March 13, 2013 . 2

At the groundbreaking ceremony for the Pakistani leg of the Iran-Pakistan gas pipeline, the USA, though absent, dominated the thoughts of all present. It was because of US opposition to the project that its getting underway was such a high-profile event, with both Presidents Mehmoud Ahmadinejad of Iran and Asif Zardari of Pakistan attending the ceremony at the Gabd zero point, where the $7.5 billion pipeline is to enter Pakistan. Though Pakistan has been accounted a US ally in its war on terror, and has provided it ‘unstinted support', it has its own compulsions which oblige it to ignore US objections. There has been the investment of time: it has been 19 years since the project was first broached, and 18 since the preliminary agreement between the two countries signed. In contrast, India was only included in the project in 2005, and promptly withdrew in 2009.

However, the more pressing reason was revealed by PM’s Petroleum and Natural Resources Adviser Dr Asim Hussain while talking to the press at Gabd. The gas brought by the pipeline would help, he said, generate 4000MW of electricity. For a country in the throes of a crippling energy crisis, which not only causes universal inconvenience, but is also costing the economy export revenues, factory closures and lost jobs, would be a great boon. It must be noted that the immediate US reaction, as expressed by the State Department spokesperson, was that Pakistan too could attract sanctions, and a recounting of how the USA was aiding projects which would add 900MW by the end of 2013. There was no mention of the TAPI project, which might indicate that the attempt to execute the project is a nonstarter.

Both Presidents referred to the objections. President Ahmadinejad said that the pipeline had nothing to do with Iran’s nuclear programme. President Zardariasked for understanding of regional states’ problems. His appeal was more heartfelt, for his party is only weeks away from an election in which it faces searching questions about its efforts to end the loadshedding it is using to justify its participation in the project. The PPP wisely selected a time just before election. One hopes that the project does not stall as soon as elections are held, but is continued under whichever government comes to power.

http://www.nation.com.pk/pakistan-ne...aking-ceremony

March 14, 2013 . 6

PM’s Petroleum and Natural Resources Adviser Dr Asim Hussain has said that those who oppose the Iran-Pakistan gas pipeline cannot be friends of Pakistan. Thus, at a press conference in Islamabad on Tuesday he provided the response of the federal government to US threats of extending the sanctions it has placed on Iran to Pakistan. Pakistan’s Ambassador to Washington Sherry Rehman, has come to Islamabad, after attending Monday’s groundbreaking ceremony, to apprise the political and military leadership of the US reaction. In case of sanctions the option of ending cooperation with the US, including withdrawing permission to NATO to use land routes over Pakistan from Afghanistan, has also been considered. The suspension would affect the impending NATO withdrawal from Afghanistan, which it has already begun.

The reason why Pakistan went ahead with the project is contained within Dr Asim’s press conference, when he said that it would generate 4000MW of power. Pakistan is undergoing severe energy shortages and the Iranian gas is all it has to put this power on line. Pakistan simply cannot afford to ignore this reality, and will regard the pipeline as, in Dr Asim’s words, a lifeline for the country, and will find the demand of reviewing the decision incomprehensible. Whether sanctions, or the related consequence of denying passage to returning NATO containers from Afghanistan, there is no doubt that on either side serious consequences are expected.

As Dr Asim pointed out, Iran was already exporting petroleum products to various countries, such as India, Turkey, Qatar and Canada. The principle should be the same, especially for all countries allied with the USA. It is incomprehensible why Pakistan will be rewarded for its unstinted support of the USA by sanctions for fulfilling an essential need. The matter should not be made into one of egos. Both countries recognise each others compulsions and room must be found for Pakistan to pursue its goal of energy independence. The future in everyone's favour is a profitably employed Pakistan, pursuing economic stability and growth. That goal can only be helped in the immediate short term most effectively by gas imports from Iran to stabilise industrial production levels. Can the USA really find fault with that?

http://www.nation.com.pk/pakistan-ne...p-gas-pipeline

March 16, 2013 . 1

Foreign Minister Hina Rabbani Khar’s statement that US sanctions are irrelevant to the Iran-Pakistan gas pipeline serves as a good reiteration of the ground reality regarding the actual status of the project. It also indicates that fear or force of foreign pressure is now dissipating and we could see timely construction of the project.

