By Kunwar Khuldune Shahid –
The IP pipeline’s math does add up but the PPP’s farewell populist shot has caused a lot of international ripples
It wouldn’t be entirely out of place to tout Tehran as a bit of a daredevil of global politics. However, saying the same of Islamabad would be stretching things beyond the laws of elasticity. Even so, the latter has come up with a braveheart stunt of its own, by approving a deal with the former over the much anticipated Iran-Pakistan (IP) pipeline, which was officially inaugurated on March 11, 2013 by Pakistan President Asif Ali Zardari and Iran President Mahmoud Ahmadinejad. The pipeline would transfer 750 million cubic feet of gas per day from South Pars gas field to Pakistan.
So why is a move that on paper wouldn’t do much more than ease gas shortfall of one billion units per day, and narrow down fiscal deficit worth $82 billion on either side of the rather friendly Iran-Pakistan divide, being peddled as a courageous step? It’s a one word answer to that question; and the dreaded S-word is written in all caps on the Washington drawing board.
Sanctions in the pipeline
A day prior to Pakistan approving the deal with Iran regarding the laying of Pakistan’s 750km segment of the pipeline on January 30, 2013, U.S. Consul General Michael Dodman said during a press briefing in Sukkur, “The U.S. State Department would impose sanctions on Pakistan if it continues work on the Pak-Iran Gas Pipeline Project.” The reason for the sanctions, of course, being Iran’s violation of the Nuclear Proliferation Treaty and the ensuing U.S. policy against nuclear proliferation that has seen the U.S. put almost exhaustive economic embargo on Iran, including sanctions on firms that are involved in business with Tehran, a ban on all imports that have an Iranian origin, sanctions on financial institutions from Iran and a ban on selling aircraft to aviation companies in Iran.
And so, at a time when even trading the extinct one-rupee note for Irani riyals might not escape the U.S. sanctions scanner, the $7.5 billion pipeline project is surely a cordial invitation for the U.S. wrath.
For the completion of any transnational pipeline project there are a lot of variables that need to be factored in: resources, demand, budget, technology and feasible commercial mechanism among other things. However, even if one were to add all of these factors up, they’d still fall considerably short of the influence of one single factor: politics.
Take the example of the Baku-Tbilisi-Ceyhan (BTC) pipeline that transports oil from Azerbaijan to Ceyhan – Black Sea port in Turkey. The pipeline’s construction work, the infrastructure and the finances were never an issue, and yet it took nearly a decade worth of negotiations before it was finally commissioned. Massive diplomatic exercise involving all major stakeholders Russia, Turkey, Azerbaijan, the then newly independent Soviet republics, U.K. and U.S. took the project towards the finish line on 2006. Central Asia is a volatile region, and hence the project got its fair share of global scrutiny. And as far as precarious regions go, there are few that can top South Asia and Middle East in that particular distinction. Therefore, any project that involves Iran and Pakistan – two of the bad boys of international politics – was never going to be a diplomatic cakewalk.
Getting the dough
Even though Iran has already completed its half (900km) of the IP pipeline, the construction of Pakistan’s half hit a $1.5 billion worth stumbling block. Russian energy giant Gazprom and Chinese banking behemoth Industrial and Commercial Bank of China Limited (ICBC) were said to be interested in financing the project, but the U.S. threat ostensibly warded off their interest. And so with Pakistan quite obviously struggling to generate the sum needed for construction it was Iran that came to the rescue on that front as well.
A total sum of $500 million ($250 million from the Iranian government and $250 million from the commercial banks) has been provided by Tehran with the remainder being collected through gas infrastructure development cess. The contract of the pipeline’s construction has been awarded to an Iranian firm, Tadbir Energy Development Group that is overseeing all the engineering work involved in the project.
So yes, Iran is providing the gas, the initial finance to set the ball rolling and is also overseeing the construction work of the pipeline in what might be perceived as one of the epic fits of brotherly love in modern times.
Bitter carrot, outdated stick
With all the necessary papers signed and details finalised, there only remains the small matter of standing up to the U.S. bullying for Pakistan. Apart from giving Islamabad a continuum of glares and trash talk, the U.S. has also had a trophy pipeline to woo Pakistan away from IP. TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline has its own charm (read less gas price per mmbtu) but it’s the ‘A’ in TAPI that makes this particular carrot rather bitter. Any project that traverses the unstable land of Afghanistan is undoubtedly light years away from being safe. And so with the carrot not being alluring, the task of moving the donkey and drawing the cart forward is all down to the U.S. stick, which is becoming increasingly predictable and outdated.
The Saudi question
While the U.S. might be the monster-in-chief in this Iran-Pakistan fairytale, there is another godfather that Pakistan has to counter: Saudi Arabia along with its sidekick Qatar. Pakistan’s fiscal resolve might be tested by sailing into waters forbidden by the U.S., but they can get a sizable economic setback if they persist on befriending Iran and in turn continuing to get the thumbs down in response to their requests for aid and cheap Saudi oil. The Pakistan-Saudi Arabia relationship has been on a bit of a downward spiral ever since the government took over in 2008, and going ahead with this lucrative project with Iran wouldn’t help the slightest in halting that plunge.
Epilogue: Is the government bluffing?
Such was the doggedness of PPP’s government in dillydallying over IP that every man and his dog had dubbed the pipeline a pipedream. And hence, watching the government spring into action at the brink of the culmination of its tenure naturally generates skepticism. Is going for IP merely a publicity stunt on the part of PPP, who’d have a precarious gift nicely gift-wrapped for their successors to deal with and might have a list of excuses in place for calling the project off in case they are reelected? Is it true that the Army was never taken into confidence before giving the project the green signal? And therefore, does General Ashfaq Pervaiz Kayani’s visit to Saudi Arabia following the IP agreement have an antagonistic bearing on the future of the IP pipeline? Is the project a massive bluff on the part of the government or is Pakistan finally ready to unfasten the U.S. shackles?
It still is a little premature to give a verdict, but with Pakistan transferring Gwadar Port operations to Chinese Overseas Port Holdings Limited at virtually the same time as it signed the IP deal with Iran, maybe, just maybe, there is a paradigm shift in Pakistan’s foreign policy.
The writer is a journalist based in Lahore