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  #1  
Old Sunday, March 25, 2012
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Default Pakistan-Iran Gas Pipeline(Important Articles)

Iran-Pakistan gas pipeline project

Nasim Ahmed

The Iran-Pakistan pipeline project is vital to Pakistan's energy and economic future. For Pakistan there is no politics involved in the venture. But the realities of power politics being what they are, it has become a victim of US strategic calculations in the region.

Washington has never made a secret of its displeasure over the project. The latest warning to come is from US Secretary of State, Hillary Clinton, who has said that America has made it clear to Pakistan that if it goes ahead with the proposed Iran-Pakistan pipeline, it could face consequences as underlined in the Iran Sanctions Act. Clinton made the remark in response to Congressman Lewis asking her why the budget request for the State Department included a $1 billion request to help Pakistan address its energy problems.

Secretary Clinton said that the Turkmenistan pipeline was a better alternative, predictable and would avoid business with Iran and added that embarking on the construction of a Pak-Iran pipeline is in violation of the Iran Sanctions Act. She said, "We all know what the consequences of that law are."

The US Secretary of State added that this move would be particularly damaging for Pakistan because the country's economy is already shaky, and would further undermine Pakistan's economic status. She added menacingly: "As we are ratcheting up pressure on Iran, it seems somewhat inexplicable that Pakistan would be trying to negotiate a pipeline project with that country."

Earlier, US State Department spokesperson, Victoria Nuland, said that Washington would not predict if the proposed Iran-Pakistan gas pipeline project would succeed but is aware that it had seen many "false starts" before. She said: "If, in fact, the pipeline does go forward - and there have been a lot of false starts and backing-and-fowarding on that - you know, we have issues of concern. And we've been very clear about those with the government of Pakistan.”

Pakistan has however refused to yield to the pressure being applied by Washington and underlined its determination to go ahead with the project. Talking to visiting Iranian Vice President, Ali Seediou President Zardari said recently that Pakistan is committed to the early completion of the Iran-Pakistan gas pipeline project to meet the ever growing demand for energy and power in the country.

Last week, Foreign Minister Hina Rabbani Khar, addressing a joint press conference with her Swedish counterpart, said that Pakistan was committed to the Iran-Pakistan gas pipeline. She also laid to rest any doubts that a Chinese bank's decision to back off from funding the project would affect plans to import gas from Iran. She said: "There are multiple sources available and this is a very viable project."

Hina Rabbani Khar disclosed that in this connection a ministerial committee has been constituted for reviewing alternate options to arrange funds for the construction of the Iran-Pakistan gas pipeline.
For Pakistan the IP gas pipeline project is its energy lifeline for the future as it will provide the cheapest and most suitable fuel for power generation. According to an estimate, 750 mmcfd of gas to be supplied by Iran would help generate around 4,000MW of electricity, besides providing job opportunities in the backward areas of Balochistan and Sindh.

According to plan, Pakistan is to lay a 781 km pipeline in its territory and the project would be completed by December 2014. The initial capacity of the pipeline would be 22 billion cubic meters of natural gas per annum, which is expected to later rise to 55 billion cubic meters. The pipeline aims to export 21.5 million cubic meters of Iranian natural gas to Pakistan every day or 8.7 billion cubic meters per year.

Iran has already laid the 56-inch diameter pipeline for a distance of 900 km from Assaluyeh to Iran Shehr. The remaining 200 km to bring the pipeline to the Pakistani border are likely to be completed in the next two years.
The stand that Islamabad has taken with regard to the Iran-Pakistan gas pipeline stems from the new orientation that Pakistan's foreign policy is being given under the present government. The whole gamut of Pak-US relations is under review at the moment by a parliamentary committee. The terms of re-engagement are being re-written so that bilateral relations can be put on an even keel. A comprehensive reconsideration of the coordinates of Pak-US relations was long overdue. All through the last six decades of building and maintaining its relations with the US, Pakistan has been at the receiving end. On more than one occasion, Washington ditched Pakistan in its moments of dire need.

The US cut off sensitive military and other supplies at crucial junctures in our history. Pakistan has also been a victim of US economic sanctions a number of times which caused severe damage to its economic and security interests.
Beginning with the Raymond Davis affair, the Abbotabad US navy SEAL raid, the Salala checkpost attack and a generally hostile attitude of the US political and defence establishment towards Pakistan in the context of the Afghan war have at last forced a review of the situation. But this is not an easy task to accomplish. We have been US-aid oriented for long and it will be tough building new sources of trade, aid and friendship in a rapidly globalizing world.
The original decision to enter into an umbilical tie with America to the neglect of our regional ties was a strategic mistake which should now be corrected. While we should continue our efforts to repair relations with Washington we need to develop a sharper regional focus and build ties of mutual trust with neighbouring states.

