Executive Summary

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Unlike oil, which can be sent anywhere in the world once it has been placed on tankers in open water, natural gas is most often sent by dedicated pipeline to specific consumers. With regard to Turkmen gas, the most likely destinations are: Iran, Turkey and Europe, China and Japan, and Pakistan and India. In the past, Turkmenistan had relied on Gazprom’s pipelines to transport its resources, but this option is unprofitable and currently unavailable.

In the future, Turkmenistan hopes to export large quantities of gas to Turkey and Europe either by a pipeline through Iran, or via a TransCaspian pipeline through Baku, Azerbaijan. Currently, Turkmenistan is exporting some of its natural gas to Iran by way of a pipeline in the Korpedzhe field in the west of the country, to the town of Kurt-Kui in northern Iran. This construction is significant because it is the first non-Russian pipeline in the Caspian region. Additionally, it could serve as a potential link for transporting gas into Turkey, which has a large demand for the product, and eventually to Europe.

Nonetheless, Turkmenistan should be wary of extending the current Iranian project west. While this route may be cheaper than a TransCaspian route to Turkey, it raises concerns over Iran’s long term intentions. On the other hand, while the proposed TransCaspian line may appear more expensive, it would not only receive strong support from the United States government, but also would serve in Turkmenistan’s best geopolitical interests.

Alternatively, Turkmenistan could ship its gas to the East into China and eventually Japan. Though both China and Japan undoubtedly could use the additional energy supply, China’s primary motivation for doing business with Turkmenistan is political. That is, the country hopes to form allies in the Caspian region. The distance between Turkmenistan and the Far East, as well as the ongoing economic turmoil in Asia however, combine to make this possible route, at best, a long-term alternative.

Until recently, India and Pakistan appeared strong potential export markets for Turkmen gas. In fact, Unocal Corporation had led a consortium to construct a pipeline from Turkmenistan to the Indian subcontinent, via Afghanistan. The day after the US launched cruise missile strikes into Afghanistan however, Unocal Corporation announced the termination of the project.

In any case, the ongoing civil war in Afghanistan makes funding and securing a pipeline through that country virtually impossible at present. Even if this route were to become possible however, Pakistan has recently discovered additional gas reserves, and so may not be an attractive consumer of Turkmen gas. Nonetheless, a pipeline to India could still prove beneficial in the future. First of all, a pipeline through Pakistan would provide India with cheaper energy than would the alternative source of LNG. Pakistan would similarly benefit economically by receiving transit fees. More broadly, a pipeline through these two countries could ease tensions, and eventually serve as a precedent for further cooperation. Once Afghanistan resolves its internal troubles therefore, a renewed attempt at a pipeline from Turkmenistan to India, via Pakistan, will likely materialize.

Introduction

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The rich abundance of natural resources in the Caspian states could prove instrumental to the economic development of these former Soviet Union republics. The Caspian states however, are not the only ones interested in developing and exporting these resources. Rather, the financial appeal of the region’s oil and gas has lured many outside parties, including the United States, into the scene.

With such emphasis placed on the basin’s oil, its large supply of natural gas is often overlooked. The problem with this particular resource, as Keith Weisman puts it, is that "oil is like casual sex" while "natural gas is like a marriage". In other words, due to its extremely capital intensive nature, and its rigorous requirements for dedicated facilities and pipelines, natural gas requires strong commitments of both supply and demand before any infrastructure can be built.

High levels of global demand exist for natural gas, and are expected to increase into the future. In fact, "natural gas is expected to be the fastest-growing primary energy source in the world over the next 25 years." Though a large potential demand exists for Caspian gas, political and economic considerations cloud the issue of transporting this good to export markets. For one thing, intra-regional conflicts place the delivery of resources at risk. Additionally, unstable markets prevent the immediate construction of the needed but costly infrastructure.