But where she has done well to make that point apparent, Washington has to take notice of this fact and stop making statements intimidating Islamabad with talk of sanctions. There is besides no use on the part of the Obama administration to keep on harping that the project invokes sanctions because that would only bring into sharp relief its unwarranted finger pointing. Continued pressure would hence not only be seen as an attempt to isolate Iran but also to deprive Pakistan of its most basic need to prevent its commerce and industry from crumbling. It is little wonder that with policies of the sort, there has been no letup in the growing anti-Americanism, particularly in countries which feel clearly discriminated against.

http://www.nation.com.pk/pakistan-ne...-and-sanctions

By:Aziz-ud-Din Ahmad

Calling the superpower bluff is a high stakes dream with many enemies

Pakistan has high stakes in the pipeline bringing gas from Iran. There are however serious hurdles in the way of its becoming functional, the most important being a stiff opposition from the US. Similar opposition is expected from the Saudi government, whose prerogative remains containing Iran. The internal threats to the pipeline emanate from the Baloch separatist organizations and from anti-Shia, anti-Iran militant networks. The militant groups can be used as proxies by the outside forces to bomb and disrupt the pipeline.

Pakistan has to take up the formidable challenge of making the pipeline a success in view of the economic compulsions it faces. The pipeline will bring it both energy security and political stability. What is more it would be a show of resistance against being dictated from abroad.

Power shortages have badly impaired the country’s economy by slowing down industrial production, weakening the country’s agricultural capacity and having a damaging impact on business in general. Thousands of workers have been rendered unemployed while the income of those working as daily wage earners have been reduced. The growing dependence on costly furnace oil for the production of thermal power continues to raise electricity charges. Recurrent power shortages have sparked countrywide demonstrations putting the PPP government at the center and the PML-N government in Punjab on the defensive.

The pipeline is vital for Pakistan. It would help shift the domestic gas production that currently hovers around 4.2 billion cubic feet per day to the industrial sector. The measure would enhance industrial output, bring laid off workers back to the factories and create more jobs.

The gas that the country would be importing from Iran would allow the generation of additional 4,123 megawatts of electricity at cheaper rate. It will also restore the 2,232 megawatts of idle thermal power generation capacity with the diversion of about 406 mmcfd, leaving 344 mmcfd for other uses such as manufacturing fertilizer and supplying gas to domestic consumers. While Pakistan would pay Iran $3 billion a year, it would reduce its oil imports by $5.3 billion, resulting in a net annual reduction in energy imports by about $2.3 billion.

The import of gas from Iran has a strategic importance for the region. Once the super power bluff has been called, India facing energy crunch may change its mind and rejoin what was originally scheduled to be Iran-Pakistan-India (IPI) pipeline. This would create further incentives for Pakistan and India to resolve mutual conflicts. It would thus become a peace pipeline. Pakistan could even become a conduit for bridging the gulf energy to China, gaining significant economic benefits from the deal.

The pipeline however constitutes a threat to US strategic aims. The US plans involve strangulation of the Iranian economy through sanctions to force Tehran to abide by the US diktat. Any opening provided to an isolated Iran is liable to weaken the politics of leverage at the nuclear negotiations, which are currently at a turning point. The pipeline agreement would indicate that the US is isolating itself in the battle over Iran. On top of that, Iran has announced plans to build a 4,000 barrel-a-day oil refinery at Gwadar that would further undercut U.S. sanctions and eventually ensure energy supplies going to China, even if the Gulf's strategic Strait of Hormuz is closed.

