How can economic development increase not only prosperity, but also security and stability in post-2014 Afghanistan and the region? Can Afghanistan reclaim its unique position as a transit route between resources in Central Asia, Southwest Asia and the booming Far East? And what are Pakistan’s challenges and opportunities in this scenario?

These were the dominant themes of the EastWest Institute’s advocacy and outreach mission to Pakistan’s capital of Islamabad from March 18-20, 2015, conducted as part of the Afghanistan Reconnected initiative (also referred to as the Abu Dhabi Process). The mission was carried out by a delegation of parliamentarians, former ministers and private sector experts from Afghanistan, Pakistan, India, the United States and Turkey. 

Speaking in Mandarin, Firestein commented on U.S. Senator Ted Cruz (R-TX) becoming the first major-party candidate to announce a bid for the U.S. presidency in 2016, as well as on the unfolding 2016 U.S. presidential election overall. 

Backed by the Asian Development Bank (ADB), the Trans-Afghanistan Pipeline (TAPI) aims to export up to 33 billion cubic metres (bcm) of natural gas through a proposed pipeline from Turkmenistan to Afghanistan, Pakistan and India. The promise of TAPI was based on the growing energy deficit in South Asia, high hydrocarbon prices and an abundance of natural gas reserves in the neighbouringcountry of Turkmenistan.

There is a need for both India and Pakistan to find long-term sustainable solutions for their ever-growing energy demands. A shortage of supply, especially for power generation, is slowing these two countries’ economic growth considerably.

In South Asia, natural gas is rapidly gaining importance as the key fuel for power generation. Gas-based power generation plants are more economical to build than alternatives such as nuclear, hydropower and coal-fired plants. Gas-fired combined-cycle turbines are flexible and able to respond quickly to peak electricity demand. Gas-based generation is also significantly cheaper than fuel oil or diesel, often used to produce electricity in India and Pakistan.

The most efficient way to address the energy deficit in South Asia is, therefore, based on the construction of gas-fired power plants. Gas is abundant in neighbouring countries such as Iran, Qatar and Turkmenistan, but the energy reality on the ground is often shaped by obstacles, which overweigh the advantages that geographical conditions offer. Iran is still under sanctions, Afghanistan remains unstable and only Qatar offers new hopes with cheaper oil-linked LNG supplies, which could counter-balance the pricing advantages offered by TAPI.

Oil prices offer little incentive for South Asian energy producers to switch from oil- or diesel-based power generation to natural gas 

Gas as the fuel of choice seems to be under (a temporary) threat as well. Lower oil prices offer little incentive for South Asian energy producers to switch from fuel oil- or diesel-based power generation to natural gas. For instance, gas has traditionally dominated Pakistan’s thermal generation. However, stagnation of domestic production and increased competition for gas from the country’s transport sector and fertiliser producers have led to a considerable decline in the usage of gas for energy production in Pakistan. However, the sharp rise in power generation costs has increased the appetite of companies to switch back to gas. But with the fall in oil prices, there is a risk that this trend might reverse and decrease Pakistani energy companies’ commercial interest in imported LNG or pipeline gas.

$2.4 billion

An increase in the estimated cost of TAPI

A combination of factors such as the oil price fall and uncertainty about transit via Afghanistan is likely to delay the launch of the TAPI further. The estimated cost of the gas pipeline has increased from $7.6 billion to $10 billion, and the estimated price based on oil-linked formula dropped from $10-$11 per MMBtu ($360-$380 per 1,000cm) to $7 per MMBtu ($250 per 1,000cm). While the price range of $6 per MMBtu ($220-$230 per 1,000cm) on the Turkmenistan-Afghanistan border is acceptable for Turkmengaz, it’s still unclear who will lead and finance the TAPI project.

According to the agreed timelines, the selection of the consortium leader should be finalised before the end of October. Needless to say, the leader has to have sufficient financial and technological clout to lead the project. An increase in the cost of the pipeline and decreased gas prices have reduced the interest of major players in TAPI.