Supply of Gas

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Though natural gas reserves exist in numerous parts of the Caspian Sea region, the three principal countries with significant gas-export potential are Uzbekistan, Kazakhstan, and Turkmenistan. Uzbekistan currently has the highest gas production, but receives little international attention because most of its gas is consumed internally. Correspondingly, few foreign companies are investing in the country. Eventually, Uzbekistan gas is likely to gain in importance. At present, however, Kazakhstan and Turkmenistan have the strongest gas-export potential.

Kazakhstan is usually noted for its large oil reserves, but the country also has a significant amount of gas reserves and could play a key role as a future supplier of natural gas. Kazakhstan produces all of its gas and oil on shore within its own borders, and future production, therefore, will not depend on questions regarding the Caspian’s legal status.

This former Soviet republic became an independent nation on December 16, 1991, under the governance of President Nazarbayev. Though its economy today, in its transition to the free market, is worse than in previous years under the Soviet Union, Kazakhstan has the advantage of being mostly energy independent, and having relatively diversified assets. In addition, Kazakhstan initiated a "mass privatization program in 1993" that "has brought in a number of foreign investors in the largest industrial complexes and energy concerns."

Yet despite its large resources and welcoming investment opportunities, Kazakhstan still lacks proper facilities to export its natural gas. In addition, since the Karachaganak field, the principle site for gas reserves, is in the northwest of the country and lies far from the nation’s "population and industrial centers", Kazakhstan to this point has been unable to distribute this natural gas to other, more populous, regions within the country itself. Therefore, although Kazakhstan may have large gas reserves, like Uzbekistan, it is not a serious short-term contender to become a major gas exporter. This is not the case for Turkmenistan.

Table 1: Gas Reserves in the Caspian Region

| Proven Gas (tcf) | Possible Gas (tcf) | Total Gas (tcf)
Azerbaijan | 11 | 35 | 46
Kazakhstan | 53-83 | 88 | 141-171
Turkmenistan | 98-155 | 159 | 257-314
Uzbekistan | 74-88 | 35 | 109-123
Total | 162-249 | 293 | 455-542

source: adapted from"Treacherous Terrain: The Political & Security Dimensions of Energy Development in the Caspian Sea Zone"

Turkmenistan:

Though the Turkmen economy has shown signs of improvement, the country is far from being financially stable. Its abundance of natural gas reserves therefore could prove to be either a blessing, should it lead to economic recovery, or a curse, should it result in corruption.

Corruption, as an aside, is very possible given the politics of Turkmenistan. President Niyazov, the self-proclaimed "Turkmenbashi", or leader of the Turkmen, has established a reputation for his "poor record on human rights and democratic reforms." In fact, "[w]hen asked…why he didn’t permit free opposition parties, Niyazov replied, ‘I…frankly…do not understand the question. There are no opposition parties in Turkmenistan. That is why I cannot give them freedom. There are none.’"

Turkmenistan’s gas reserves are found primarily in the east, in the Dauletabad-Donmez field within the basin of the Amu Darya River, and in the south, in the Yashlar field within the Murgab river basin. In the past, Turkmenistan had relied on Gazprom’s existing pipelines to deliver gas to European nations. But Gazprom insisted on selling only Russian gas to those countries who were able to pay in dollars, which in effect forced Turkmenistan to deliver gas to countries such as Georgia and Ukraine who were unable to pay in hard currency. At the same time, Gazprom demanded transit fees of Turkmenistan for the use of its pipelines. The end result of such maneuvering was that Turkmenistan received little if any payment for its natural gas, and eventually lost its rights to use Gazprom’s infrastructure. Yet on a more positive note, through this whole process, Turkmenistan established a reputation as a reliable exporter of gas.

Currently, with its lines of transportation cut off to Europe, one of the simpler options that Turkmenistan faces is renegotiating relations with Gazprom. Yet, given the recent history, it is clear that Turkmenistan should look towards other options for exporting its natural gas.