China is a long-term all-weather friend with whom we should further deepen our ties, specially in the economic sphere. We should also try to normalize our relations with India without compromising our principled stand on Kashmir. The grant of Most Favoured Nation (MFN) status to India should open up new avenues of mutually beneficial trade relations. To the west, ties with Afghanistan needs to be more diligently and carefully nurtured. We have adopted the right approach in pushing for an Afghan owned and Afghan-led peace process. Russia in the north-west needs more attention than we have given it so far. In the new strategic game in the region, Moscow has a crucial role to play and Pakistan has much to gain by building closer political and economic ties with it.

Washington cannot dictate to us as it did in the past if we have a strong and dependable network of friendly neighbours. In the long-term perspective, the Iran-Pakistan gas pipeline can prove to be the starting point of a new vision of peace and prosperity for the entire region.

Source: WEEKLY CUTTING EDGE
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Old Wednesday, April 04, 2012
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The pipeline path
April 4, 2012
Najmuddin A. Shaikh

AT a time when Punjab’s cities are witnessing violent demonstrations against power outages, when the Supreme Court has declared all RPP contracts void ab initio and when each fortnight we see a fresh ‘circular debt’ crisis, it is understandable that everyone is looking to the Iran-Pakistan pipeline as a panacea.

We are all ready to make shrill noises about Pakistan’s sovereign right to go ahead with this project despite the threat of possible US sanctions. Since the question of sanctions looms large in the Pakistani imagination little heed has been paid, in the public discourse, to other aspects.

These aspects include: the work that Iran has done to extend the pipeline (IGAT 7) that it has built primarily to bring the Pars gas to the province of Sistan-Baluchistan; the cost of the Pakistan part of the project; the problems associated with building a pipeline through insecure Balochistan; and the viability of working out a barter agreement to enable Pakistan to pay for the gas without having to resort to the international banking system. Using this system could well entail denial of access to US financial markets.

In this and a subsequent column I intend to discuss my understanding of these issues in the hope that better informed and technically far better qualified experts inside or outside government will provide clearer and more definitive answers.

First, according to my reading of American law — the Iran-Libya Sanctions Act (ILSA) now made ISA again, the Comprehensive Iran Sanctions, Accountability and Divestment Act, the various executive orders and the Iran-related provisions of the National Defence Authorisation Act — a company can be sanctioned if it invests in Iranian energy projects or supplies equipment for them. And foreign banks can be sanctioned if they make payments to the Iranian central bank to pay for Iranian oil.

It would then seem that no sanctions could be imposed if Pakistan has not invested in the Iranian portion of the pipeline and no sanctions would apply if Pakistan made no payments for Iranian oil through the Iranian central bank. Gas purchases appear to be excluded from the present legislation.

Another part of the legislation calls for sanctions on pipelines to and from Iran but this has quite clearly not been applied to the three pipelines already operational — Iran-Turkey, Iran-Armenia and Iran-Turkmenistan. There appears to be little risk, therefore, of sanctions on the Iran-Pakistan pipeline though questions may be raised for local banks if they are asked to finance the project. (Legal experts might like to see the report prepared by Kenneth Katzman for the US Congressional Research Service).

Second, the Iranian part of the pipeline has been built up to Iranshahr, which is about 250km from our border. IGAT 7, a 56-inch-diameter pipeline, became operational in August 2010 and is supplying gas to Sistan-Baluchistan. The last portion up to our border remains unbuilt; however, so far as my information goes an Iranian company has been selected to carry out the pipe-laying. One should assume that the Iranians have wisely decided not to start work on the last portion until construction commences in Pakistan.

The 900km stretch built so far has reportedly cost the Iranians $700m. This means a cost, for a 56-inch-diameter pipeline, of less than $0.8m per kilometre. Presumably they have used pipes manufactured by their own Ahwaz Rolling Mill, a public-cum-private sector enterprise. Currently, the pipeline is carrying 1.8 billion cubic feet of gas per day (bcfd) but its capacity can be increased to 2.9bcfd which is more than sufficient to meet our needs. It is, however, the cost of the pipeline that should be of most interest to us as we ponder the allocation of contracts for the building of our 780 kilometre-long 42-inch-diameter pipeline.

Before I turn to the issue of the pipeline’s cost and financing let me talk about the sorry experience we have had in the past with energy projects. In 1984, we had purchased from the Soviet Union three turbines of 210MWs for the Multan power plant at a total cost of $371m for which the Soviets had provided the credit. This worked out at approximately 0.5 million per megawatt of installed capacity.

At that time I recall the then finance minister the late president Ghulam Ishaq Khan before signing the agreement in Moscow met Marshal Malinovsky, the then Soviet defence minister. Our minister argued that the price we were being asked to pay was too high. The marshal said the price was reasonable but complained bitterly that the Chinese had made copies of these Soviet-designed turbines and were selling them at half the price.

As ambassador in the US in 1990-91, I pointed this out and said that since it was then a buyers’ market, private investors should be able to get equipment at prices only nominally higher than those we paid in 1984 to the Soviet Union. We ended up agreeing that the cost would be $1.2m per megawatt for the Hub power plant and guaranteed a fixed return to the investors on this exorbitant price.