Furthermore, Turkmenistan’s legislation does not allow the granting of large scale onshore concessions/PSAs to foreign companies, which, in turn, reduces their interest in TAPI. Granting access to onshore deposits to the consortium leader might help to choose an appropriate candidate. Alternately, Turkmenistan can lead the project directly or via Turkmengaz with the help of an international consortium. A trans-Afghan energy bridge could bring peace and stability to the conflict ridden-country. In fact, all neighbouring countries, including Turkmenistan, have a vital interest in a stable Afghanistan.

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This article was originally published in Oil Journal, LUKOIL Overseas’ official English-language newspaper. To read it at Natural Gas Europe's website, click here.

Defence & Diplomacy: Afghanistan Reconnect Process by sultanhali

These were the dominant themes of the EastWest Institute’s advocacy and outreach mission to Pakistan’s capital of Islamabad from March 18-20, 2015, conducted as part of the Afghanistan Reconnected initiative (also referred to as the Abu Dhabi Process). The mission was carried out by a delegation of parliamentarians, former ministers and private sector experts from Afghanistan, Pakistan, India, the United States and Turkey. First convened by EWI in 2012, this distinguished group has continued to meet in order to address the region’s need for reforms and develop concrete recommendations for improving cross border cooperation in the fields of energy, trade and infrastructure.

President of Pakistan H.E. Mamnoon Hussain expressed sincere appreciation for EWI’s long standing commitment to the region. A series of intense exchanges with several high-level governmental policy-makers of Pakistan focused on the challenges of regional infrastructure construction and cross-border trade facilitation, including the development of a functioning regional network of roads, air and railway transportation as a prerequisite for further developments in trade, energy and mining. The relevant ministries of Pakistan also received the recommendations in writing and assured that these will be carefully considered.

All meetings took place in a frank and friendly manner and were off the record, except the inauguration which drew great attention from the media. Speaking at that opening, Ambassador Martin Fleischer, EWI’s vice president and director of its Regional Security Initiative, underlined that the Afghanistan Reconnected Process is based on the conviction that security and economic development are interdependent. Fleischer also asserted that unlocking the economic potential of the region is dependent not only on Afghanistan’s own transformation and institution-building, but also on reforms in Afghanistan’s neighboring countries and cooperation between them.

In his keynote speech, H.E. Sartaj Aziz, advisor to the prime minister on foreign affairs and national security, termed Afghanistan a vital connector for regional energy, communication and transmission corridor. Discussing his government’s efforts to link these corridors, Aziz referred to recent agreements on the Peshawar-Kabul Road and Chaman-Qandhar railway lines, affirming that these links would not only improve trade relations between the two countries, but would also help connect Central Asia with South Asia. The extension of the Afghanistan-Pakistan Transit Trade Agreement (APTTA) to Tajikistan and other regional countries would be a great step in the right direction. Aziz stressed his government’s fundamental conviction that only peace and development in Afghanistan can bring stability to the region. Pakistan would continue to support the reconstruction of Afghanistan, particularly in a post–NATO situation. This would include bilateral and regional projects, such as the Kunar dam, with its capacity to generate 1500 MW of hydro-electricity, and the Central Asia South Asia Electricity Transmission and Trade Project CASA-1000 and its upgrade to CASA- 1300 with addition of 300 MWs.

H.E. Sayed Tariq Fatemi, special assistant to the Prime Minister of Pakistan on Foreign Affairs, lauded EWI’s initiative and stressed the imperative role of the business community and private sector in expanding Pakistan-Afghanistan economic cooperation and advancing the shared goals of regional connectivity and economic integration. “A peaceful neighborhood is a pre-requisite for Pakistan’s economic development” he stressed and added that since the establishment of a new national unity Government in Afghanistan, relations between Afghanistan and Pakistan had substantially improved.

H.E.  Shahid Khaqan Abbasi, federal minister for Petroleum and Natural Resources urged Pakistan, Afghanistan and neighboring countries to engage in intensive partnerships to meet their growing energy demands, and to harness the massive economic opportunities provided by energy trade. He said that the region is at the early stages of a transition toward an energy economy in response to a global trend toward prioritizing energy security. Abbasi stressed  that there are no political obstacles to the implementation of major regional energy projects such as TAPI and CASA-1000. As a gateway to resource rich Central Asia, Afghanistan holds the keys to unlock a prosperous regional economy by acting as a transit route for energy supplies from Central Asia to energy markets in South Asia—a “scenario with win-win potentials for all stakeholders,” Abbasi said.