One such option is to use a US $190 million, 124- mile pipeline from the Korpedzhe gas field in western Turkmenistan to the town of Kurt-Kui in northern Iran. Gas began flowing through this pipeline in early March 1998, at a capacity of 141 Bcf. This capacity should rise to 283 Bcf per year by 2003. Though Iran has plenty of gas reserves, they are mostly in the South of the country while the main population center is in the North, and so both Turkmenistan and Iran will benefit from this pipeline. It is significant to note that with this construction, Turkmenistan has initiated the first non-Russian pipeline in the Caspian region. Additionally, the pipeline sets the stage for a potential link, through Iran, into Turkey and perhaps Europe.

Reliance on a pipeline to Iran, however, may not be in Turkmenistan’s best interests. For one thing, the United States opposes such a project. Secondly, and more importantly, it could lead to some of the same problems Turkmenistan faced with the Gazprom lines. That is, Iran, like Russia, has high reserves of natural gas, and, therefore, it is a key competitor in the region for gas exports. For the present, however, Turkmenistan appears to have found a short term economic solution to exporting at least some of its natural gas.

Future options for Turkmenistan:

With the Iranian pipeline of limited capacity, Turkmenistan still faces the dilemma of exporting its abundance of natural gas reserves in the future. Its neighbors in Central Asia offer only a limited market since the internal politics of the region put the delivery of gas at risk. Additionally, the region’s economic instability creates a poor export market from Turkmenistan’s perspective.

Globally, however, there is a large and growing demand for natural gas, and its consumption is in fact expected to increase at a rate more than three times that of oil. More specifically, the potential markets for Turkmenistan gas are Turkey, Europe, the Far East, and South Asia.

Turkmenistan-Turkey:

Turkey is a strong and growing market for imported gas. According to the United States Energy Information Administration: "Current gas production in Turkey meets just 2.8% of domestic consumption requirements," and this consumption will increase fourfold over the next twenty years. At present, Turkey gets most of its gas from Russia. However, it would like to establish long term relations with Caspian and Central Asian states and to diversify its gas-import sources. Additionally, Turkey would like to serve as a link between the Caspian region and European nations, and so it therefore has been pushing for gas pipelines from Turkmenistan, with the long-term intention of eventually serving as a transit country for Caspian Gas to Europe.

One proposed method of supplying gas to Turkey from Turkmenistan is through Iran. There are a few variations of this alternative, such as transporting the resource from the Korpedzhe field through the previously mentioned pipeline to Kurt Kui. The supply would be sent to Tabriz, Iran via existing pipelines in Neka, and then new infrastructure would have to be built to transport the gas to Erzurum, Turkey. The route most likely to materialize however, is the Shell project of a pipeline from the Shatlyk field in eastern Turkmenistan to Dogubayazit, Turkey, which would eventually distribute the gas to European nations as well. With a combined length of 3,800 km to Europe, the total cost of the project would be US $4 billion. The capacity of this line is an estimated 105 bcf for the US $1.6 billion portion to Turkey.

Exporting Turkmen gas via Iran is cheaper than the alternative of sending it under the Caspian Sea. In fact, according to Kemp, in 1995, when the proposed Iranian route was through Kurt Kui, Iran agreed to finance 50% of the total expenditure. It seems highly likely that Iran would once again accept much of the financial burden of the Shell project as well.

The US has discouraged such transit of Turkmen gas through Iran. In fact, the US had originally considered placing sanctions on the companies involved, under ILSA, for a similar pipeline that proposed to supply Turkey with Turkmen gas via Iran. However, on the grounds that Iran was only a transit country, the US decided that the Turkmenistan-Turkey pipeline, proposed by the consortium of Fernas and STFA Enerkom in August 1996, did not violate ILSA. Whether the U.S will similarly ignore ILSA if a new Turkmenistan-Turkey pipeline through Iran goes forward is not clear. If in this case the US government decides to harden its stance against Iran by threatening to impose sanctions on parties involved, it will be difficult to get monetary support from financial companies and individual lenders. In all likelihood however, the US government will once again decide that this project does not provide excessive support to Iran.

