Pakistan defiant on Iran gas pipeline
By Syed Fazl-e-Haider
KARACHI - Pakistan on Tuesday gave an unequivocal assurance to Iran for early implementation of the US$7.6 billion Iran-Pakistan (IP) gas pipeline, a week after the toughest warning issued yet by the United States to Islamabad to shelve the project
Islamabad and Tehran vowed to intensify work on the IP project during a meeting of the Pakistan-Iran bilateral talks, which began in Islamabad this week, led by visiting Iranian International Affair
President Asif Ali Zardari gave an assurance on Tuesday that his country was committed to the early implementation of the project to meet the country's ever growing energy needs during his meeting with the Ali Saeedlou. Washington, which has intensified its efforts for increased economic sanctions against Iran, has serious reservations over the IP project.
Last week, a senior US diplomat reportedly warned Islamabad that any attempt to go ahead with the gas pipeline would be considered as "furthering Iran's nuclear program". The US has also offered to Pakistan alternative sources of energy in the form of imports of liquefied natural gas (LNG) at cheaper rates from Turkmenistan.
During his meeting with Ali Saeedlou, Sheikh assured him of the country's commitment to implementation of multi-billion-dollar gas and electricity import projects.
"Pakistan is fully committed to importing electricity and gas from Iran, and we are working on a fast-track basis to finalize these deals at the earliest," Dawn reported Hafeez Sheikh as saying.
The two sides also discussed ways to enhance banking cooperation and strike a currency swap ar
rangement to promote bilateral trade. Under the IP deal, the two countries signed in June 2010, Iran will export 21.5 million cubic meters per day of natural gas to Pakistan by the end of 2014.
The IP pipeline has reportedly reached Iran's border, while Pakistan has completed the survey for construction of pipeline on its side.
Last month, US President Barrack Obama signed a US defense funding bill that includes new sanctions on financial institutions dealing with Iran's central bank. The law is expected to have repercussions for Pakistan's plans to import gas from Iran and could make it difficult for the country to implement the IP pipeline project.
"Pakistan will be in for serious trouble if it does not abandon the project," The Express Tribune reported an American diplomat as saying. "Any country, any bank or any financial institution which tries to work with Iran will certainly be slapped with sanctions."
The US is dangling energy-deficient Pakistan both stick and carrot in a move to persuade
it to abandon the IP gas pipeline. Washington has offered the country to provide gas at a rate approximately one-third of the price Iranian gas would cost to the country.
American energy companies have increased their gas supply in recent years, causing natural gas prices to fall 5.7% on January 12 to their lowest level in over two years. Iranian gas will cost $12 per million British thermal units (mmbtu) while LNG would cost $18 per mmbtu. The US could help Pakistan buy LNG at $4.5 per mmbtu.
The IP project is seen as an energy lifeline in Pakistan , which at present suffers chronic gas shortages affecting its industry and daily life. Petroleum Minister Asim Hussain has warned that the whole energy system of the country could collapse as the demand and supply gap of gas has reached 2.2 billion cubic feet (bcf). The gas in the system is 3.8 bcf while the demand has shot up to 6 bcf.
The IP project would help generate around 5,000 megawatts of electricity, which is equivalent to present peak shortage of power in the country. Local analysts believe that a land-based pipeline would be one quarter the cost than any other option, while the country could also earn about $200 million to $500 million annually in transit fees if the gas is exported to India or another third country.
Pakistan has settled all issues relating to IP gas pipeline project with the Iranian authorities, including a gas sale and purchase agreement (GSPA) and third-party certification for uninterrupted supply of gas from the source field to Pakistan for 30 years
Under the IP pipeline construction plan, a 42-inch diameter pipeline would be installed to connect Balochistan, Sindh and Punjab through Khuzdar to Karachi, while the main pipeline would continue toward Multan in Punjab with a joint venture of major gas distributors Sui Northern Gas Pipeline Ltd and Sui Southern Gas Co.
Last month, US Stated Department spokesperson Victoria Nuland expressed concern over the IP project and said the law President Obama signed "forbids dealing with central Iranian banks".
"We've made absolutely clear over many months now our concern about this deal [the IP agreement] and we will continue to talk to Pakistan about it. Were it to go forward, how it might be impacted - again, this is the kind of conversation that we have to have with Pakistan and that we're starting to have now," Dawn reported Nuland as saying.
Islamabad however renewed its commitment to go with the IP project believing that US sanctions would not affect the project.
The pipeline was originally planned to extend from Pakistan to India in 1993. Pakistan has also been taking up the proposal of involving its closest ally, China, in the IP venture in a bid to deepen ties with Beijing as an alternative to increasingly fragile relations with the United States.
Syed Fazl-e-Haider (Syed Fazl e Haider
) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at [email protected]