The scandal of the RPPs apart, there have been repeated instances in our public-sector organisations of exorbitant sums having been paid for contracts offered without public bidding or through manipulated tenders. On each occasion it has been argued that the need was urgent and procedures ensuring transparency and proper evaluation could not be followed. Let us not make this project another such example by suggesting that this pipeline should cost us $2m per kilometre and should be awarded without bidding.

The writer is a former foreign secretary.
-Dawn
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Old Monday, April 23, 2012
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Americans and Saudis: hands off Pakistan’s pipeline please
April 23, 2012
By Pervez Hoodbhoy

Now and then, as though out of sheer boredom, the United States shoots itself in the foot and loses the occasional goodwill it creates with aid programmes. Consider the latest: Secretary Hilary Clinton says that “As we are ratcheting up pressure on Iran, it seems somewhat inexplicable that Pakistan would be trying to negotiate a pipeline with it”. Appearing before Congress, she threatened that sanctions could be imposed by the US on Pakistan’s precarious economy, and these would be “particularly damaging” and “further undermine their economic status”.

One wonders why Mrs Clinton finds Pakistan’s attempt to tap into its gas-rich neighbour “inexplicable”. In fact, there is no mystery. Half of Pakistan’s energy needs are met from gas, but only 30 per cent of gas is domestically produced. Natural gas runs the country’s electricity generating plants, powers its factories, and is used as fuel for cars, buses and trucks.

Without additional energy supplies, social chaos and disruption lies in the months and years ahead. Electricity shortfalls sometimes reach as high as 6,000MW, meaning that 40 per cent of the demand is unmet. Daily blackouts have gutted industrial production, closed markets, and CNG is rationed in spite of a huge price hike. Power riots broke out two weeks ago in Lahore. In October, protesters against power outages held up a train in Gujranwala, ordered passengers onto the platform, and set three coaches on fire.

Iran’s gas could be critical for avoiding mass rioting and social breakdown. Should it actually come through, the proposed 56 inch diameter, 2,100-kilometres long IP pipeline would deliver a whopping 750 million cubic feet of gas per day from Iran’s South Pars gas field, located near Iran’s southern city of Asalouyeh. This could become Pakistan’s jugular vein or, more accurately, its windpipe.

Expectedly, Secretary Clinton’s threats have drawn a strong reaction from Pakistani officials and leaders, with each trying to stand taller than the other. All this comes at a time when Pakistan-US relations are at a dangerous low. Quite apart from everything else, threatening Pakistan is poor diplomacy because it is reacting to something that, at the moment, is no more than a possibility.

Although the pipeline project’s formal completion date is December 2014, a detailed feasibility plan is still being worked out and the source of funding is unclear. In July 2011, President Ahmadinejad has offered to fund construction of the 761 kilometres inside Pakistani territory. Iran declared at the time that it had laid the pipeline on its side to within 50 kilometres of Pakistan’s border. But the Iranian offer has to be taken with a good pinch of salt because Iran’s economic difficulties are rapidly mounting. China’s largest bank, the Industrial and Commercial Bank of China, has backed out from its earlier commitment. Currently the Pakistan government is negotiating with Gazprom, the Russian gas and oil giant. Nothing is clear.

The threats to Pakistan clearly violate the principle of fairness. Let’s say that Iran is indeed a “bad guy”, and that it is wrong to trade with bad guys. But, by this logic is it okay for the US to conduct $500 billion dollars of trade with China annually, a country that it alleges — perhaps correctly — of violating human rights? What about the planned $80 billion US arm sales to Saudi Arabia, a country that officially does not accept the right to religious freedom and treats its women abysmally? The IP gas pipeline, on the other hand, involves a piddling $1.5 billion and brings obvious advantages to Pakistan.

US antagonism to the IP pipeline comes, of course, because of Iran’s nuclear programme. This is why India, China and Turkey are also being hectored into reducing their imports of Iranian crude oil. In 2008, US pressure forced India to pull out of the Iran-Pakistan-India pipeline, also known as the “Peace Pipeline”.

Suppose, for argument’s sake, Iran’s secret agenda is indeed that which the US alleges — i.e. to make nuclear weapons. If true, I find it personally regrettable. The world needs less, not more, nuclear weapons. It is in Iran’s long-term interest to shelve such ambitions and get on with improving the lives of ordinary Iranians. Yet, in all fairness, there are nine other nuclear states in the world with America’s perennial ally, Israel, being among them.

But let us not blame the Americans alone. Another nation has now stepped in to discourage the construction of the IP pipeline. The kings and princes of Saudi Arabia — who had earlier urged the US to destroy Iran’s nuclear programme by launching military strikes and “cut off the head of the snake” — are making their presence felt here in Islamabad.

Two weeks ago, the Kingdom of Saudi Arabia’s deputy foreign minister, Prince Abdul Aziz bin Abdullah, sought to persuade Pakistan to abandon the IP pipeline and cancel electricity/oil import deals with Iran. Although details have not appeared in the press, Abdul Aziz apparently offered some kind of a financial bailout as the quid pro quo.