The threat of the US sanctions has stopped a number of countries from financing the pipeline. If Iranian gas begins to arrive in Pakistan, it would be another proof that, despite being a super power, the US is gradually losing hold over the world.

While brandishing the threat of sanctions against Pakistan, the US is cautiously weighing their possible effects. Pakistan’s territory provides the cheapest exit to the US forces withdrawing from Afghanistan. Pakistan’s help is required to restore peace in post-occupation Afghanistan. The consequences of a further ratcheting up of the anti-US sentiment in the nuclear armed Pakistan cannot either be easily ignored.

Even if the US was not to urgently impose sanctions on Pakistan, it is likely to use Saudi Arabia and Qatar to pressurize Pakistan to abandon the pursuit of the Iranian gas. Is General Kayani’s visit to Saudi Arabia at this juncture a purely private affair? Is a news item circulating in the media regarding the army having not been consulted while taking the pipeline decision without any significance?

For nearly five years, the PPP hadn’t gone beyond huffing and puffing over the pipeline. It had meanwhile carried out every US directive, except when found to be unpalatable to the army. How come it has suddenly decided to break ranks? Is the deal merely an election stunt meant to attract anti-US voters? Will the PPP abide by the contract in case it comes to power again?

As things stand, every major party has supported the gas deal as it helps in the elections. Will any of these parties continue to stick to the stand once it is in power and pressures are exerted from important quarters?

Will the deal survive if the PML-N wins the elections?

The Sharif family feels itself under obligation to the Saudi ruler for the crucial help and hospitality extended to it. Will Nawaz Sharif resist the pressure from Riyadh? Will the PML-N agree to forgo the support of its allies that include clerics dependent on Saudi charities to run their lucrative seminaries?

Imran Khan could manage to oppose the US policies and still raise funds for the cancer hospital in America because he was in the opposition. Will he enjoy a similar easy access to Western charities after heading a government blamed for helping Iran, which is being widely demonised by the US media?

Any government really committed to complete the pipeline project will have to deal firmly with threats emanating from militants with divergent backgrounds. On the one side, is the resourceful LeJ and the remnants of the Jundullah who are deadly opposed to the Shia community and its spiritual center, Iran. On the other side, are the various Balochi separatist groups who disown and disrupt each and every development programme in Balochistan introduced by the Pakistan government.

The PPP-led government had enough time at its disposal to reach an honourable deal with the Baloch nationalists within the parameters of a federal polity. What is more it had initially enough goodwill among the Baloch militants to bring them down from the mountains and back from foreign countries and make them part of the mainstream. The PPP miserably failed to do what was doable back then. It remains to be seen if Nawaz Sharif or Imran Khan have the required strength and far sightedness to undertake what has now turned into an uphill task.

Militants like the LeJ will continue to be on the rampage till the military undergoes a through change of heart on the issue of using these networks in pursuit of its strategic needs in Afghanistan and the Indian-controlled Kashmir. They also flourish because they have their sympathisers in the PML-N and religious parties .

Pakistan needs to live with its neighbours in peace to become a secure and prosperous country. If militant organizations continue to use its territory as a launching pad for jihad, other countries will encourage, train and support militant group in Pakistan. Any government which takes over after the elections will have to dismantle the terrorist networks through a combination of diplomacy and use of force. Unless this is done attempts to bomb and sabotage the project will continue.

The writer is a political analyst and a former academic.

http://www.pakistantoday.com.pk/2013...eline-survive/

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.

http://www.pakistantoday.com.pk/2013...stan-pipeline/

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 through banking restrictions. These are not binding on other countries including Pakistan.

Second, even as regards the unilateral restrictions placed on import of oil from Iran by the EU and US, exceptions have been made by Washington for European and other countries, including India, which are highly dependent on Iranian oil. Since Pakistan has virtually no other quick option to meet its energy needs, the US threat of “consequences” is specially insensitive and unfair.

