The United States has renewed its opposition to the multi-billion-dollar Iran-Pakistan gas pipeline, warning that Islamabad’s continuous pursuit of the plan may invoke US sanctions.
The issue was raised during the fourth round of Pak-US strategic dialogue on energy that concluded in Islamabad on Thursday without any major tangible gains.
Officials familiar with the development told The Express Tribune that the US Special Envoy for International Energy Affairs, Ambassador Carlos Pascual, ‘advised’ Islamabad to abandon its plan to import gas from Iran. He proposed instead that Pakistan pursue the TAPI project, a gas pipeline through Turkmenistan, Afghanistan, Pakistan and India.
Pakistan has reservations about the TAPI project due to security concerns about Afghanistan and unsettled issues relating to gas prices.
The South Pars gas field in Iran is the largest in the world, meaning that its production costs for Iran are significantly cheaper than those for gas extracted from smaller fields in Central Asia, including the Caspian Sea fields to which Turkmenistan has access.
A US embassy spokesperson confirmed that Washington is concerned with Pakistan’s current direction, and the issue was raised in Ambassador Pascual’s meetings. “The proposed Pakistan-Iran pipeline, if built, could raise concerns under the Iran Sanctions Act. We are encouraging Pakistan to seek alternatives”, read a terse response from the US embassy.
The renewed opposition from the US came just days after high level talks between Pakistan and Iran, where the two neighbours vowed to go ahead with the project that would bring its first gas flow by 2014.
Water and Power Minister Naveed Qamar, who co-chaired the meeting, denied to The Express Tribune that such a discussion took place.
However, another senior government official said that despite opposition from the US, Pakistan would not abandon the project, as an agreement has already been signed with Tehran.
The two-day strategic talks ended without any significant developments, despite initial high hopes. The US seems reluctant to provide significant investment in Pakistan’s financially crippled power sector.
A senior government official told The Express Tribune that the US special envoy has informed Pakistani authorities that it would be naïve to expect large support from Washington in the power sector until there is an institutional overhaul in the way the energy sector is regulated and managed.
He said that the US has urged Pakistan to introduce major reforms by scrapping redundant policies and implementing new regulations. The latest US stance highlights the urgency to reform the sector that has stalled economic growth. Despite special cabinet committees, the government has failed to carry out reforms over the past three years.
According to a US embassy handout, Ambassador Pascual reaffirmed the United States’ long-term commitment to working with Pakistan to establish a commercially viable and sustainable power sector. It further stated that, during the talks, Pakistan underscored its will to strengthen energy sector governance and efficiency, pursue regulatory reforms, improve financial management, and create a business climate that helps drive investment.
The US, welcoming these plans which were elaborated in the Integrated Energy Sector Report, maintained that these measures will help develop a stronger foundation for investment. Both sides agreed to continue technical exchanges in areas that can help improve power availability.
“As all Pakistanis know, reliable and affordable energy is critical to Pakistan’s prosperity,” said Ambassador Pascual. “Without it, businesses can’t operate and families can’t light and cool their homes. Pakistan’s future depends on power.”
The US also welcomed Pakistan’s continued engagement with international financial institutions and the private sector to assess the feasibility of viable hydropower projects, a reference to the $12 billion Diamer Bhasha dam, for which the Asian Development Bank has agreed to provide funding.
Published in The Express Tribune, September 16th, 2011.