China to build gas pipeline from Iran to Pakistan

China is footing 85% of the $2 billion dollar cost of extending the pipeline through Pakistan (the Iranian portion has already been completed). Why would China be concerned with helping to solve Pakistan’s severe energy shortage issue? They aren’t. The IP, or sometimes known as the peace pipeline, is merely a required step in the ultimate objective of extending the pipeline through India to China.

The U.S. has been the sticking point for years in delaying the project with potential sanctions dangled over the head of Pakistan if they struck a deal with a terrorist supporting nation. When Iran advanced their nuclear weapons program sufficiently to be able to build a nuclear weapon, they changed their negotiating tactics with the west. They could now strike a deal agreeing to inspections and publicly agreeing to a deal designed to keep them a year away from acquiring a nuclear weapon. Since they have already surpassed that point, they could safely publicly negotiate away that potential in exchange for removing sanctions.

This is why China has given the go ahead to complete the pipeline. Publicly, there is still rhetoric that an Iran-U.S. deal is still not a sure thing. Behind the scenes it is seen as a virtual certainty so China is positioning itself for the eventual extension all the way to its ports. A good reference here.

The U.S. has pushed for the TAPI (Turkmenistan, Afghanistan, Pakistan, India)pipeline as the preferred method to distribute natural resources from the Caspian Sea region as opposed to the Middle East. When the U.S. announced its ‘pivot to Asia’ in 2012, it signaled to others that a change was coming. The TAPI pipeline project was seen as a primarily one that benefits Russia as the source. The Russian expansion into Crimea and Ukraine changed the dynamics so that Washington moved its support from TAPI to IP.

We need to remember that both Pakistan and India have vital energy needs to solve. China does as well but has expansionist plans to boot. The U.S. knows that China will be the ultimate benefactor in either pipeline project but that is seen as part of the Asian pivot. Incorporating China into global commerce including natural resources is a national defense strategy. Removing exclusive supply agreements and expanding all sources to a wider global base is a policy designed to eliminate potential chokehold points such as OPEC pricing monopolies and shipping weaknesses like the Straight of Hormuz. Pipelines create alternatives to supply disruptions created by world powers that control distribution.

Natural resource geo-politics are ever changing. The U.S., China and Russia still call the shots and constantly shuffle and maneuver the world’s assets like a giant chess board. China will no doubt see the U.S, sanctions easing as a window of opportunity. However, the U.S. sees it as part of its pivot strategy so both can claim victory.