H.E. Eng. Khurram Dastgir Khan, minister of Commerce, outlined Pakistan’s plans for massive investment to improve infrastructure on the border with Afghanistan and India, and initiatives to upgrade port capacities at Karachi, port Qasim and port Gawader, in order to provide opportunities for Afghanistan and other Central Asian Republics to expand access to regional and international markets. Khan affirmed that new land-ports will be constructed at the Torkhan and Wagah borders to expedite Afghan exports and imports across Pakistan.

H.E. Mohammed Zubair, minister of Privatization, was briefed on the Turkish experience with private sector engagement in border management, which has led to substantial improvement in Turkey’s border posts at little or no cost to the government. The minister expressed a desire to explore the applicability of this innovative model in Pakistan.

A cross-cutting theme in all talks was the need to normalize relations with India, or at least put political issues aside, so as to foster cross-border economic cooperation. The next advocacy mission of EWI’s Afghanistan Reconnected series will take place in New Delhi mid-June this year.

Afghanistan Reconnected is funded by the governments of Germany and the U.A.E., as well as private donors. The mission to Islamabad was supported by the Pathfinder Group and its Chairman Ikram Seghal, who is also a member of EWI’s board of directors, and the Karachi Council on Foreign Relations (KCFR). EWI’s Chief Operating Officer Mr. James Creighton signed a Memorandum of Understanding with KCFR to sustain the cooperation between the two institutes.
 

Media Coverage 

1.      Dawn

2.      The News

3.      Express Tribune

4.      Express Tribune ISL

5.      Daily Times

6.      Business Recorder

7.      Pakistan Observer

8.      Jang

Event Photos

Advocacy meeting with H.E. Eng. Khurram Dastgir Khan, Pakistani Minister of Commerce 
 

Speech at opening session by H.E. Sartaj Aziz, Advisor to the Prime Minister on National Security and
Foreign Affairs, Pakistan
 

Exchange of gifts between EWI CEO James Creighton and Ahsan Mukhtar Zubairi, Secretary General
and CEO, Karachi Council on Foreign Relations (KCFR) 
 

EWI delegation leaving the Presidency after meeting with President Hussain

The East West Institute (EWI) US, which was founded in 1980 with Ross Perot Jr as chairman, is an international, non-partisan organisation with offices in New York, Brussels, Moscow and Washington. Its track record has made the EWI a global go-to place to build trust, influence policies and deliver solutions. This prestigous think tank seeks to make the world a safer place by addressing seemingly intractable problems that threaten regionaland global stability.

A composite delegation of business leaders is meeting in Islamabad today, with the Pathfinder Group assisting the EWI in facilitating discussions with members of the private sector, parliamentarians from the region and relevant governmental institutions in Pakistan about the EWI’s Afghanistan Reconnected Process (ARP). This was previously called the Abu Dhabi Process because it was, at one time, being funded solely by Abu Dhabi. Now, it has the additional support of the German government to address opportunities and challenges for economic growth in Afghanistan and the rest of the region, comprising India, Pakistan, Iran, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan and China. The UAE, US, Europe and various regional and international organisations are supporting the process. According to Ambassador Martin Fleischer, the vice president and director of the EWI’s Regional Security Initiative, ARP is based on the conviction that security and economic development are interdependent. Afghanistan’s future is dependent not only on its own transformation but also on reforms in its neighbouring countries, unlocking the region’s economic potential. The EWI’s advocacy and outreach missions are aimed atfosteringa demand driven reform process, from which Afghanistan and its neighbouring countries, particularly Pakistan, could greatly benefit.

