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Politics and the pipeline

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

Asif Ezdi, "Politics and the pipeline," The News. 2013-03-18.