But leaving aside the issue of US approval, the question remains as to whether transportation through Iran is in Turkmenistan’s best interest. At present, because Iran has not developed the vast majority of its gas reserves, there is little reason to worry that it will emerge as a competitor in the Turkish market. There is, however, the fear that Iran will levy extremely high transit charges on parties involved, a valid concern which applies to potential oil pipelines through Iran as well.

Although the transit fee issue is the primary short term drawback to the Iranian pipeline, in the longer run Turkmenistan has to be aware of Iran’s incentive to provide its own gas to Turkey. It is even possible, in fact, that Iran will be flexible on such transit fees precisely because of its long term interest "in seeing the pipeline built because it will provide an outlet for its own sizable gas reserves". At any rate, one should question Iran’s motives in so generously contributing to the construction of the Turkmenistan-Turkey pipeline. As Keith Weisman of AIPAC, the American Israeli Public Action Committee predicts, Iran may very well start selling its own natural gas to Turkey, while getting cheap, bartered goods to Turkmenistan. After all, Iran has much to gain from a pipeline through its borders, not only financially, but also politically, such as gaining dominance in the emerging region, as well.

As Ira Joseph explains in the Baker Institute Study "Caspian Gas Exports: Stranded Reserves in a Unique Environment", Turkmenistan and all investing parties should realize that shipping gas to Turkey via Iran might not be economically feasible. In other words, Turkmenistan may not be able to offer competitive gas prices in the Turkish and European markets because of the high financial costs of its new pipelines. Joseph provides a fairly thorough breakdown of the economics involved:

Turkey has said that it will purchase the gas for $2.60-$2.70 per mmBtu. Although there are many factors to be considered, overall for Turkmenistan to go ahead with the construction of the pipeline, Joseph estimates that it must generate cash flows of $1.50-$1.75 per mmBtu. For Turkmenistan to receive $1.50 when it is selling for $2.60, its total costs must be less than or equal to $1.10. Given, however, that its production and shipping costs alone are estimated by the Turkmen government to be $0.90, without even factoring in Iranian transit costs, the likelihood of Turkmen parties breaking even, let alone making a profit, on this investment are slim.

Under the Caspian:

The US government supports the TransCaspian Gas Pipeline System, a project headed by Amoco Eurasia, which offers an alternative to the route through Iran. In June 1998, Amoco Eurasia, along with a consortium of Bechtel Enterprises, and General Electric Capital, proposed to build a 1,200 km pipeline to Turkey, with an initial capacity of 350 bcf, from western Turkmenistan, near Turkmenbashi, across the Caspian Sea to Baku, Azerbaijan. There the pipeline would link up with existing infrastructure to Tbilisi, Georgia, and a new line would be built from Tbilisi through Erzurum, Kayseri, and finally, to Ankara, Turkey. Before getting the gas to Baku however, for the first phase of the project, Bateman, a Dutch/South African company, would have to get gas from eastern Turkmenistan to Turkmenbashi. Amoco Eurasia has estimated the total cost of the TransCaspian route to be US $2.4 billion. The additional implementation of a TransCaspian Oil pipeline however would reduce this estimated cost, since there would be no need to re-survey the seabed.

For "geopolitical purposes", the US government has been openly in favor of the TransCaspian gas line as opposed to the alternative route through Iran. The gas pipeline across the Sea, according to analysts, would "reassure pro-Israeli factions and anti-Iranian hard-liners in the United States of the administration’s commitment to isolate the Tehran regime". While the route undoubtedly serves US interests, it is still questionable whether or not it is sound economically. Yet Turkmenistan’s president, Saparmurat Niyazov, and Turkey’s leader, Suleyman Demirel, signed an agreement on the project on October 30,1998. According to news reports, in the next phase of the project, involved parties will form a consortium, and will sign two intergovernmental agreements, most likely by May 1999. The US is understandably pleased with this recent development, because, as Ambassador Richard Morningstar explained, the US government had been pushing for quick acceptance of the TransCaspain Gas route, in order to avoid Turkey’s turning to Iran or Iraq for supplies. Additionally, though Morningstar did not explicitly say so, the agreement between Niyazov and Demirel will help push along the implementation of the US backed TransCaspian Oil pipeline.