The US advice that Pakistan should instead execute the Turkmenistan-Afghanistan-Pakistan-India (Tapi) pipeline is disingenuous. This project is unlikely to be executed until there is peace in Afghanistan and this prospect is as distant as ever. Pakistan cannot afford to wait indefinitely. In any case, Pakistan (and India) can well consume all the gas that can be supplied through both the Iran and Turkmenistan pipelines.

There is one crucial issue in the agreement which should be clarified: the pricing mechanism. Hopefully, the price of Iranian gas has been linked to global gas prices. The expanding extraction of oil and gas from in the US and Canada has reduced gas prices to less than half of prices elsewhere. As shale extraction spreads to other countries — such as China — and the US and Canada build LNG terminals and pipelines to export shale gas, the world price of gas will come down dramatically.

If the Iran gas price is fixed at the current level, Pakistan is likely to find in a few years that it is paying well over market price.

Then, the “take or pay” provision in the Agreement would lock Pakistan into a very costly embrace.

The writer is a former Pakistan ambassador to the UN.

http://dawn.com/2013/03/17/pipeline-politics-2/

__________________
"Nay! man is evidence against himself. Though he puts forth his excuses." Holy Qur'an (75:14-15)

The ground-breaking ceremony for the Pakistan section of the Iran-Pakistan gas pipeline last Monday was an event of high symbolic importance. It was designed to seal Pakistan’s commitment to finally go ahead with the project 19 years after it was first mooted. But much of the western media played down its significance. One leading news agency described it as a “nebulous deal” and The Economist weekly wrote that it looked like a gimmick. The British weekly noted also that for five years Zardari’s administration had sat on the country’s energy crisis, with little action beyond get-rich-quick schemes for his cronies. The spokeswoman of the State Department also expressed doubts that the pipeline will ever be built. “We’ve heard this pipeline announced about 10 or 15 times before in the past,” she said, “so we have to see what actually happens.”

There can be no doubt that Zardari was motivated mainly by considerations of domestic politics and that his main purpose was to give the PPP a badly needed boost in the coming elections. It is also true that a lot of work remains to be done before Iranian gas starts flowing into Pakistan. But even if Zardari’s main interest was to advance narrow party interests and even with the uncertainty surrounding the completion of the project, going ahead with it was the right decision. Also, “what actually happens” depends largely upon us, especially on the resourcefulness of the new government and on whether it has the spine and the nerves to stand up to US bullying.

The pipeline certainly makes a lot of economic sense, because it will narrow the huge energy deficit that is crippling our economy. The price at which Iran has offered to sell the gas is not cheap but our domestic resources are depleting and the choice is not between cheap gas and not-so-cheap gas, but between an assured supply of gas at international prices and no gas at all.

The pipeline agreement will also serve the foreign policy interests of both countries. Iran will gain because it will lessen the country’s isolation in the face of US-led economic sanctions. For its part, Pakistan will benefit from the fact that the pipeline deal will help repair our somewhat frayed relations with Iran and blunt India’s effort to encircle Pakistan by building up strategic partnerships with our western neighbours. The Indian policy planners cannot have failed to notice that the ground-breaking for the pipeline took place close to the southern Iranian port of Chabahar which India is developing in order to gain access to landlocked Afghanistan and Central Asia, bypassing Pakistan and as an outpost to outflank Pakistan in the western Arabian Sea.

India cannot also have missed the fact that Iran and Pakistan have begun talks on an oil refinery at Gwadar, not far from Chabahar. In another sign of growing mutual trust between the two countries, Ali Akbar Velayati, a top foreign policy aide of Iranian Supreme Leader Khamenei, last month rejected media reports that Iran viewed Pakistan’s development of the Gwadar deep-sea port with suspicion.

India has been riled by the Iran-Pakistan pipeline also for another reason. For a long time, it tried to exclude Pakistan by pushing the idea of a deep-sea pipeline from Iran to India that would bypass Pakistan. India later agreed to consider an Iran-Pakistan-India (IPI) pipeline when the sub-sea project was found to be financially non-viable. But Delhi was never enthusiastic about associating Pakistan with the venture. India finally withdrew from IPI in 2008 under US pressure, but gave security concerns and high costs as the reason.