The EWI’s present advocacy and outreach mission to Pakistan is a follow-up to the high-level consultations held from 2013 to 2014, addressing the region’s need for reforms and crossborder cooperation in the fields of energy, trade and infrastructure. The mission focuses on regional infrastructure and connectivity, such as developing a functioning regional network of roads, air and railway transportation as a prerequisite for further developments in trade, energy and mining. The first consultation, ‘Afghanistan reconnected: Afghanistan’s potential to act as an economic land bridge in Asia’ was held in Istanbul from April 9 to April 11, 2013. The second, ‘Afghanistan reconnected: linking energy suppliers to consumers in Asia’, was held in Islamabad from September 2 to September 4, 2013, to address the possibilities for regional energy trade between suppliers and the energy markets, especially in South Asia, focusing on Afghanistan’s potential not only as a transit country but as a future producer of energy. Held in New Delhi on November 19 and 20, 2013, the third consultation emphasised the need to invest in Afghanistan’s potential and facilitate the transition from an aid-based economy to a sustainable market economy.

The fourth consultation, ‘Afghanistan reconnected: creating momentum for regional economic security’ was held in Berlin from April 8 to April 10, 2014. The consultation reviewed progress on regional economic cooperation to develop an agenda of targeted activities to be implemented in 2014 and 2015. Based on the Istanbul recommendations (in the fifth consultation, held on November 26-27, 2014), the private sector was recruited to advocate the implementation of the priority reform measures identified.The EWI has engaged with prominent business leaders, parliamentarians and senior government officials from the region to develop a sustainable partnership for efficient trade expansion. The Istanbul conference identified bottlenecks in regional trade and developed practical recommendations to unlock trade potential. The recommendations included adopting long-term multi-entry visa regimes to facilitate themovement of entrepreneurs in the region, establishing cross-border free trade zones,reducing smuggling and informal trade, and adopting single window customs clearance systems to streamline customs’ procedures.

The EWI’s advocacy paper has a three-pronged purpose: to lay out macro issues affecting regional cooperation and development in Afghanistan and its neighbours. To analyse in greater detail select areas of regional economic security, with good prospects for progress in the short term and help generate momentum and facilitate breakthroughs in dealing with more difficult issues.To make a case for the private sector’s proposal on regional trade and transit policy reforms.Opportunities for regional cooperation exist in various sectors including, border management, security, narcotics and trade and transit facilitation, transport infrastructure and trade facilitation, narcotics production and trafficking,electricity trade, hydropower generation and energy issues. Given the political obstacles to such progress, there is a need for political initiatives aimed at building mutual confidence, easing political concerns, attaining donor support and helping increase benefits from regional cooperation.

Obstacles to trade include infrastructure costs arising from the lack of proper legal and regulatory systems, restrictive trade policies, poor border management and the absence of effective transport facilitation. They also include inadequately harmonised trade and customs procedures, lack of transparency, high levels of corruption, illegal trade, a weak private sector and the absence of vital services such as trade, finance and telecommunication facilities. While the second tier of obstacles can be resolved relatively quickly, effective cooperation is necessary amongst regional players and within each country to overcome these issues. Once addressed, these systems can pave the way to resolving the more daunting obstacles holding back growth and stability.

Increased regional transit trade will boost private investment and growth in the short term, helping realise the long term vision for Afghanistan as a trade and transit hub. Sustained peace in Afghanistan, open trade and private sector growth, facilitated by supportive public policies, institutions and social and infrastructure investments, will help secure higher growth and reduce the risk of future economic insecurity. In order to promote long distance and continental trade with landlocked Central Asia, the development of ports serving the Indian Ocean is critical. Afghanistan’s trade is now mostly via Pakistan, through Karachi and Port Qasim. Together these two ports have a total of 40 berths that are largely underutilised. With the new Gwadar deep water port becoming increasingly functional, the China Pakistan Economic Corridor (CPEC) can become a major force to facilitate as much as 50 percent of the total transit from Central Asia. CPEC is a game changer for the region; with increases in efficiency and trade facilitation, the capacity of all these ports could be enhanced. The prerequisite to peace and prosperity in the region is understanding and cooperation between landlocked Afghanistan and Pakistan because Pakistan provides the gateway to the Indian Ocean and the world. Ashraf Ghani’s election as Afghanistan’s President had an extraordinary effect in bettering the relations between the two countries. In the words of this visionary, “we cannot let the past bury the future”.

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To read the article at The Daily Times, click here.

Firestein shared his views on the role foreign policy will likely play in the 2016 presidential election, his opinions on the front-running candidates’ foreign policy credentials and his assessment of larger trends in global conflict.

To listen to the discussions, click here.