At first glance, the lower figures attached to the Iranian route seem to support its construction. Yet the fact that the Iranian pipeline is cheaper, does not necessarily make it more practical. For one thing, this line has a lower capacity than the TransCaspian route. Similarly, if Turkmenistan constructs the pipeline via Iran merely because it costs less, there is no guarantee that the country will receive larger profits than it would under the TransCaspian pipeline. In the long run therefore, larger profits from the TransCaspian line could more than make up for the initial differences in investment costs. Even more importantly, any analysis needs to consider additional factors, such as Iran’s economic and political long term interests and motives.

Turkmenistan-China-Japan:

Another alternative Turkmenistan is exploring is exporting gas to the Chinese, and ultimately Japanese, market. Key companies involved in the exploration include Exxon, the Japanese Mitsubishi Corporation, and the Chinese National Oil Company. This proposed pipeline would run from various reservoirs in East Turkmenistan, through southern Uzbekistan and Kazakhstan, into China and then Japan, for a combined length of 8037 km and capacity of 1059 bcf. More specifically, after "follow[ing] an exiting line through Kazakhstan [a] completely new line would…be laid connecting China’s western Xinjiang Autonomous Region" to the Kazakh fields. "Finally, it would tunnel under the Yellow Sea, over South Korea, and under the Sea of Japan, before terminating in Japan." The estimated cost of the pipeline varies among sources, but a common number cited is US $10 billion.

With respect to energy supplies in the past, China has historically been very self-sufficient, neither importing nor exporting natural gas. In the future however, China’s natural resources will be insufficient to meet its growing energy demand, and so Caspian gas would be of great economic value to China. Yet as Fred Starr explains: "While we’re all talking oil, other people are talking about long term relationships". In other words, Caspian gas would not be merely economically beneficial to China. Rather, China has solid motivation to establish relationships with both Kazakhstan and Turkmenistan- in order to extend her sphere of influence, and to gain valuable allies in the region.

Japan should similarly witness a substantial increase in its energy needs in upcoming years. Currently, Japan only produces 20% of its own energy, with oil being the preferred imported natural resource. Yet despite this preference for oil, Japan’s demand for natural gas has actually "quadrupled in the past 30 years, and is expected to grow in the future. As a result, Japan has expressed a solid interest in a pipeline from Turkmenistan, most likely for the purpose of decreasing its dependence on resources from the Persian Gulf.

Thus both China and Japan remain potential export destinations for Turkmen gas. Unfortunately, politics and economics militate against a Far East pipeline anytime soon. For one thing, involving so many transit countries would raise many complicated legal and political issues. Additionally, given the extremely capital intensive nature of natural gas pipelines, especially one of such length, investing parties would be wary of the feasibility of sustaining a long term supply and demand. Even more importantly, the recent Asian economic crisis has created a very unhealthy atmosphere for this large of an investment. All in all, the consensus, both by academics and politicians alike, seems to be that a pipeline from Turkmenistan to China and then to Japan, while feasible, is more likely to be a long run possibility than an immediate solution.

Turkmenistan-Pakistan-India

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Following the global pattern, South Asia, like so many other parts of the world, is witnessing a rise in the demand for energy. In terms of natural gas, however, in the past, Pakistan has been relatively self-sufficient. Nonetheless, anticipating that Pakistan’s domestic reserves would run out in the near future, many Caspian countries such as Kazakhstan and Turkmenistan, as well as other contending forces such as Russia and Iran, have been vying for the Pakistani market. However, given that, in the past two years, Pakistan has witnessed five significant natural gas discoveries, it is unlikely that it will need to import further supplies from the Caspian Basin in the near future. India on the other hand would be highly appreciative of Caspian gas.