Over the coming years, the Iran-Pakistan pipeline also has the potential to transform the geopolitical landscape of South and Central Asia and the Gulf region by opening up a trans-regional energy corridor that links China, the world’s second biggest economy, with the oil- and gas-producing countries of the Persian Gulf through Pakistan, with Gwadar as the hub. This route would reduce the distance between western China and the Gulf by a half.

Gwadar also has the advantage that it lies outside the Strait of Hormuz and would remain open even if that narrow passage is closed for some reason. Iran’s deputy oil minister, Javad Owji, was quoted last week as saying that Iran is holding talks with several Chinese companies for the export of gas and LNG to China through a pipeline that passes through Pakistan. In addition, a deep-water port at Gwadar connected with the hinterland by modern road and rail links could also serve as a commercial and shipping hub which serves not only Pakistan but also Central Asia and western China.

Needless to say, these road and rail links and the pipeline can only be built if the situation in Balochistan is stabilised. That can only happen if bold steps are taken to satisfy the demand of the people of the province for genuine autonomy and to give them control over their natural resources.

If the opportunities that the pipeline deal opens up are vast, so are the challenges. One, the financing of the Pakistan section has still to be arranged; two, US has threatened that sanctions will be “triggered” if the project goes forward; and three, countries that fear being disadvantaged by the Iran-Pakistan pipeline and its possible extension to China at a later date will be tempted to step up efforts to destabilise Balochistan in order to hinder the realisation of the project.

Tehran has promised Pakistan a loan of $500 million out of the $1.3-1.5 billion needed to build the Pakistan section of the pipeline. Because any bank which provides the money would risk US sanctions, coming up with the rest will not be easy for Pakistan but it is not impossible.

Pakistan must also take seriously repeated US warnings of sanctions under its domestic legislation, the Iran Sanctions Act. But the US also needs Pakistan’s cooperation to extricate itself from Afghanistan. It is therefore very likely that while Washington will sanction any companies that participate in the pipeline project, it will not impose any cuts on its economic and military assistance programmes for Pakistan or use its clout in the IMF or other international financing institutions to block loans to Pakistan.

While opposing the Iran-Pakistan pipeline project and rejecting Pakistan’s demand for access to nuclear power technology, the US has not been wanting in expressing its “understanding” for Pakistan’s energy requirements. It has been particularly supportive of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. But as The Economist wrote, the Americans’ idea of gas all the way from Turkmenistan is a pipe dream.

Despite this, the US backs TAPI for two reasons: firstly, because it excludes Iran; and secondly because it fits in nicely with US strategic plans – under various innocuous sounding labels such as the “New Silk Road” project and the “Istanbul Process” – for the economic integration of South and Central Asia under Indian leadership.

Now that the PPP-led government has relinquished office, the next move on the Iran-Pakistan pipeline will be for the new government that comes into power after the elections. PTI and PML-Q have expressed support for the project. But disturbingly, the PML-N, the party with the best chance of forming the next government, has expressed reservations. Its spokesman Mushahid Ullah has said that PML-N would review the pipeline project. Tariq Fatemi, foreign policy adviser to Nawaz Sharif, has lamented that the PPP-led government would be “bequeathing to the next government this huge irritant in Pakistan-US relations”, indicating that PML-N views the pipeline as a problem rather than an opportunity.

Nawaz Sharif is not in power yet, but he has evidently decided not to lose any time in trying to curry favour with Washington. On this point at least, the difference between him and Zardari is hard to tell.

Email: asifezdi@yahoo.com

http://www.thenews.com.pk/Todays-New...d-the-pipeline

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"Nay! man is evidence against himself. Though he puts forth his excuses." Holy Qur'an (75:14-15)

A GOOD deal of excellent comment has appeared recently on the geopolitics of the Iran-Pakistan (IP) natural gas pipeline. But what about the economics of it?

