Deal on gas pipeline
At long last, after decades of dithering, it is here. Construction on the gas pipeline from Iran to Pakistan has finally begun, with the $7 billion project expected to be complete by 2014. While there is still room for hiccups (there always is where the government of Pakistan is involved), one can now be reasonably assured that the project will reach its completion stage soon enough.
What started out initially as the Iran-Pakistan-India pipeline – hence the moniker “peace pipeline” – was reduced to the Iran-Pakistan pipeline after India pulled out, ostensibly over a pricing dispute. That reason has always been somewhat suspect. India and Pakistan are both energy starved economies and Iran has the second largest gas reserves in the world. Given the proximity between the three countries, the economics of the project were rarely, if ever, in doubt. What held up the project for so long was politics and for that the government of Pakistan has ensured that its economy has paid a heavy price for its unwillingness to put the country’s economic interests foremost.
It was absolutely inexcusable that Pakistan should have a gas shortage when it has neighbourly ties with Iran, one of the most hydrocarbon-abundant nations in the world. Iran was willing, nay eager, to supply gas to Pakistan regardless of whether India came along on the pipeline or not. But Pakistani leaders, craven as they are to Washington’s whims, did not wish to anger the United States which had explicitly opposed the deal owing to its own efforts to isolate Iran because of their longstanding mutual animosity and Iran’s alleged nuclear programme.
The Americans may have their own strategic logic behind their actions and Pakistan should cooperate with its allies to the degree that it can. Yet when their interests come in direct conflict with ours, the government of Pakistan should make it abundantly clear that its economic interests are of vital importance. If the country had secured gas supplies from Iran earlier, there is a chance that the power crisis would not have been quite as severe.
According to the government’s own estimates, published in the Economic Survey 2009-2010, the country lost 2.2 per cent in GDP growth owing to the power crisis. That is approximately $3.5 billion in economic losses in a single year, not quite something that a developing economy can afford. When taking into consideration the fact that the losses were partly to appease a foreign power, the lack of growth stings even more.
The Indians, for their part, were unwilling to become part of the project largely due to their fears over the security of the pipeline. In addition to that there had also been some speculation that some segments of the Indian political spectrum were uncomfortable with the idea of having a vital energy supply route pass through Pakistan, fearing a sudden loss of supply owing to political reasons.
While there may be some grounds to those fears, the Indians should perhaps try to put a little more faith in expanding economic ties with Pakistan as a means of promoting peace. Pakistanis have already done so through the Indus Water Treaty, which places the control of Pakistan’s rivers in India's hands. While there have been troubles of late, the treaty has managed to last even through the three wars that have been fought by the two countries since it was signed in 1960.
For its part, Pakistan stands to gain tremendously from the pipeline regardless of whether India joins. For instance, one of the most rapidly growing industries in Pakistan is petrochemicals (fertilisers, plastics, chemicals, etc). The key raw ingredient for that industry is natural gas. Having ample, steady supplies from Iran will be a great boost to the industry and allow it to compete in the international market.
In short, while we are tempted to berate the government for having taken so long to get the project going, the occasion calls for congratulations all around. To quote the Farsi proverb: der ayad durust ayad.
Published in the Express Tribune, June 15th, 2010.
What started out initially as the Iran-Pakistan-India pipeline – hence the moniker “peace pipeline” – was reduced to the Iran-Pakistan pipeline after India pulled out, ostensibly over a pricing dispute. That reason has always been somewhat suspect. India and Pakistan are both energy starved economies and Iran has the second largest gas reserves in the world. Given the proximity between the three countries, the economics of the project were rarely, if ever, in doubt. What held up the project for so long was politics and for that the government of Pakistan has ensured that its economy has paid a heavy price for its unwillingness to put the country’s economic interests foremost.
It was absolutely inexcusable that Pakistan should have a gas shortage when it has neighbourly ties with Iran, one of the most hydrocarbon-abundant nations in the world. Iran was willing, nay eager, to supply gas to Pakistan regardless of whether India came along on the pipeline or not. But Pakistani leaders, craven as they are to Washington’s whims, did not wish to anger the United States which had explicitly opposed the deal owing to its own efforts to isolate Iran because of their longstanding mutual animosity and Iran’s alleged nuclear programme.
The Americans may have their own strategic logic behind their actions and Pakistan should cooperate with its allies to the degree that it can. Yet when their interests come in direct conflict with ours, the government of Pakistan should make it abundantly clear that its economic interests are of vital importance. If the country had secured gas supplies from Iran earlier, there is a chance that the power crisis would not have been quite as severe.
According to the government’s own estimates, published in the Economic Survey 2009-2010, the country lost 2.2 per cent in GDP growth owing to the power crisis. That is approximately $3.5 billion in economic losses in a single year, not quite something that a developing economy can afford. When taking into consideration the fact that the losses were partly to appease a foreign power, the lack of growth stings even more.
The Indians, for their part, were unwilling to become part of the project largely due to their fears over the security of the pipeline. In addition to that there had also been some speculation that some segments of the Indian political spectrum were uncomfortable with the idea of having a vital energy supply route pass through Pakistan, fearing a sudden loss of supply owing to political reasons.
While there may be some grounds to those fears, the Indians should perhaps try to put a little more faith in expanding economic ties with Pakistan as a means of promoting peace. Pakistanis have already done so through the Indus Water Treaty, which places the control of Pakistan’s rivers in India's hands. While there have been troubles of late, the treaty has managed to last even through the three wars that have been fought by the two countries since it was signed in 1960.
For its part, Pakistan stands to gain tremendously from the pipeline regardless of whether India joins. For instance, one of the most rapidly growing industries in Pakistan is petrochemicals (fertilisers, plastics, chemicals, etc). The key raw ingredient for that industry is natural gas. Having ample, steady supplies from Iran will be a great boost to the industry and allow it to compete in the international market.
In short, while we are tempted to berate the government for having taken so long to get the project going, the occasion calls for congratulations all around. To quote the Farsi proverb: der ayad durust ayad.
Published in the Express Tribune, June 15th, 2010.