Since its transition in 1991 from a socialist economy to the free market, India has witnessed large GDP growth. Unfortunately this growth has been accompanied by a supply shortage that is "stunting the country’s potential prosperity," and so the government is trying to find new resources of energy. Until now, coal has served as a primary energy source, but it poses environmental risks. Increasing natural gas consumption therefore would not only help fill India’s excess energy demand but also would have the added benefit of helping India environmentally.

With such a large demand in the Indian subcontinent, gas-producing nations have been quick to invent routes to transport their supply to this area. Three routes have received consideration: Iran ® Pakistan ® India; Turkmenistan ® Iran ® Pakistan ® India; and Turkmenistan ® Afghanistan ® Pakistan ® India.

The shaky relationship between Pakistan and Iran is the primary setback to the first two of these three routes. Though the two countries were on their way to resolving their differences, re-ignited conflicts between Sunni and Shiite Muslims have soured relations. The tension between the Muslim population, of which Sunni’s comprise 90%, and the Shiite’s comprise 10%, has spread from a being a purely religious issue, into a contentious political issue with highly religious overtones between Pakistan and Iran. As such, a joint project of large scale, such as one of the two gas pipelines in question, would have difficulty gaining support in both the predominantly Sunni country of Pakistan, and in its Shiite neighbor of Iran.

The third route through Afghanistan to Pakistan, also raises grave political and security concerns. Nonetheless on October 27, 1996, President Niyazov granted approval to the Unocal Corporation’s proposed route from Turkmenistan to India. Along with five other international companies and the Turkmen government, Unocal had formed a consortium known as the Central Asia Gas Pipeline, Ltd., or CentGas, that hoped to build an approximately 1000 mile long pipeline south from the Dauletabad field in Chardzhou, Turkmenistan, to Pakistan’s marine terminal on the Arabian Sea, via western Afghanistan. According to Unocal, the total project would cost US $1.9 billion to Pakistan, plus an additional US $600 million for the eventual connection from Pakistan to India, and would have a capacity of 700 bcf.

Though Unocal had recognized both the financial risk of borrowing as well as the physical risk of running pipelines through war torn Afghanistan, it had nevertheless expected the project to be successfully implemented in the near future. The day after the United States government mounted cruise missile strikes against training bases in Afghanistan however, Unocal scrapped this project, which interestingly enough, had been supported by the White House. Spokesman Barry Lane presented Unocal’s official position as: "Given the political conditions, the project has been suspended." The political conditions to which Lane was referring were not only the alleged terrorist acts by Osama Bin Laden, but also the ongoing civil unrest and humans rights violations claims, in Afghanistan.

The Islamization of the state remains the official goal of the Taliban, which today comes fairly close to controlling the nation in its entirety. Yet the movement has come under scrutiny for numerous purported human rights violations, and human rights groups worldwide have placed this civil war at the top of their international agenda.

The relevance of the Taliban movement to the development of cross-country infrastructure is multifold. For one thing, financial institutions will not fund pipeline expenditures because influential nations have not recognized the Taliban as the official government of the Afghan country. Here, no amount of "political risk insurance" can help alleviate repayment concerns. Secondly, the movement has sparked a strengthening of intra-regional coalitions, with Iran and the Pakistani backed Taliban on opposing sides for both religious and political reasons. Though recent days have shown the supposed improvement of relations between Iran and the Taliban, while it is likely that they will avoid the extreme of war, it will probably take some more time yet before the two groups can fully reconcile their differences.

Upcoming political stability in the region therefore seems rather unlikely. On the bright side however, many key countries have a high stake in the route through Afghanistan to South Asia, and this truth suggests that the civil war may actually come to an end sometime soon. Just recently in fact, on November 6, Pakistan and Turkmenistan announced that they would send diplomats to Afghanistan to help bring peace to the nation. Similarly, from the White House’s point of view, this route from Turkmenistan serves the dual purpose of "capturing the South Asian gas market coveted by Iran" while "depriv[ing] Iran of transit fees for Turkmen gas crossing its territory." Peace in Afghanistan would undoubtedly re-ignite hopes for a gas pipeline to the Indian subcontinent.