Contrary to most expectations, and after a delay of years, Pakistan and Iran have finally made significant headway in the Iran-Pakistan (IP) gas pipeline project. Despite strong and consistent opposition from the US, Pakistan has cited the so-called peace pipeline as vital to its energy security and needs, and is committed to seeing gas flow from Iran by December 2014.

The IP pipeline is slated to deliver 750 million cubic feet of gas per day (mmcfd) from the Iranian South Pars gas fields, to the Sui Southern Gas Company’s transmission and distribution network. Currently, Pakistan is facing a natural gas shortfall of nearly 1.5 billion cubic feet per day (bcfpd), which is expected to rise — without countervailing measures — to around 6-8bcfd by 2020.

Pakistan is actively seeking a multitude of diverse sources to meet its rapidly growing energy requirements, including import of liquefied natural gas and liquid petroleum gas, the Tapi project, import of electricity from Central Asia and, possibly, India, and greater exploitation of indigenous hydel, natural gas and coal resources.

The IP gas pipeline is thus one, albeit important, component of Pakistan’s overall energy requirement mix. Pakistan has earmarked the potential gas supply from the IP pipeline exclusively for generation of approximately 4,000 megawatts (MW) of electricity. Currently, the country is facing a power shortfall of approximately 4,000-5,000 MW, which peaked last year at around 7,000 MW.

Thus, the gas from Iran via the IP pipeline can not only wipe clear the power shortfall, but it can do so at a significantly reduced generation cost from the current fuel mix which is skewed towards furnace oil and diesel.

The direct economic cost to Pakistan emanating from the energy crisis amounts annually to around three to four per cent of GDP. The direct cost is mainly in the form of lost output/GDP. However, the broader macroeconomic collateral costs are substantial too, and include a decline in employment levels, lower incomes, lower government revenue, a decline in export orders, drastically lower fixed investment levels, and greater fragility of the banking system.

In addition, the persistent energy shortfall has burdened public finances through the provision of heavy subsidies via the budget, amounting cumulatively in the past five years to approximately Rs1.5 trillion, leading to a diversion of budgetary resources from development projects, and to a rapid build-up of public debt.

The build-up and persistence of the inter-enterprise circular debt in the energy sector has sapped the financial strength of energy companies, severely curtailed their operations and profitability, and drastically reduced new investment in upstream exploration and production activities, and in downstream projects such as installation of new generation capacity. Another important motivation for Pakistan to actively pursue the IP gas pipeline could include a strategic diversification of its energy sources.

Iran is currently under three layers of international sanctions targeting its alleged pursuit of “non-peaceful” nuclear activities — a unilateral sanctions regime imposed by the US in conjunction with the European Union, and a multilateral regime under the framework of the United Nations.

Broadly, US sanctions prohibit US nationals and entities from business and arms dealing with Iran, while also targeting Iran’s financial dealings with the rest of the world.
Its ambit extends to non-US persons, however, in the case of re-export of sensitive US-origin goods, technology or services to Iran or the government of Iran.

The UN sanctions regime embargoes all dealings with Iran and designated Iranian entities that relate to “proliferation-sensitive nuclear and ballistic missiles programmes”. UN sanctions on Iran have been imposed via four binding Security Council resolutions, namely: 1737 (2006), 1747 (2007), 1803 (2008) and 1929 (2010).

Prima facie, transactions with the Iranian oil and gas industry that do not constitute investment in Iran’s energy infrastructure appear to be excluded from the ambit of the sanctions’ regimes of the US, EU and the UN. In addition, the US has provided a waiver to nine countries from its sanctions rules on import of, and processing payments for, Iranian oil.

