The regime change in Afghanistan and the removal of Western political influence will probably make the implementation of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline even more difficult than before.
Simon Pirani, senior research fellow at the Oxford Institute for Energy Studies (OIES), told New Europe by phone on September 10 the proposal to export up to 33 billion cubic metres of natural gas per year through an approximately 1,800-kilometer pipeline from Turkmenistan to Afghanistan, Pakistan and India was already economically unfeasible even before the Taliban’s quick takeover of Afghanistan.
“Let us ignore for the moment the high gas prices because this is something probably temporary so without these high gas prices, which will not continue forever, basically it’s very hard to see how the economics of TAPI can work under any circumstances. Unless you think the high gas prices will go on for 15 or 20 years, then this project does not work because then it is cheaper to bring LNG (liquified natural gas) to India or to Pakistan and the difficulties of building the pipeline and the expense of building the pipeline mean that this project cannot work,” Pirani said.
“This was always been the situation for many years and for many years when with colleagues I was looking at this pipeline, I had the impression that although the economics do not work, it was supported particularly by the Asian Development Bank and as US diplomats in Central Asia say as a ‘Peace Project’. In other words, it was their idea of nation building in Afghanistan that it would not only help to create a non-Chinese export route for the gas in Turkmenistan, which is good from the United States strategic point of view but also it would help with this nation building which is also part of the United States strategic view,” he argued. “Well, we had the Trump Presidency and now we had the withdrawal from Afghanistan and so clearly this strategic prospective of the United States now no longer exists so I think that this reduces still further the likelihood that this TAPI pipeline will ever be built,” Pirani added.
Commenting on what does regime change in Afghanistan mean for Central Asia and investment risk, Chris Weafer, co-founder of Macro-Advisory in Moscow, wrote in a note to investors on September 2 that Turkmenistan is best placed politically. He reminded that the government in Ashgabat has maintained frequent and direct contacts with the Taliban and, at a February meeting, secured an agreement to allow the TAPI gas pipeline and the Turkmenistan-Afghanistan-Pakistan (TAP) Power Interconnection projects to proceed.
“But these also depend on major financial support from IFIs, such as the World Bank, and will be delayed for some time,” Weafer wrote, adding that it may accelerate the plan to export gas to Europe. “The inevitable stalling for these projects may lead to a greater and more immediate focus on the proposed Trans-Caspian gas pipe that would bring Turkmenistan gas to Europe via the Southern Gas pipeline. This would help improve Ashgabat’s relations with the EU and, possibly, help in the government’s efforts to attract more Western investment,” Weafer argued.
But Pirani noted that the eastward extension of Southern Gas Corridor and economics of taking the gas from Turkmenistan across the Caspian Sea and bringing it to Europe are very problematic without high gas prices persisting for many years. “I cannot see that. What I can also see is that, if we are talking about 20-30 years, we are talking about the changing of energy policy in Europe. I think the consensus now is that this is going to mean lower gas demand in Europe over longer term even though the gas demand in Asia and other places is going up so I’m pessimistic about TAPI and the Southern Corridor,” Pirani said.
“The bad luck for Turkmenistan is that it’s landlocked apart from the Caspian Sea. It’ very far from where large quantities of gas are needed. This is the natural and geographical circumstances that Turkmenistan was cursed. Historically, the gas resources were developed in the context of the Soviet Union, that worked fine but that no longer exists, of course,” he said.
Marika Karayianni, Caspian energy expert at University of Peloponnese, told New Europe on September 8 the TAPI pipeline is assessed to be delayed due to stability and security reasons related with the Taliban regime. Regarding the regime change in Afghanistan, Karayianni said she does not foresee any effect, either positive or negative on the Trans Caspian. “There is no interconnection between these two pipeline projects, the end markets are completely different. And the economics as well,” she said and added, “The Trans Caspian issue is quite complex, its realization will be delayed for several reasons”.
Meanwhile, Weafer noted that Afghanistan has the largest reserves of undeveloped minerals. The change of government and the removal of Western political influence opens the door for Chinese investment into Afghanistan, he said, adding that the major prize is the estimated $3 trillion worth of undeveloped minerals in the country, including large deposits of rare-earth metals. “But China will be wary of engaging directly with the Taliban given the very harsh criticism of the leadership against China’s treatment of the Muslim Uighurs,” Weafer said and added, “China will be nervous of the extremist groups, such as ISIL, who are predominantly in the AfghanistanChina border regions. Beijing will probably try to pursue investment projects via Pakistan, which has a close political relationship with the Taliban”.
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