But Pakistan needs energy security, not more loans. The Saudi attempt to create divisions and distrust with a neighboring country is plainly insidious and deserved a riposte from Pakistan’s leaders — one no less stout than the one delivered to the Americans. The Saudi plan is just as unworkable as the TAPI pipeline, which the US is pushing as an alternative to the IP pipeline. TAPI would run through Turkmenistan, Afghanistan, Pakistan and India. But with Afghanistan likely to be embroiled indefinitely in civil war after 2014, only a wild optimist can believe that a pipeline traversing its hostile and intractable terrain could provide secure oil supplies.

It is time for the US to get real and know that countries will pursue their goals rather than those preferred by Washington. John Foster Dulles is dead, as is Ronald Reagan — strong-arm tactics have seen their day. Instead American diplomacy needs to show sensitivity, and factor in the needs of the countries it deals with. Else the U.S shall isolate itself away from a goal that is truly important, the fight against global terrorism.

-The Express Tribune
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Old Saturday, April 28, 2012
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Stakeholders agree on TAPI transit fee
Raza Khan


The issue of gas price and transit fee which has prevented the launch of the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline project has finally been solved raising hopes about the start of the project. The four countries signed the transit fee deal for the $7.6 billion TAPI project, in Islamabad recently.

According to the terms of the agreement the deal has set 49. 5 per cent per MMBTU as transit fee for the gas to be pumped from the Turkmenistan gas fields to the rest of the countries. The agreement of the stakeholder states on the transit fee has raised prospects of the TAPI project. So far there had been no sale and purchase agreement between Turkmenistan and the recipient countries of the gas. The issue of fixation of gas rates has also been a contentious issue and may delay the groundwork on the project.

Although TAPI is a project of great significance, it could not proceed even after 17 years since the start of initial work on the project. The gas pipeline, if completed, will go a long way in fulfilling the ever-increasing industrial and domestic energy needs in energy-deficient Pakistan and India besides Afghanistan. But more than mere providing energy to the recipient countries, the TAPI gas pipeline is a project of colossal economic, political and strategic value.

The gas project will supply 3.2 billion cubic feet of natural gas per day from Turkmenistan gas fields to Afghanistan, Pakistan and India. The share of the three countries would be: Afghanistan 500 million cubic feet (MMCFD), Pakistan 1,325 and the rest for India. In this way India would be the major recipient of gas. However, Afghanistan and Pakistan would not only get the required gas but also transit fees for the length of pipeline using their respective territories. The need of Pakistan for gas and electricity is, perhaps, more urgent than of any other country in the region, as it is already facing severe energy shortfalls. The agreement on the transit fee of TAPI will especially benefit Pakistan.

Islamabad would now not only expect to get a huge volume of gas supply from Turkmenistan, but also it would improve its bargaining position vis-à-vis Iran in negotiating a gas price from the proposed Iran-Pakistan (IP) gas pipeline project. In other words Pakistan would now only be less dependent on the gas from IP which faces more issues than TAPI.

Presently, Pakistan’s economy is faced with the situation known as stagflation, that is having the symptoms of both stagnation and inflation. This has hugely undercut the capacity of the economy to make a turnaround resulting in extremely low (negative in real terms) economic growth in the last several years. As in the coming years Pakistan would want to achieve a better economic growth, then gas from TAPI would be direly needed. TAPI would supply 1,325 MMCFD gas to Pakistan.

India's economy is also going to gain substantially from the TAPI gas pipeline, as it is an energy-deficient country. The sustaining of a 9-10 per cent growth, which the Indian economy has achieved in recent years, would be unimaginable without energy from projects like TAPI. This India knows quite well and, therefore, it is doing all it can to promote this project. Afghanistan is also going to benefit substantially from the TAPI gas pipeline. As its vast energy reservoirs remain dormant and will remain so for years to come, and the huge reconstruction and rehabilitation process in the war-devoured country will increasingly require energy sources.

Moreover, Afghanistan is also going to earn millions of dollars in transit fees from the project which will be critical for the country's ruined economy.

For Turkmenistan, the project is not less than a boon. Having huge reservoirs of natural gas but without having a matching demand or network to export it, the country has been greatly interested in the project. However, it could do little to remove obstacles in the way of the project. The completion of the project would help it to earn billions of dollars by selling gas to the recipient countries. The TAPI gas project is going to have significant political and strategic consequences, largely wholesome, for the region. The project will increase the interdependence of the stakeholders, particularly of Pakistan and India on the one hand and Afghanistan and Pakistan on the other.

However, one criticism of the project is that it is an old one and facing a lot of difficulties. Still the critics admit that Pakistan and all other stakeholders have no other option but to stick to the project. Turkmenistan and Afghanistan need money to sell gas and serve as transit for the TAPI pipeline respectively, while Pakistan and India need gas for meeting their economic and energy needs.

Indubitably, the economic, political and developmental advantages of TAPI are numerous. However, the completion of the project is not going to be a cakewalk. There are some very big obstacles in the way of implementing the project. These obstacles are of financial, security and political nature. The foremost obstacle which the contracting countries would face is raising the relatively colossal amount of US $ 7.6 billion funds for the completion of the project.

