Pipe­line pol­i­tics

The Pak Banker - - 4EDITORIAL - Munir Akram

THE only ex­ist­ing gas pipe­line in Pak­istan is the Sui gas distri­bu­tion net­work that has sup­plied Pak­istani homes, fac­to­ries and power plants for the past four decades. Pak­istan is a low en­ergy pro­ducer, and has used mostly gas and hy­dropower, rather than coal, as the main en­ergy source.

Un­for­tu­nately, Pak­istan has burnt up the ma­jor part of its pre­cious Sui gas re­serves. More­over, it has not ex­ploited its hy­dropower or coal po­ten­tial; has not ex­plored ex­ten­sively for oil and gas do­mes­ti­cally; and does not have a liq­ue­fied gas im­port ter­mi­nal nor the ca­pac­ity to re­fine larger im­ports of oil. Thus, at present, the best and quick­est op­tion for Pak­istan to fuel its homes and fac­to­ries is the im­port of pipe­line gas from Iran. But pipe­lines are al­ways a highly po­lit­i­cal is­sue. They have played a prom­i­nent role in the pol­i­tics of the re­gion.

In the mid-1990s, the pro­posal for the Turk­menistan-Afghanistan-Pak­istan gas pipe­line was ex­ten­sively dis­cussed with the Afghan Tal­iban government. Two com­pa­nies were vy­ing to se­cure this project — Uno­cal from the US and Bri­das from Ar­gentina. Unini­ti­ated in the re­al­i­ties of power pol­i­tics and eco­nom­ics, the Tal­iban chose Bri­das over Uno­cal to ex­e­cute the project.

Soon af­ter, they be­came in­ter­na­tional out­casts, re­viled for their un­ac­cept­able sup­pres­sion of women and other hu­man rights vi­o­la­tions. Po­lit­i­cally iso­lated and fi­nan­cially bereft, the Tal­iban made the Faus­tian bargain to host Osama bin Laden and his co­horts. The rest is, well, his­tory.

Since the 1970s, Pak­istan also at­tempted, in fits and starts, to se­cure gas sup­plies from Qatar through a pipe­line travers­ing sev­eral Gulf Co­op­er­a­tion Coun­cil coun­tries and cross­ing un­der­wa­ter to the Pak­istan coast. Ini­tially, the project was hin­dered by tech­ni­cal dif­fi­cul­ties and in­ter-Gulf pol­i­tics. Later, po­lit­i­cal mis­steps be­tween Is­lam­abad and Doha fur­ther de­layed the pipe­line.

Sub­se­quently, as the de­mand for gas rose glob­ally and the price in­creased, this op­tion be­came closed to Pak­istan. Re­cent at­tempts from Is­lam­abad to pur­chase Qatari gas have foundered due to dif­fer­ences over pric­ing and in­cen­tives. In any case, large im­ports are not fea­si­ble in the ab­sence of ei­ther a pipe­line or an LNG ter­mi­nal in Pak­istan.

The Iran-Pak­istan gas pipe­line also has a long his­tory. It was con­ceived over 20 years ago. Ini­tially, its im­ple­men­ta­tion was de­layed be­cause Pak­istan could not de­cide be­tween the Turk­menistan, Qatar or Iran op­tions.

In the spring of 1994, there was a strate­gic swing in Tehran to­wards In­dia, first man­i­fested in the change of the Ira­nian po­si­tion on Kash­mir at the UN Hu­man Rights Com­mis­sion. Soon af­ter, the scheme emerged to build an un­der­wa­ter gas pipe­line from Ban­dar Ab­bas to Gu­jrat or Mum­bai. Closer study re­vealed the high cost and tech­ni­cal dif­fi­cul­ties of such a ven­ture. Soon af­ter, Tehran floated the pro­posal for an over­land pipe­line to Pak­istan and through it to In­dia. Af­ter ini­tial hes­i­ta­tion, Pak­istan en­dorsed this pro­posal. In­dia agreed to it only af­ter the po­lit­i­cal dust raised by Kargil had set­tled. How­ever, dif­fer­ences over gas pric­ing and tran­sit fees be­tween the three par­ties con­tin­ued to be­devil the project.

Fol­low­ing Pak­istan’s post-9/11 al­liance with the US, and the emerg­ing “strate­gic part­ner­ship” be­tween Washington and New Delhi, en­thu­si­asm for the Iran pipe­line waned in both Is­lam­abad and New Delhi. While Pak­istan con­tin­ued to pay lip ser­vice to the ven­ture, In­dia backed out from the deal af­ter its agree­ment for peace­ful nu­clear co­op­er­a­tion with the US.

Af­ter sev­eral re­cent false starts, Pak­istan has signed the agree­ment for the con­struc­tion of the pipe­line with much fan­fare. Given the ab­sence of other op­tions, the deal is a “no brainer” for Pak­istan. Fur­ther, Iran has al­ready con­structed most of the pipe­line on its side. It has of­fered to pro­vide a $500 mil­lion loan to Is­lam­abad to con­struct its side of the pipe­line. The gas sup­plied by Iran would go di­rectly into the ex­ten­sive Sui distri­bu­tion net­work.

Yet, it is a mea­sure of the pre­vail­ing cyn­i­cism in Pak­istan, and mis­trust of Is­lam­abad that the con­clu­sion of the agree­ment with Iran is be­ing at­trib­uted to elec­tion pol­i­tics rather than na­tional in­ter­est.

Im­ple­men­ta­tion of this agree­ment will not be smooth sail­ing. The US has warned Is­lam­abad that im­port of gas from Iran vi­o­lates (un­spec­i­fied) sanc­tions and will have “con­se­quences” for Pak­istan. The US pres­sure is un­jus­ti­fied and un­just.

First, the UN Se­cu­rity Coun­cil sanc­tions against Iran do not bar gas (or oil) ex­ports or im­ports. Re­straints on Ira­nian oil ex­ports have been placed uni­lat­er­ally by the Euro­pean Union and in­di­rectly by the US

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