US, Pak, Iran wrestle in energy game

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As Washington increases its pressure on Islamabad to abandon the Iran-Pakistan (IP) gas pipeline, the Pakistan government is pushing for more concessions from the United States in the shape of a favourable price for the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline and financing for the large-scale hydroelectric projects and technology to tap gas reserves.
An official source said on Thursday the US pressure was only for Pakistan to abandon one project, the IP gas pipeline, as Pakistan planned to adopt the Turkish model for energy trade with Iran to evade UN sanctions. “Pakistan can have second thoughts on the project provided the international community gives financial assistance to overcome the energy crisis that has held hostage the entire economy,” said the source.
Pakistan is already up against the wall following the freeze on external inflows after the suspension of the International Monetary Fund (IMF) programme in May 2010. Its energy sector development programme has received no foreign assistance during the first quarter of the current financial year. The country is losing out on 3 to 4 percent in Gross Domestic Product (GDP) growth alone to the energy shortfall, without which the average GDP of 2.6 percent for the last three fiscal years would have been much better.
US pressure has forced other international financial institutions and bilateral donors to follow a ‘wait and see’ approach until Pakistan falls in line. Pakistan is looking towards other international players to help overcome the energy crisis. China and Russia are both interested but until the resolution of the circular debt and relaxation of the Public Procurement Regulatory Authority (PPRA) rules, they are noncommittal. The local banking sector is already overexposed in the power sector and is reluctant to finance existing and new power projects.
Pakistan is seeking financial assistance from China for the IP gas pipeline infrastructure. Iran is also interested in including either China or India in the pipeline project to make it financially viable. Pakistan has already opted for the coastal route for the pipeline to avoid any sabotage activity by Baloch insurgents, which gives confidence to both China and India to opt for the project.
However, Washington is pressing Islamabad to opt for the TAPI pipeline, but Pakistan considers it dangerous because of the long transit through war-torn Afghanistan. But the US proposes that the pipeline would help integrate Afghanistan into the regional economy and curb warfare as local tribesmen would be paid handsomely to protect the pipeline in their territory. Pakistan has apprehensions and wants alternatives such as a more conducive price, financial compensation in case of any cut-offs and support in speeding up exploitation of its indigenous natural gas reserves.