It may be mentioned that the project is to be financed through a private consortium to build and run it. However, the project is yet to secure full financing for construction. But the Asian Development Bank (ADB) has come forward in a big way to make the critical funds available for at least the commencement of the project.

The security of the 1,680 kilometres long gas pipeline is a big question mark. In particular, securing the gas pipeline in Afghanistan would be a daunting task. Afghanistan has vowed that it will provide what it takes for the security of the pipeline. In this regard, Afghanistan is going to deploy a force of 7,000 soldiers to ensure security of the pipeline on its territory. After the recent display of ability and capacity by Afghan National Security Forces to overtake law and order duties by killing 20-plus Afghan insurgents without losing many of its men in multiple terrorist attacks by the former on high value targets, it is expected that Kabul could provide security for the TAPI pipeline. TAPI has also been facing opposition from Russia and Iran because both the states consider the project to be against their national and economic interests.
Russia and Iran are the largest producers of natural gas in the world and the TAPI project would squeeze the South Asia market for their own gas supply projects.

It is important to note that the stakeholder states have eventually agreed on the transit fee for TAPI gas project after the US on several occasions asked Pakistan to desist from the IP gas project with Iran and, instead, should concentrate on TAPI. With the US's interest and money comming into TAPI, it is expected that the project would ultimately start on the ground and may also be completed sooner rather than later.

-cuttingedge
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Old Friday, May 04, 2012
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Does Iran-Pakistan pipeline have a future?
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
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Old Tuesday, May 15, 2012
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IPI and TAPI: the peace pipelines
May 14, 2012
By: Khalid Iqbal

The concept of energy security does not have a uniform meaning due to the complexities arising out of regional intricacies and global market dynamics. The World Bank defines energy security as “the sustainable production and use of energy at reasonable costs to ensure a certain quality of life.”

The flow of energy resources across states’ boundaries does not guarantee as such regional peace, unless it is supported by an enabling environment in the overall context. However, if managed in a prudent way, it does become a contributory factor and an enabling tool for achieving and sustaining regional peace.

In political and diplomatic terms, peace is achieved by eliminating and/or mitigating the causes of conflicts to bring the possibility of an armed conflict to zero. One could start the process from either way: begin with creating interdependencies and proceed to zero conflict state or follow the reverse path.

If prudence prevails, interstate flow of energy could cement the bonds of friendship and boost economic cooperation. With India’s withdrawal from the IPI project – at least for the time being – the focus is now on the negotiations over the IP and the TAPI projects. However, perception has it that after consolidating the gains of Agreement 123, India would disregard American pressure and rejoin the project.

Though there has been a great deal of optimism generated over the project among the TAPI partners as well as its lead developer, the Asian Development Bank, numerous hurdles continue to haunt. To start with, route security is an issue. The pipeline will transit some 730 kilometres through Afghanistan. Due to the ongoing insurgency in the war-torn country, concerns over the security of the pipeline remain absorbing.

Likewise, there are concerns about sections of the IPI and TAPI pipelines passing through Balochistan where the law and order situation is not satisfactory. However, we may observe that though domestic gas pipelines through Balochistan are targeted occasionally, the supply of gas has never been disrupted to the extent to cause a paralysis.

For security reasons, the Asian Development Bank has proposed alternative TAPI routes. Though the governments of Afghanistan and Pakistan are committed towards providing full protection to the pipeline, it would be better to select the most secure route.

Yet, another uncertainty is about the sustainability of gas supplies from Turkmenistan. Turkmenistan has already signed agreements with Iran and China to increase existing supplies to these markets; a similar understanding has also been reached with Gazprom. Therefore, questions have arisen over whether it will be able to meet its commitments for TAPI.

In addition, Turkmenistan’s gas sector suffers from several constraints, including lack of financial resources and technical capability to develop new projects. Turkmenistan also lacks adequate pipeline network infrastructure to deliver gas to its markets, and continues to be dependent on Russia’s network for exports to the West. Some experts are of the view that it is unlikely that it will be able to increase its export volumes substantially over the next 10 years.

Afghanistan and Pakistan would not only get the required gas, but also transit fees for the length of the pipeline using their respective territories. It would improve Pakistan’s bargaining position vis-à-vis Iran in negotiating a gas price from the proposed Iran-Pakistan (IP) project, and it would be less dependent on the gas from a single source. The TAPI agreement commits the four nations to providing government support, including security for the pipeline.

The dark side is that TAPI provides a cover for the Americans to maintain a potent military presence in Afghanistan, though for other strategic reasons. Both India and Pakistan are energy starved countries and need gas urgently from whatever source it comes.

Washington’s support implies that TAPI will attract the financiers more promptly. However, the overriding American objective to promote TAPI is to ensure that the IPI project is effectively killed. America has a history of bulldozing economically unpopular projects in exchange for politico-strategic gains. For example, in 2005, despite substantial opposition from within business and political circles in both the US and the Caspian States, a hugely expensive and logistically challenging pipeline from Baku in Azerbaijan to Ceyhan in Turkey, transiting a fractious Georgia, was built by an 11-member consortium led by British Petroleum under pressure from Washington.