At the European Gas Conference 2015 late January, EWI Fellow Danila Bochkarev discussed the future of liquefied natural gas (LNG) in Europe. At the conference, which took place in Vienna, Austria, Bochkarev sat on a panel that sought to answer where LNG in Europe may come from. Bochkarev expressed skepticism that Russia would be the source for European LNG. "Not only is Russia a latecomer, it is mostly focused on Asia,” he said.

"The question remains whether...LNG would really go to Europe," Bochkarev said. 

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To read more of Bochkarev's thoughts on the future of LNG, click here. 

Vice President and Director of Regional Security Ambassador Martin Fleischer presented EWI’s activities in the region, introducing a keynote speech by Ambassador Miroslav Jenča, Special Representative of the UN Secretary-General for Central Asia and head of the United Nations Regional Centre for Preventive Diplomacy for Central Asia (UNRCCA). The high-level event was enriched by comments from Mr. James Appathurai, Deputy Assistant Secretary General for Political Affairs and Security Policy, and Secretary General’s Special Representative for the Caucasus and Central Asia, NATO; H.E. Mr. Homayoun Tandar, Ambassador of Afghanistan to the European Union, Belgium and Luxembourg; and H.E. Mr. Rustamjon Soliev, Ambassador of Tajikistan to the European Union, Belgium and Luxembourg. The roundtable discussion was moderated by Mr. Christian Forstner, head of the Hanns Seidel Foundation’s Brussels Center.

Ambassador Fleischer outlined the prospects for stability and cooperation in Afghanistan and Central Asia, presenting the steps taken by EWI’s Afghanistan Reconnected Process. This initiative aims at forging regional economic cooperation to minimize the economic impact of security transition in Afghanistan in the years to come, by engaging governments, Members of Parliament and private-sector leaders from the region. The Afghanistan Reconnected Process has identified energy trade and transit, cross-border trade facilitation and investment in regional transport infrastructure as most urgent areas of cooperation that can contribute to enhanced cooperation and economic security in the region. In 2015, EWI will undertake comprehensive regional advocacy and outreach missions for the implementation of the priority measures identified, with the private sector as main driver of the economic cooperation agenda.

While recognizing the value of EWI’s initiatives in the region, Ambassador Jenča acknowledged the increasing complexity of Central Asia and the need for more regional cooperation, in the interest of stability. The situation is not only related to the completion of NATO’s combat mandate in Afghanistan, the withdrawal of troops and the potential security implications on Central Asia, but also to other regional and broader challenges. In particular, the presence of Central Asian foreign fighters in the Middle East, the crisis in Ukraine, the falling ruble and prices of oil and gas, as well as the decreasing remittances of labor migrants from Central Asia in Russia also had a significant impact on the region and its stability.

Beyond the issue of regional cooperation, Ambassador Jenča wondered if countries of the region truly identified with Central Asia as a region. The lack of regional structures, limited cooperation, communication, transport links and cross-border trade, which stagnates at about 6 percent of total trade in each country, seem to suggest that this is not the case. The slow progress of the CASA 1000 and TAPI projects exemplify the skepticism encountered by cross-border initiatives, which require further stability and international community involvement to succeed.

At the same time, Ambassador Jenča mentioned that the main challenges and obstacles to stability often lie within Central Asian states. The succession of political leaders, socio-economic problems, marginalization, shortcomings in the rule of law, religious extremism, inter-ethnic tensions and organized crime are issues which need to be addressed by the countries in the region in particular through preventive efforts, which UNRCCA promotes. Moreover, the more stable, democratic and prosperous the countries will become, the more resistant they will be to external threats.

Despite the risks and threats faced by the region, Ambassador Jenča stressed that Central Asian states had made continuous progress in the past 20 years and had managed to keep the region stable. In this respect the international community needs to build upon and sustain the developments achieved in the region. As Central Asian states continue to diversify their foreign policy and partners to face increasing challenges, the EU has the opportunity to become an even more attractive partner in the region, and may consider more targeted support to Central Asia.

The ensuing discussion referred to the challenges posed to the region by unresolved border disputes, tensions over the use of common water resources and energy needs, marginalization and human rights questions, drug trafficking, terrorism and other forms of organized crime. Such trends continue to undermine regional stability and require concerted efforts by all countries of Central Asia to develop effective responses.

