IP gas project

Attention: open in a new window. PDFPrintE-mail

Weekly Updates - Editor's Pick

President Asif Ali Zardari categorically stated during his meeting with visiting Iranian Vice-President for International Affairs Ali Seedlou that Pakistan is committed to the early implementation of the Iran-Pakistan (IP) gas pipeline - a natural gas pipeline from the Iranian South Pars gas field in the Persian Gulf to energy-starved Pakistan.

Iran's official Islamic Republic News Agency reported that the Iranian Vice President committed to completing the pipeline "before due time." The IP gas pipeline was conceived by a visionary Pakistani engineer in the 1950s in an article published by the Military College of Engineering, Risalpur and conceptualized by Rajendra Pachauri, currently working for Yale's Climate and Energy Institute with the then-Iranian Foreign Minister.

The fact that it was acknowledged as a win-win project by the participating countries accounts for it being still alive in the hearts and minds of the three governments.

Thence began a series of parleys between the three countries that were periodically deadlocked for any one or more of three reasons.

First, a failure to reach a firm agreement over pricing of the gas which led to the withdrawal of India from the deal; additionally India also expressed security concerns given that the pipeline's route would necessarily have been through nuclear rival Pakistan.

Recently, India's announcement that it would defy Western sanctions (as opposed to the United Nations sanctions proposed and vetoed by China and Russia) against the purchase of Iranian oil in the aftermath of the ongoing conflict over Iranian nuclear ambitions, lends credence to the view that India would not compromise on what it regards as its economic interests.

But pricing may well remain an issue and would have to be resolved through a trilateral meeting.

The visit of Dr Asim Hussain, Special Assistant to the Prime Minister on Petroleum and Natural Resources, to India recently and reports that the revival of the IPI was discussed would be good news for Pakistan as the pipeline would then not only meet our energy needs but also generate a hefty transit fee.

The second impediment has been the United States leverage over Pakistan.

In the economic arena, the US has emerged as a significant donor of military as well as civilian assistance, though during Musharraf's era military assistance through the Coalition Support Fund was considerably greater than for civilian purposes - a condition that was revised under the Kerry-Lugar bill.

The trickle of civilian and military assistance subsequent to the Salala attack has reduced US economic leverage.

Over decades, considerable US political leverage has been in evidence and an example in recent history includes US brokering of a Musharraf-Benazir Bhutto deal resulting in the National Reconciliation Ordinance.

However, reports that the Pakistani government requested the US administration to rein in US businessman Mansoor Ejaz over the Memogate controversy, reports that can never be confirmed, led to a deterioration of relations between the Obama and the Zardari administrations.

However, Memogate is all but resolved and no one knows if the Obama administration played a role in it.

Be that as it may, the drone strikes have begun again and with no condemnation by either the Pakistani civilian or military leadership, one would be compelled to assume that the impediment to relations on the same keel as before, remains the parliament that is awaiting the recommendations of the committee headed by Raza Rabbani.

Significantly the US spokesperson Ms Nuland expressed serious concern over President Zardari's statement with respect to the IP gas pipeline.

However, it remains to be seen whether US leverage on our decision-making apparatus has been restored or not.

The third impediment has been finances and this particular impediment has been more noticeable in recent years with respect to Iran and Pakistan - Iran because of it taking a stance in international relations that has angered the US and its allies in the West, thereby compromising its exports and Pakistan because of a burgeoning budget deficit attributed to mismanagement and corruption.

However, no financier in the world would regard the IP project as not being extremely profitable and hence money for the laying of the pipeline can be generated through a public-private partnership, inclusive of both domestic and foreign private investors.

The cost benefit analysis of the pipeline cannot focus on its economic and internal rates of return but must necessarily take account of US anger and its pervasive influence over Pakistan's major donors (multilateral as well as bilateral), the pricing of the gas and the cost of borrowing for the project.

Courtesy: Business Recorder

forex pakistan

Forex open Market rates & comments Archive

Login Form