The US government made finances available from government agencies such as the Overseas Private Investment Corporation (OPIC) and the US Export-Import Development Bank. The objective that America was seeking then was to provide a route that would circumvent the Russian territory and break Moscow’s stranglehold over the European gas market.

The tussle over the IPI and the TAPI is not a mere economic battle; it has far-reaching geopolitical dimensions. The IPI and TAPI are symbols of the ‘new great game’ – the main goal of which is gaining control of oil and gas reserves in this region. The US and its allies want Pakistan to abdicate the IPI and pursue the TAPI only; India has already done so. Now, China and Russia are supporting Pakistan to withstand the US pressure for giving up the IP project.

The imported gas price is likely to be around 80 percent of the oil price; hence, it will not be affordable by domestic and industrial consumers and could only be used for power generation. Moreover, with oil prices fluctuations, gas prices would also follow the suit adding a factor of uncertainty to our economy.

Pakistan is suffering because of overpriced power purchase arrangements reached with IPPs. Despite the generation capacity, we cannot have electricity because it is not affordable. Islamabad should not commit the same folly once again; it should purchase gas at a price that is economically viable.

Land, however, has to be reclaimed by the governments for these projects. In Pakistan, there are various means by which land can be acquired. Whatever pattern is followed, the affectees must be satisfied in terms of compensation and as far as it is possible, they should be made perpetual stakeholders through a kind of stipend, so that they have an abiding interest in the infrastructure’s safety and security.

An offset amount may also be pre-decided for the socioeconomic uplift of the areas through which the pipeline is to pass. Subject to no act of disruption, such an amount could be payable to local administration annually for financing public welfare projects.

With respect to international dispute settlement, diplomatic means are most commonly used. There is an array of dispute settlement mechanisms available to choose from. Comprehensive dispute settlement mechanisms should be worked out for both the projects, and such arrangements must be underwritten by appropriate institutions like the Asia Development Bank.

Apparently, IPI and TAPI present a win-win setting for all participants. Hopefully, ways and means would be found to materialise these two projects, which can be rightly termed as peace pipelines.

The writer is a retired Air Commodore and former assistant chief of air staff of the Pakistan Air Force. At present, he is a member of the visiting faculty at the PAF Air War College, Naval War College and Quaid-i-Azam University.

Email:khalid3408@gmail.com
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Iran-Pakistan: a moment of rejoicing
By S Rahman

It is indeed a moment of rejoicing. The people are happy that the Government of Pakistan is finally resolute on going ahead with the Iran-Pakistan (IP) gas pipeline project. People are even more happy at the fact that the rumour mill that was bent upon tarnishing the image of the PPP-led government and the PPP co-chairman and President, Asif Ali Zardari, has come to a standstill.
The PPP leadership must be congratulated for taking such a bold and wise decision that is going to lead to an economic turnaround and prosperity. It was able to tackle this decision because the party has its roots with the masses that has provided them sufficient strength to remain steadfast despite threats of sanctions and other stringent measures by the US. Pakistan can now be rated among independent nations that have the ability to take decisions that are in the best interest of its people. This was already expected since the PPP government draws strength from the masses and from Shaheed Zulfikar Ali Bhutto’s philosophy that “people are the fountain of power”. However, some media persons, as well as jealous opponents, have continued to work day and night to paint the incumbent Pakistani leadership as obsequious, which does the foreign masters’ bidding. The detractors forgot to take notice of one important factor that a government elected by the masses and committed to the masses’ welfare can’t afford to follow the dictates of external powers.
Prime Minister (PM) Raja Pervaiz Ashraf and his government has been endeavouring for quite some time to remove the bottlenecks and put the Iran-Pakistan (IP) project on a fast track. After the government paved the way for the smooth take-off of the project, the added strength and impetus came from President Zardari’s visit to Iran, where he had a meeting with his counterpart President Mahmoud Ahmedinejad and Iranian Supreme Leader Ayatollah Ali Khamenei. During this high profile meeting, it was agreed that the pipeline project will be completed in a period of 15 months. A very encouraging statement was given on this occasion by Ayatollah Khamenei who stated that the project should continue despite hostilities.
President Zardari’s visit to Iran should be regarded as a practical step towards the finalisation of the IP gas pipeline project. One of the fruits of this visit is the formation of a joint IP contracting company that will complete the pipeline’s construction within the next year and a half.
If one were to evaluate the overall performance of the PPP during its different tenures, the IP gas pipeline project is yet another landmark after the Pakistan Steel Mills, the Old Age Benefit Scheme and the nuclear programme.
In fact, progress as well as empowerment of the masses is the hallmark of the PPP that has also boosted the people’s morale by pushing the IP gas project forward without getting deterred. The decision-making abilities of President Zardari and Prime Minister Ashraf have also been acknowledged through the length and breadth of the country and among all prominent sectors of national life, including the intelligentsia. As a result of the diplomatic finesse displayed, American pressure appears to have subsided, as declared by Foreign Minister Hina Rabbani Khar. If that is the case, then it can be counted as another success of the sitting government. The success is thus two-fold, which means that on the one hand, this project would rid the country of gas shortage and energy deficiency and, on the other hand, it would provide a sense of self-esteem and dignity to the Pakistani citizenry.

