customer – large enough to call the shots in the Turkmen natural gas industry. The government in Ashgabat tried to diversify its export destinations, starting shipments to China and pushing for a more direct route to Europe that would bypass Russia, but its efforts backfired. Nervous about losing control over Turkmenistan’s natural gas supply, Moscow blocked construction of the proposed Trans-Caspian pipeline. Russian natural gas giant Gazprom, meanwhile, gradually reduced its purchases of Turkmen gas until 2016, when it stopped them altogether. As a result, Turkmenistan has no way to move its natural gas west or north.
To the south, its luck hasn’t been much better. Iran, which also opposes building a pipeline under the Caspian Sea, has been embroiled in a dispute with Turkmenistan over natural gas for nearly two years. The trouble started in 2017, when Turkmenistan stopped sending natural gas to Iran, alleging that Tehran owed state-owned energy company Turkmengaz $1.8 billion. Iran sent Turkmenistan a formal complaint in January, and the case has since gone to the International Court of Arbitration. In the meantime, China is the only country buying Turkmen gas – an arrangement too close for Ashgabat’s comfort to its former setup with Russia, and one that isn’t quite paying the bills. The loss of energy export revenue has plunged the Turkmen economy into crisis, complete with high inflation and food shortages. The situation is so dire that Turkmen police have started fining people who come to the capital from other parts of the country to buy food.
Saudi Arabia can help Turkmenistan get its natural gas to new export markets through the TAPI pipeline. In return, Turkmenistan can keep Pakistan from relying too heavily on Iranian natural gas and, by extension, from becoming too receptive to Iran’s influence. Pakistan expects to receive its first gas shipments from Turkmenistan through TAPI in 2020 – that is, assuming the project reaches completion. The pipeline is set to run from Turkmenistan’s Galkynysh gas field right through Afghanistan’s Kandahar province, where the Taliban recently assassinated the local police chief, before passing into Pakistan and then India. The war in Afghanistan and the insurgent threat there have made construction of the pipeline risky and put off most investors.
And security may be only part of the problem. There’s also the possibility of international opposition to TAPI, namely from Russia. The project is a headache for Moscow. Once completed, the pipeline would further jeopardize Russia’s influence over Turkmenistan, an area it has had close ties with since the 19th century. That Turkmenistan has maintained its neutrality since the Soviet Union’s collapse – declining to join other regional countries in blocs and treaties with Russia, such as the Commonwealth of Independent States – is vexing enough for Moscow. In recent years, Russia has noticeably stepped up its efforts to ensure its presence in Central Asia. But because it’s in no financial position to lend money to Ashgabat, Moscow has relied instead on economic pressure to try to force Turkmenistan’s cooperation. The results have been mixed, and now it stands to lose not only sway with Turkmenistan thanks to TAPI but perhaps also profit: Gazprom is considering helping develop four natural gas fields in Iran and building an LNG plant, along with the offshore pipeline, to facilitate the shipment of Iranian natural gas to Pakistan.
Even so, the prospect of Saudi involvement in Turkmenistan seems to have renewed Russia’s interest in Turkmen natural gas, and Gazprom reportedly is thinking about resuming its imports from the Central Asian country. That means Moscow’s relationship with Riyadh and Tehran could change. Russia historically has been the only power that tends to maintain good relations with Iran and Saudi Arabia, selling weapons to both countries and trying to act as mediator between them. Their overlapping – if not conflicting – interests in Turkmenistan could become the basis of a dispute down the line.