Pakistan and India- Conflicts and Resolutions

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Were the Taliban issue in Afghanistan to be resolved, long-standing conflicts between Pakistan and India would still make the practicality of a pipeline to the Indian subcontinent questionable. Through signing its deal and forming a consortium, Unocal originally expressed confidence in both countries’ abilities to maintain a peaceful relationship, at least with regard to a joint pipeline. Yet recent nuclear missile tests by both Pakistan and India have reawakened concerns about the security and feasibility of such an investment.

The ongoing debate over the legal status of Kashmir has been a divisive issue and the primary source of tension between the two countries. Resolving this long-standing conflict obviously can not occur overnight, but a mutually beneficial project of large scale, such as a pipeline from Turkmenistan to the subcontinent, might prove instrumental to a cordial relationship between and India and Pakistan. In fact, both Ambassador Naresh Chandra and Ambassador Riaz H. Khokhar, the respective Indian and Pakistani Ambassadors to the United States, categorized a natural gas pipeline into the subcontinent as an effective "confidence building measure."

Before the discovery of additional natural gas reserves in Pakistan, economies of scale were the chief justifications of a pipeline to India. Since both Pakistan and India had a growing need for imported gas, a shared pipeline would reduce implementation and operation costs, and thereby reduce the overall cost of gas for both countries. With the discovery of additional reserves in Pakistan however, the economies of scale argument is not really applicable to Pakistan. Nonetheless, Pakistan would still benefit economically from a joint pipeline because it would receive transit fees for the movement of gas across its borders.

Similarly, according to Tongia and Arunachalam, authors of "Natural Gas Imports by South Asia: Pipelines or Pipedreams?", India’s benefits from a shared pipeline can be seen by comparing the cost of this option with the price of LNG, or liquefied natural gas, its other contending energy option. Since a joint pipeline would reduce the final cost of natural gas for India to significantly below the cost of LNG, the pipeline is sound economically from India’s point of view as well.

Given that this investment would be economically advantageous to both Pakistan and India, the question remains as to whether or not it is practical. After all, with such a history of conflict between them, the two countries may very well be unable to cooperate on the implementation and regulation of the pipeline. The Indus Waters Treaty of 1960, which resulted from a conflict over the waters of the Indus basin after the partition of 1947 however, shows that cooperation between Pakistan and India is at least conceivable. In 1951, David Lilienthal, former chairman of the Tennessee Valley Authority and US Atomic Energy Commission, visited the region, and wrote in his journal: "India and Pakistan were on the verge of war over Kashmir…One way to reduce hostility…would be to concentrate on other important issues where cooperation was possible". The resulting Indus Waters Treaty did indeed reduce hostility between the two countries, and suggested that collaboration "between India and Pakistan is possible in cases where the benefits of the agreement are plentiful and pressing, overwhelming the political hedging that prevents other forms of reconciliation". Since the joint pipeline in question would benefit both countries, after working out minor glitches such as deciding the exact route of the infrastructure, Pakistan and India should be able to cooperate on its joint implementation and regulation.

Similarly, according to Siddiqi, India and Pakistan should realize that the creation of this pipeline would increase the security of the region. In other words, if a broader definition is used, the security of a nation depends not only on military strength, but also on economic development and energy availability. Since this pipeline would be economically beneficial to the region, and would supply additional energy power to India and possibly Pakistan, both countries would benefit by increased security.

With the recent pipeline explosions in Columbia and Nigeria in mind, one cannot help but wonder whether extremists groups on either side of Kashmir would seek to sabotage the project. The fact that the pipeline would be beneficial on many levels to both countries, however, suggests that Pakistan and India will do their utmost to guarantee the safety of the infrastructure. It would be in Pakistan and India’s best interests to secure the pipeline, through military troops if necessary.