Published in The Express Tribune, March 5th, 2013.
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Better late than never
By: Inayatullah | March 09, 2013


Pakistan’s decision to go ahead with the Iran-Pakistan gas pipeline may well prove to be a test case in the presently fluctuating relations between USA and Pakistan.

President Asif Zardari’s visit to Iran after the PPP-led government sat over the proposed project for more than four years may well have been motivated by the urge to bolster the party’s prospects in the coming elections. The fact that Pakistan has taken a firm stand, however, is a significant step to further the county’s national interests.

As expected, the Obama administration has been alerting Pakistan to the probability of clamping sanctions under the US Sanctions Act. The State Department spokesman, Patrick Ventrell, told reporters in Washington last Sunday that the finalisation of the Iran-Pakistan pipeline project was bound to raise “serious concerns” in USA. This, he said, had been made “absolutely clear” to Islamabad. Ventrell added: “As a member of the international community, a current member of the IAEA board of governors and the UN Security Council, Pakistan has an obligation to join multilateral efforts to convince Iran to adhere to international nuclear obligations.” He also referred to US contribution towards Pakistan with a view to alleviating the energy crisis.

On March 7, another US Department’s spokesperson, Victoria Nuland, spoke on the subject and said: “The proposed deal will violate UN sanctions laws.” She acknowledged that Pakistan has a lot of unmet energy requirements. The US, she added, was aware of these requirements and has been “working in close partnership to find better ways” to meet these needs.

While the US threat has to be addressed carefully, according to the expert opinion in Pakistan, apprehensions about sanctions are not justified considering that the purchase of gas from Iran will not attract them in view of the nature of the deal. There will be no Pakistani investment in Iran’s energy sector, as the payment for gas supplies is to be made through the export of foodstuffs and other commodities. These commodities do not come into the category of sanctionable items. Also, no sanctions have been imposed on Turkey and Turkmenistan because of the Iranian pipelines laid there. India, too, has been importing oil from Iran without any fear of sanctions.

Another good reason for the US to avoid imposing sanctions on Pakistan is the Afghanistan endgame compulsions. These will include smooth and economical transportation of goods and military personnel from Afghanistan.

For this, the US will need Pakistan’s approval for the use of its territory. Washington knows too well how it had to face logistical and financial difficulties for months when after the Salala killings the route through Pakistan remained out of bounds for the Nato containers. The available alternative routes are cumbersome and much more expensive.

It is now well understood that USA very much requires Pakistan’s close cooperation in holding talks with various elements of Afghan resistance for a face-saving exit from Afghanistan and ensuring some sort of stability in the country. One may also keep in view the ongoing dialogue between Iran and the P-5 countries. As the talks proceed, there is every possibility that some of the sanctions imposed on Iran maybe relaxed on Tehran agreeing to observe certain conditions demanded by IAEA and some of the influential members of the international community.

Pakistan most urgently needs gas to increase its energy supply. Because of the myopic polices of the Masharraf regime and a wilful neglect to add capacity as well as defaulting on fully utilising the existing capacity, the country has suffered enormously. The resort to, more or less, inefficient and expensive rental plants has taken a heavy toll of our scarce funds and spawned large-scale corruption and further with unending outages, severely damaging industrial production and making the people’s lives extremely miserable.

The American aid for energy that, too, has taken time to materialise will - the whole of it - help provide only a small part of the overall requirements.

It is imperative that the concerned authorities in Pakistan not only stick to the deal with Iran, but also ensure that all possible hurdles are overcome speedily and every possible assistance is provided to complete the task of laying down the pipeline in a record time. Some of the works undertaken and urgently completed, recently, by the Punjab government provide a good example to follow.

It is a matter of deep regret that the federal government wasted so many years to strike the deal for the gas to flow from Iran to Pakistan. The negligent administration possibly would be paying a price for this unpardonable conduct in this respect at the polls due to be held after the next few weeks.

Hopefully, the interim government and the elected rulers later would not let the grass grow under their feet and will accord the highest priority to this project. They are also expected to take up a number of large and small hydel projects both for generating power and storage of water for irrigation.

The pipeline project with Iran will open up avenues of extensive relations with one of our close neighbours. Besides boosting economic ties, we need to enhance our cultural relations with a country that has contributed so much, overtime, to our history, languages, literature, art and architecture. With time, tourism will also grow bringing the people close to each other.

It does one’s heart good to see the government entrusting the management of Gwadar seaport to the Chinese. How short-sighted of the concerned authorities that it had let things drift and allow a crucial project, pregnant with immense possibilities of benefit to Pakistan and with enormous positive international implications, to remain undeveloped for years.

It is further important that we take serious steps to promote people-to-people contacts with China. There is also need for doubling and, in fact, tripling the volume of our trade with the fastest growing and the second largest economy of the world located so closed to our borders. In most of our leading universities, arrangements should be made to teach Chinese. More of Chinese and Pakistani students should study in each others’ universities and a sizeable programme of exchange of groups of young men and women chalked out.