For this reason, South Korea, Japan, South Africa, China and India continue to purchase crude oil from Iran — though at lower levels than previously — while Turkey continues to be supplied Iranian gas via pipeline. In fact, Iran’s crude oil exports rose 13 per cent in February from January to 1.28 million barrels per day (mbpd) — but down from an average of 1.5mbpd in 2012 and 2.5mbpd in 2011, according to the International Energy Agency.

However, under new US rules that took effect from February this year, the importers of Iranian crude are required to pay in local currencies kept in escrow accounts — or risk being debarred from the US financial system.

The purchase of Iranian natural gas does not appear to be “sanctionable” activity under current rules. However, even if it were met by the US “dialling up the pain” for Pakistan, economically or via other means, cold economic logic dictates that Pakistan should follow through on the pipeline. This is so since the annual cost of the foregone natural gas is around two to three per cent of GDP, at least, while the likely cost of US economic sanctions would be far below this level.

(As a relevant aside, fears of an economic “meltdown” in case of US sanctions are grossly exaggerated — and appear to be designed to foster and perpetuate a degree of dependency. “Noopolitik”?)

Pakistan should pursue deeper economic engagement with Iran as part of an expanded effort for regional economic integration which the US purports to support.
Relations with Iran should not be viewed as a “zero-sum” game to any other set of Pakistan’s important bilateral relationships — in line with the US approach to Pakistan and India.

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

http://dawn.com/2013/03/22/pipeline-economics/

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"Nay! man is evidence against himself. Though he puts forth his excuses." Holy Qur'an (75:14-15)

By: Malik Muhammad Ashraf | March 23, 2013 . 2

While the outgoing government claimed the groundbreaking of Iran-Pakistan (IP) gas pipeline project as a great success, its detractors are terming it a deft PPP move for political gains during the upcoming elections. Whatever the reason and motivation behind it, one cannot deny the economic benefits that this energy-starved nation will accrue once the gas pipeline is completed.
Pakistan being a sovereign country has the right to decide what is in its best national interest, and there are no two opinions about the fact that our economic prosperity and security is inextricably linked to South Asia. Therefore, the next government owes it to the nation to remain steadfast in safeguarding the national interest and not allow any foreign power to jeopardise this much-needed lifeline for Pakistan. The traditional aversion to the projects initiated by outgoing governments and the impulsive streak to scrap them must give way to rational thinking divorced from party politics and only guided by national interests.

Equally important for Pakistan, its neighbours and the Central Asian States are the other two trans-regional projects of Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and the 1,227km electricity transmission line between Kyrgyzstan, Tajikistan, Afghanistan and Pakistan known as CASA-1000.

TAPI was conceived in 1995 by Western multinational oil companies, who were working in Kazakhstan and Turkmenistan in the 1990s, in view of Russia’s refusal to allow them the use of the pipeline network in these countries that it controlled. These companies needed an independent export route avoiding both Iran and Russia. Thus, the project was launched in 1995 after Pakistan and Turkmenistan signed an inaugural memorandum. On April 2008, Pakistan, Afghanistan and India signed a framework agreement to buy natural gas from Turkmenistan.

The CASA-1000 represents a landmark cooperation between Kyrgyzstan, Tajikistan, Afghanistan and Pakistan. It also holds the promise to establish and develop inter-regional linkages between Central and South Asia. The project devised on the similar lines as the North American grid spanning over 340,000km and European power system traversing a territory of 230,000km, though ambitious but seems achievable. A high level inter-governmental committee has already been established to evolve the modalities for its implementation, resolve technical issues and devise rules and regulations.
The implementation of CASA-1000 will require strategic actions and a long-term vision, private sector and government participation and the support of many partners. Ultimately, its realisation will deliver reliable and affordable electricity to regional countries, besides generating revenues for Kyrgyzstan and Tajikistan. Also, it will strengthen inter-regional cooperation, investments in social services and encourage community benefit-sharing. In addition to the commitment of the countries benefiting from it, the CASA-1000 has the support of the World Bank and other donor agencies.