Finally, the last significant issue surrounding the joint pipeline is whether or not the project would be risky from India’s point of view. In other words, would India’s supply of gas be put at jeopardy because it would travel through Pakistan? Most likely, the presence of a third party buffer state, with economic interests vested in the pipeline, would prevent such a possibility. Similarly, the Indus Water Treaty that has lasted more than 25 years shows that international cooperation can result when economics translates into politics. Lastly, if necessary, both mechanical constructs on the pipeline (such as linking it to domestic gas networks or keeping reserves in underground gas storage) as well as international agreements, could be developed so as to reduce the potential of a disruption of supply.

Conclusion

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Table 2: Turkemenistan Gas Export Options

Destination of Route | Cost (in US $billions) | Capacity (in bcf)
Iran | 0.19 | 141
Iran à Turkey | 1.6 | 105
TransCaspian to Turkey | 2.4 | 350
China à Japan | 10 | 1059
Pakistan à India | 2.5 | 700

Ambassador Morningstar was correct when he compared the Caspian gas issue to "peeling an onion- it just goes on and on and on, and nothing is really as it seems". While transporting gas from the Caspian region, particularly Turkmenistan, to other markets, is by no means hopeless, it is devilishly complicated.

Assessing the best route for Caspian gas is unavoidably entangled with international politics. A pipeline from Turkmenistan to India for example will depend not only on Afghanistan’s internal war, but also on Pakistan’s position toward the Taliban, and the relationship between Pakistan and India. Most likely, a pipeline passing from Pakistan to India would economically benefit both countries, and would also serve as a vehicle to reduce hostilities. However, in today’s climate, this route is not only unsafe, but also financially impractical, due to Afghanistan’s current internal troubles. If stability were to come to Afghanistan however, a route from Turkmenistan to the Indian subcontinent would most likely materialize.

Just as a gas pipeline to India is impractical because of political concerns, the route to China and then Japan does not today appear practical on economic grounds. For one thing, questions of long term supply and demand, especially considering the cost of such a lengthy investment, prevent this pipeline’s immediate construction. The primary deterrent of the Far East route however, is the ongoing Asian economic crisis. Without financial stability, it would be extremely difficult to borrow enough money to construct such capital-intensive infrastructure. Yet provided the economic turmoil in Asia passes, a pipeline from Turkmenistan to the East would serve as a viable long-term possibility.

Turkmenistan’s only real alternative at present is a pipeline into Turkey and eventually Europe, either through Iran or under the Caspian Sea. While going through Iran appears cheaper than the TransCaspian proposal, in reality such a path could, in the long run, not be in Turkmenistan’s best interests. Even if the US were to change its policy towards Iran, Turkmenistan might still be better off transporting its gas under the Caspian rather than through Iran, in order to avoid the construction of a pipeline through a future competitor nation.

Such a TransCaspian gas line is also an all around plus from the United State’s point of view. For one thing, it would supply gas to Turkey, an important US ally in the region, from a source other than Russia or Iran. Similarly, it would be in tune with the White House’s dual-containment policy against these two countries of Russia and Iran. Finally, the creation of the TransCaspian gas pipeline could help push along the adoption of a Trans-Caspian oil line- another US backed project.

As Fred Starr explained, we should see both oil and gas in the Caspian in their relative contexts, rather than through "monomania" blurred lenses. For nations in the Caspian region, the real issue is not gas, or even oil, exportation. These countries are primarily agricultural nations with cotton as their major crop, and the desperate need for water is a top regional priority. In reality then, the United States and other outside powers’ policy concerns do not directly overlap with those of the Caspian states, whose number one objective is sovereignty. In the sense that exporting natural gas will bring about economic gains for Turkmenistan, however, and hence help it reach this ultimate goal of autonomy, the US is at least partly justified in its involvement in the country.

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