May 4, 2012
Rizwan Zeb

According to media reports, Saudi Arabia has approached Islamabad offering an energy aid package if Islamabad agrees to abandon the Iran-Pakistan gas pipeline project. Although the details of this offer are not available, it is an indication that the long-proposed Iran-Pakistan (IP) gas pipeline continues to stall. Although Pakistan is facing an imminent energy crisis, for Islamabad the project is caught up in the complexities of its relationships with Iran and the United States and now Saudi Arabia.

Islamabad is of the view that securing funds for the construction of the Iran-Pakistan (IP) gas pipeline should not be a problem. According to media reports, addressing a joint press conference with the visiting Swedish Foreign Minister Carl Bildt, Pakistan’s Foreign Minister Hina Rabbani Khar stated that there are multiple sources available. “This is a fairly viable project and we hope there will not be any problem in trying to find ways and means of ensuring its funding.” She further stated that in keeping with the severity of the energy crisis in the country, “We cannot afford to be selective in pursuing energy sources and we will continue to do whatever we consider to be in our national interest.” However, if recent developments are any indication, one can conclude that the IP gas pipeline is in trouble once again. The Iran-Pakistan pipeline, as it was initially planned, has been around for quite some time now. The discussions for it started in 1994 between Islamabad and Tehran. On the suggestion of Tehran, New Delhi was included in the proposed pipeline project and it became the Iran-Pakistan-India (IPI) pipeline. In February 1999, an agreement between Tehran and New Delhi was signed. The 1999 coup in Pakistan resulted in some delays, but it soon came back on track. According to various media sources, Tehran was also keen to involve China in the project. After India abandoned the IPI in 2009, after signing a civilian nuclear deal with the United States, the final destination of the pipeline remains unclear.

Both Tehran and Islamabad, however, continued working on it. A gas purchase agreement between Iran and Pakistan was signed in 2009. According to reports, especially from Iranian sources, Tehran claims to have already completed its part of the pipeline while a feasibility study is underway on the Pakistani side. In recent times, Islamabad showed more inclination towards the IP pipeline than other options, including the Turkmenistan-Afghanistan-Pakistan-India pipeline (TAPI). This is for various reasons, such as the deteriorating Afghanistan-Pakistan relations, the uncertainty over Turkmenistan’s ability to supply the agreed amount of gas, and the cost and duration involved in the completion of the pipeline. The last point being the most important, as Islamabad is in urgent need of new gas sources as it is increasingly running out of its own gas reserves. A number of experts have estimated that, even if demand does not increase, reserves would be completely depleted by 2028-30.

Washington is strongly against the project. According to US policymakers, this would provide Tehran with capital, which it will use to pursue its anti-American, anti-Israeli and anti-western agenda and to further its nuclear programme. According to media reports, the US Secretary of State Hillary Clinton, addressing the House Appropriations Subcommittee on Foreign Operations, stated that embarking on the IP pipeline project is in violation of the Iran Sanctions Act.

Although Islamabad has reiterated that it would go ahead with the IP pipeline, it would be a bumpy ride. Earlier this year, Pakistan’s own Oil and Gas Development Corporation and the National Bank of Pakistan reportedly withdrew from the project, stating likely adverse implications for their foreign partnerships and businesses. But, if Pakistan does decide to back off from the project, it will have to pay a huge amount in compensation to Iran as per the 2009 agreement. The only encouraging note so far was that the Industrial and Commercial Bank of China was considering financing the project; however, recently different media sources have reported that it has decided not to. Another option is Gazprom, the Russian company, which has showed interest in the project. It would be some time before we finally know whether it will happen or not.

While the IP pipeline project continues to face various serious hurdles and challenges, prime amongst them is how Islamabad will manage its complex relationship with both Tehran and Washington. The recent Saudi offer, while it would not solve any of the energy related problems, yet has added a new complicating factor into this already complex puzzle for Islamabad. What exactly the Saudis have offered and how exactly will it contribute in solving Pakistan’s looming energy crisis? What effects will it have on Islamabad-Tehran and Islamabad-Riyadh relations? Islamabad has to keep this in mind while deciding its course. We, at the time of the writing of these lines, are not even sure of the choice of the timing and the motivation of the Saudis for their offer. In keeping with all the pieces of the puzzle, while Islamabad should go ahead with the IP pipeline feasibility study and see what shape the current crisis between the US and Iran takes, and what would be the outlook of post-elections Iran, it should also explore other possibilities, such as TAPI and/or a Qatar-Pakistan pipeline. However, Islamabad should not be the one to be accused of abandoning the pipeline project. IP’s future depends on so many variables and only time will decide its fate. Islamabad has to take its decision based on its energy needs and also keep in mind that countries can’t change their geography.

The writer is based at the Centre for Muslim States and Societies, University of Western Australia and is an Associate of Future Directions International. He is a former visiting scholar for the India/South Asia Project, Foreign Policy Programme at the Brookings Institution, Washington DC, USA and a Benjamin Meaker visiting professor of politics, IAS, University of Bristol, UK
-Daily Times