Russia had initially opposed CASA-1000. But now it has not only expressed support, but also promised to contribute $500 million for it. This was publicly announced by Russian President Vladimir Putin on the eve of 10th Shanghai Cooperation Organisation (SCO) meeting held in Petersburg that is, probably, one of the major steps towards the implementation of the project. Observers attribute this change in Russian stance specifically to wean away Turkmenistan from the Trans-Caspian energy ventures. The other reason advanced by some is that Russia might be contemplating to develop a geopolitical axis, extending from Russia across Central and South Asia to the Middle East as a strategy to counter US plan for Greater Middle East or Greater Central Asia.

It is important to mention that Pakistan government’s efforts in recent years to reach out to its neighbours and build regional linkages have also tremendously contributed to Russia’s support for the project and Pakistan becoming full member of the SCO.

Needless to say, Pakistan decidedly will be the biggest beneficiary of both TAPI and CASA-1000 when they materialise. Both these projects like IP have been in the pipeline for years waiting to be implemented due to the volatile situation in Afghanistan and other geopolitical developments. Even now their implementation depends upon peace in Afghanistan.

Pakistan will have not only to facilitate the process of an Afghan-led and Afghan-owned reconciliation in Afghanistan, against the backdrop of US withdrawal, but also stay away from taking sides in any eventuality occurring in that country. Further, it needs to mend fences with India that can also benefit from these projects.

As it is evident, TAPI and CASA-1000 have the support of USA, Russia and China, but Washington is bitterly opposed to the IP. The fact is that all the three projects are badly needed for Pakistan. The situation is quite complex and untangling this conundrum will pose a great challenge to the political leadership that will be mandated to run the affairs of the state in the polls.
Whatever the responses of the future government to these challenges may be, they must be guided by the geographical realities of our region.

The writer is a freelance columnist.
Email: ashpak10@gmail.com

http://www.nation.com.pk/pakistan-ne...-and-casa-1000

March 22, 2013 . 3

President Asif Zardari may be seen as doing a bit of emergency work to repair the relationship with the USA, with his trip to Turkmenistan, where he went on Wednesday to further the discussions on the $7.6 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. It would seem this way because the visit followed the US reaction over the groundbreaking of the Iran-Pakistan pipeline, which was highly unfavourable. The USA has been pushing TAPI as an alternative to the Iranian pipeline even though its passage through Afghanistan is doubtful, thus throwing the whole project in doubt. However, President Zardari’s interest in the TAPI project should not be seen merely as a desire to placate the USA, but as an expression of the Pakistani desire for both projects. It should be noted that the Planning Commission has predicted that, even with both the IP and TAPI pipelines in operation, the energy crisis in Pakistan would not be over, even in 2019-20.

It should also be noted that for withdrawing from the Iranian pipeline project, the USA gave it a civilian nuclear agreement to India, which allowed it to shop around for nuclear power to replace the thermal generation it was foregoing, but Pakistan was given nothing equivalent. However, Pakistan has, because of its own energy shortage, got to pursue the TAPI project; the basic error of the USA has been to regard the TAPI project as a substitute for the IP project. Pakistan suffers from a severe energy shortage, which is not just causing ordinary people severe inconveniences, but is also wreaking economic havoc in cancelled export orders, factory closures and job losses. This crisis is so severe that the TAPI pipeline is not an alternative, but is important in itself.

President Zardari is thus not engaged in pure electioneering posturing, but is merely doing what is necessary to safeguard the national interest. The need of the hour is to pursue both projects vigorously. The USA must be convinced that just as Pakistan cannot afford to rely on the TAPI project alone for its energy needs, it cannot afford to rely on the IP project alone. Thus the logical next step would be for Pakistan to work with Afghanistan to provide the necessary security to allow the project to go through. If need be, President Zardari must use his good offices, as he has done so far.

http://www.nation.com.pk/pakistan-ne...3/now-for-tapi