Doubts over Iran-Pakistan pipeline

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More to gas pipeline project than point scoring

The Pak-Iran gas pipeline is not only important for energy starved Pakistan but also for Iran in terms of diluting the impact of UN and US sanctions against it for refusing to abandon its nuclear programme but also to show the world that it was not isolated, more so in its own region. The groundbreaking ceremony of the Pakistani section of the pipeline on 11 March despite US threats of sanctions against Pakistan, provides much required props to Iran to reinforce that notion.

While the decision of the Pakistan government to go ahead with the project has been widely hailed, there are certain elements who are reading too much between the lines and casting doubts about the completion of the project. Some believe that timing of laying the foundation suggests that the PPP would use this as a political ploy during the elections. Still others believe that the project might not see the light of the day as envisaged because Pakistan simply does not have the required money to funnel into it. Another debilitating factor being mentioned is the possibility of US sanctions that can have adverse affect on our already febrile economy.

The foregoing views need to be evaluated in the context of the ground realities and the compulsions involved in going ahead with the project and its envisaged advantages. With regards to the contention that the move to initiate the project at the fag end of the tenure of government is designed to gain political mileage during the ensuing elections, my considered view is that it reflects a traditional impulsive propensity to look askance at every initiative of the sitting government by the elements opposed to it without conducting an objective appraisal of the undertaking. There is certainly much more to it than the political point scoring, which these critics conveniently ignore. Even if that view is given credence, the move is beyond reproach morally and politically. All over the world, political parties, especially those running the governments seek the mandate of the people on the basis of their performance and the projects of national importance set up by them. The Pak-Iran Gas Pipeline is almost indispensable in view of the energy crisis gripping the country at the moment and its future needs. The completion of the project would be instrumental to the addition of 4,000 MW of electricity into the system. Ever since it was conceived in 1995 it has remained a non-starter due to a number of geo-political variables. The present government evinced serious commitment right from the beginning in tiding over the energy crisis, especially in completing the IP. However, the issue could not be resolved immediately due to issues pertaining to the pricing of the gas and related matters which came to fruition after long and protracted negotiations between the two sides. The pressure tactics used by the US and the lack of financial resources for the project also played their part. But these factors did not dampen the resolve of the government to have it implemented. It is therefore just a coincidence that it finally came through at the end of the tenure of the government.

Coming to the financial aspect of the project, the construction of the Pakistani section of the 781 km of the pipeline and the required equipment is estimated to cost US$1.5 billion. Iran has committed to provide US$ 500 million and the construction of the pipeline by an Iranian firm. After the laying of the foundation stone for the project, China has come forth with an offer of a loan of US$500 million. So two third of the finances required have already become available and raising the rest of the money should not be a big problem given the importance of the project for the country. It can be raised internally or taken from a friendly country, possibly Russia. Our relations with Russia have witnessed a qualitative change during the last five years. Russian leader Vladmir Putin during the 11th summit of the SCO at Petersburg not only expressed Russian support for the materialization of mega projects like TAPI and CASA but also announced to provide US$500 million for the completion of the venture. During his bilateral meeting with former Prime Minister Syed Yousaf Raza Gilani, he offered a loan of US$500 million for the expansion of Pakistan Steel Mills and provision of technical support for Guddu and Muzaffargarh power plants. Reportedly, the Russian government also wishes to finance Bhasha Diamir Dam on government-to-government funding basis. It also supports the construction of the IP Gas Pipeline which adds another element of optimism to the availability of the required financial resources and viability of the project to be completed in the stipulated time frame. Since this money will be available without putting a drain on the internally raised revenues and other receipts, it will certainly not burden the economy as being envisaged by some quarters.

As regards US sanctions, Pakistan has endured them in the past as well when the former opposed our nuclear programme and imposed them in the form of Pressler Amendment. But it could not stop or dissuade Pakistan from abandoning the venture which was so vitally needed to ward off threats to our security within the region. The Pak-Iran Gas Pipeline is a lifeline for Pakistan which will serve its economic interests for a long time to come besides other benefits that will come through economic integration with the region.

The PPP-led government may not have been successful in meeting the inherited challenges owing to a myriad of internal and external constraints and the overall security environment in the region, but it is an irrefutable reality that it has done a lot in the energy sector to not only lessen the impact of the energy crisis but also to cater for the future needs of the country. It added 3,500MW electricity to the system. It negotiated an agreement with China for building Chashma III and IV which will be completed by 2017. Similarly China is working on 17 power generation projects in Gilgit-Baltistan, including the Neelum Jhelum project with a cumulative power generating capacity of more than 10,000MW.

The fact is that if Nawaz Sharif says that he will resolve the power crisis within three years if he is voted into power, he is right: all the projects already in the pipeline shall become operational by then.

The writer is an academic.

6 COMMENTS

  1. Neither Pakistan nor Iran have the resources and technology to undertake and complete this project without international assistance.
    Dr.Mukhtar Ahmad
    Islamabad

  2. We applaud worthy writer's perception about this IP project and wish that his perception could be translated into ground reality and project could see the light of the day despite of public apprehensions like US stance, financial management, security issues etc. But the fact remain that Pakistan need to depend on indigenous resources for power production may it be hydro or coal base and natural gas if become available from Iran should be used for making fertilizers / petrochemicals and then as industrial fuel, all as import substitution or exports augmentation.

  3. Number of flaws in this article….
    1. Iran does not have $ 500 million as claimed by author..because of sanctions Iran defaulted on a payment of $ 145 million to India. Whatever it is selling it only gets some food items as payment..no cash transaction. It has no money.
    2. China has committed $500 million !!!! When ? in what form ? Originally a Chinese financial institute was to finance this project ..however it withdrew in wake of fear of sanctions. Why would China offer $ 500 million ? If China is that intrested let it say that extend the pipeline to China ?
    3. A fact the author has omitted that there are only 2 companies in the the world, one Russian and one European company who have the technology to construct pipeline. The European company was never intrested and the Russian company withdrew. Iran has no technology. Iran's claims are false.
    4. Pakistan's financial condition is percaroius. It urgently needs 10 billion dollars to avoid default of payment situation. This money is no where in Pakistan's hands. It all has to come from outside. Saudi Arabia is enemy of Iran and will never pay a penny. IMF and World Bank are all controlled by US and allies. 1.5 billion annual US aid will be suspended. So from where the money will come ???? Forget pipeline, even to pay the minimum for the borrowed money.
    5. Author is bragging about previous US sanctions forgetting that at that time Pakistan's economy was not in such a bad condition and those sanctions were mainly on military hardware so did not affect too much.

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