Let us hope the next elected national government would have men and women endowed with vision, will and competence to make up for the last decades and move fast to lift the society and the state to higher levels and scrupulously work for the development of the country and welfare of the people.

The writer is an ex-federal secretary and ambassador, and a freelance political

and international relations analyst.

Email: pacade@brain.net.pk

http://www.nation.com.pk
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IP gas pipeline
March 09, 2013 .


The government seems to have settled for a mere ‘hope’ that the USA will understand its compulsions in going ahead with the Iranian gas pipeline, according to the Foreign Office spokesman during his weekly briefing to the press on Thursday in Islamabad. He told the press that “We know about their concerns but expect and hope that all our friends, including the US, will show more understanding on this issue.” This seems more like a ‘hope against hope’ rather than a genuine understanding. The project is not just important to the future welfare of Pakistan’s citizens, as the Iranian gas will help end the energy shortage that manifests itself in long hours of loadshedding. The shortage has led to cancelled export orders, falling export revenues, closing factories and lost jobs. On the other hand, the isolation of Iran for its alleged nuclear programme, is not a circumstance that Pakistan would wish to share. Threatening Pakistan with sanctions is unfair though, given that China and India are exempt from similar sanctions applicable to them for their trade with Iran.

Not only would this be the President's second visit to Iran this year, but it would also represent an important part of the PPP campaign in the coming election. The resistance to the US pressure on the pipeline is an election stunt as much as necessary spine required for the project, but a discerning observer should look to see where the funds for the pipeline are and whether Pakistan will be able to fulfil its commitments before election time, or whether the new government after elections will have to make room in the budget for the project. At the same time, there must be a realization that Pakistan cannot withdraw from the project. However, it is of sufficient importance to Pakistan for President Asif Zardari to go to Iran for a solution to loadshedding which is an existential threat and cannot be ignored. It cannot be forgotten that no viable alternative was proposed, the TAPI proposal being a nonstarter for the immediate short term.

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Default Pipedream?

Pipedream?
By Dr Farrukh Saleem

The good news is that the cost of the Pak-Iran gas pipeline has come down from $1.5 billion to $1.3 billion. The bad news is that neither Iran nor Pakistan has $1.3 billion. The good news is that President Zardari will be inaugurating the pipeline on Monday. The bad news is that a ‘pipedream’ is being inaugurated, not a pipeline.

There are two major prerequisites to building the pipeline: money and technology. There are two sources that have the money: Chinese banks and western financial institutions. There are two sources that have the required technology: Gazprom, the Moscow-based gas giant and western pipeline entities. On March 14, 2012, the Beijing-based Industrial and Commercial Bank of China Ltd (ICBC) backed out of a deal to finance the Pak-Iran gas pipeline. On May 14, 2012, Gazprom, the largest extractor of natural gas in the world, pulled out of the Pak-Iran pipeline project.

No money, no technology. All politics. Lately, the Americans seem to be ditching our president and our president is out with a double-edged sword: annoy the Americans and when the project actually fails the next rulers in Islamabad can be conveniently held responsible for the failure.

The Iranians are completely isolated and are therefore playing along pretending that they are still interacting with other countries of the world. On February 6, 2012, Iran defaulted on payments for wheat imports from Ukraine. On February 7, 2012, Iran defaulted on payments worth $144 million for rice shipments from India. Conclusion: Iran has no hard currency left in its reserves.

The good news is that Iran is desperate to deal with Pakistan. The bad news is that South Pars gas field’s reserves are yet to be ratified by a third party. The good news is that Sui Northern and Sui Southern are charging us around $3.50 per unit of gas. The bad news is that Iranian gas price is pegged to the price of crude and at the current level Pakistani consumers would have to cough out around $13 per unit of Iranian gas. More recently, Pakistan has asked Iran to revise the price of gas downwards from 78 percent of crude to 70 percent of crude (Iran has refused to renegotiate the price downwards).

On December22, 2011, the National Bank of Pakistan (NBP), responsible for raising the rupee component of the project, informed the Economic Coordination Committee’s (ECC) Steering Committee on Iran-Pakistan (IP) Pipeline that it had “branches in different countries of the world and therefore it feared that these branches could be closed due to US sanctions.” Subsequently, the NBP pulled out of the project.

In December 2011, the Oil and Gas Development Company Limited (OGDCL) “already cash constrained due to the circular debt, said that its US investors had threatened to retreat if the company financed the IP gas pipeline project.” Subsequently, OGDCL pulled out of the project.

The other good news is that our second-largest source of grant assistance is Saudi Arabia (America is the largest). The other bad news is that al-Mamlakah al-’Arabiyyah as-Su’udiyyah does not want Pakistan to trade with Iran.

Our pipedream fantasy; End tragedy solve the riddle; And dissipate ideals of indecision pipe; Pipedreams like these will; Cease and die unleashed.

The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com. Twitter: @saleemfarrukh
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