MALAYSIA: OIL PIPELINE

published in B&E 28/06/07

‘Truly Asia’ pipeline

Iran-Malaysia cooperation to checkmate US moves

Some perceive the nuclear imbroglio in Iran as a problem, others view it as an opportunity. A psychiatrist would suggest that the difference lies in the perception and an international relations analyst would make us believe that the differences stem from ideological misperceptions which shape the worldview of a nation. On the other hand, a more credible explanation about the respective stands of Malaysia and the US vis-à-vis Iran flow from the politico-economical perspective. It is this perspective which facilitates our understanding of the urge of Malaysia to build a 300 km-long pipeline running from refineries in the west to its east coast. Kuala Lumpur intends to use the opportunity provided by anxiety over Iran’s eventual fate among global players to its advantage. The game is simple. Singapore, the staunch US ally in the region , is strategically placed close to the Malacca Strait (a shipping route through which oil reaches from Iran to the ports at South China Sea). In order to apply pressure on Iran, the US may use its existing strategic leverage in Singapore and choke the Iranian oil supplies. If this was to happen, China (which draws a lot of its burgeoning energy needs from Iranian oil fields) would feel the pinch. This politico-military calculus is causing a lot of consternation, both in China as well as Iran. This anxiety is being used by Malaysia to strengthen its economic base. The solution they are now working upon is to help China and Iran by-pass the ‘Malacca dilemma’ by commissioning refineries and pipelines running from its west coast (Yan in Kedah state) up to Bachok, located on the eastern coast of Kelantan state. This would facilitate the China-bound oil tankers from Gulf to off-load at Yan, thus obviating the need to cross narrow confines of the Malacca strait. No points for guessing that this project slated to begin construction by end-July is opposed by the US and funded by Iran (National Iranian Oil Company or NIOC is one of the chief financiers of the project costing 50 billion Ringgit or US$14.5bn). China palpably is happy, since Beijing neither can nor does it intend to challenge the US supremacy at sea, thus it is busy aiding such pipeline projects (Gwadar port in Pakistan & Myanmar’s pipeline project from Sittwe to Kunming, capital of Yunnan Province) to ensure the smooth flow of hydrocarbons from the Gulf. Interestingly, Japan too has shown interest in the Malaysian project and is also one of its financiers, along with Saudi Arabia.

“Despite the political equations with the US, Tokyo’s strategic energy demands ensure that it supports all initiatives which help it to secure its crude supply-chains”, said Dr. Vijay Sakhuja of the Institute of Southeast Asian Studies, Singapore, in a chat with B&E. The Malaysian initiatives are a cause of concern for Singapore. As Dr. Sakhuja says: “Should the proposed Malaysian mega-project reach its fruition, which it would (given that there is both domestic political & international financial support) and will have an impact on Singapore’s dominant position as Asia’s frontrunner in trans-shipment in Asia.” The moral of the story is that while the US is busy flaunting its military muscle to secure its economic interests across the globe, others are quietly and diplomatically inching ahead to replace US as the “strategic balancer” in Asia-Pacific.