The regional dimension of the threat of violent extremism was strongly remarked, in light of the possible return of over 2,000 fighters from the region who joined the IS insurgency in Iraq and Syria. In addition, Ambassador Soliev noted that IS has announced future actions in Pakistan and Afghanistan, raising the level of alert of neighboring countries. A recent meeting of deputy foreign ministers from the region has discussed the issue at length in Ashgabat, Turkmenistan.

In addition, developments in Afghanistan are affecting security in Central Asia as a whole, as there is a potential threat of terrorist and extremist actions related to lesser control over the Afghan territory after the withdrawal of the International Security Assistance Force (ISAF). In this respect, Ambassador Tandar stressed the key role of Afghanistan, which he described as “The Shield of Central Asia” in the fight against terrorism.

Speakers agreed that ISAF and the international community have not successfully addressed narco-trafficking stemming from Afghanistan during ISAF’s mandate, and that it is having an impact outside the country’s borders, feeding organized crime in the region and beyond. As the NATO presence decreases, poppy cultivation is increasing—as forecasted by UNODC, whose regional program on the topic is coming to an end. These developments may exacerbate the already fragile security situation in the region. Further commitment is therefore required from the international community. NATO is available to provide support to Central Asia in relation to narco-trafficking, as well as in the field of border control and transit through training and mapping exercises. However, its involvement should not be seen as part of a zero-sum game by other influential actors in the region, as it will not be embedded in a political agenda.

It was also mentioned that Central Asian states can play a more important role in stabilizing Afghanistan, using their comparative advantages of geographical proximity, cultural similarities, and potential for mutually beneficial regional cooperation. Countries in the region are already involved in Afghanistan’s energy, infrastructure, transport and capacity building, but further engagement is necessary. These countries, however, need to be supported by the international community in order to harvest the fruits of regional cooperation. In particular, Afghanistan needs to be better engaged in regional processes and relevant regional initiatives. At this critical time, international support for concrete projects is needed more than ever.

Speakers agreed that Central Asian states feel they need to survive between two powerhouses: Russia and China. The former’s influence in security and politics is great, and the latter’s economic clout is growing continuously.  This often puts countries in the region in front of difficult choices. For example, Ambassador Jenča referred to Kyrgyzstan’s decision to join the Eurasian Economic Union, as well as China’s pledge of 3 billion dollars for projects in the region, through its Silk Road Initiative. Central Asian states are strengthening ties with these partners, while others’ commitments to the region have been less consistent. In particular, the US’ interests in the region remain unclear, while the EU needs to show itself as a more appealing partner, beyond its ongoing engagement in the area.

Particular attention was paid to the EU’s involvement in Central Asia, thanks to the contribution of Members of European Parliament Dorfmann and Zeller from the audience. More specifically, they highlighted how the EU is lagging behind Russia and China in the establishment of its priorities in the region. After the launch of the EU Strategy for Central Asia in 2007, its role was largely neglected until the current Latvian EU Presidency, which has committed to producing a more focused updated strategy by the summer. The EU has nonetheless expanded its assistance to Central Asia, and the European Parliament has been supporting the region’s path towards democracy. Moreover, Ambassador Soliev reminded the audience about the upcoming EU-Central Asia High-level Security Dialogue, to be held on March 11, 2015, in Dushanbe, Tajikistan.

Ambassador Jenča stressed fostering cooperation and establishing partnerships as fundamental factors for advancements in the region. In particular, he recognized the commitments in this direction made by Afghanistan’s President Ashraf Ghani, who, since his inauguration has conducted numerous international missions aimed at strengthening ties with neighboring countries. Moreover, looking at the region as a whole, Ambassador Jenča concluded that cooperation between states in the region is an absolute priority for stability, and that the implementation of national reforms is key.

In this sense, in the margins of the conference, the UNSRSG and EWI formed a partnership for the final and critical phase of the Afghanistan Reconnected Process, aiming at advocating for reforms with governments in the region. By sharing the policy recommendations developed by business leaders from Central Asia and neighboring countries with concerned national administrations, the initiative will promote and support change towards enhanced economic cooperation and stability for the region.