Iran gas pipeline

As much as we like to delude ourselves into believing that China is an all-weather friend who will stand by us no matter what, the alliance between the two countries is one that is based, like all alliances, on convenience and self-interest. There are now increasing signs that, in many areas, these interests are now diverging. The Industrial and Commercial Bank of China, which had previously committed to financing the Iran-Pakistan gas pipeline, has now decided to back off, most likely because another alliance — that with the US — took precedence over the alliance with Pakistan. The US has already threatened to impose sanctions on any company that deals with Iran and it appears that the Chinese have caved in. The former has also worked overtime to ensure that the Iran-Pakistan gas pipeline does not become a reality and its efforts do not seem to have been in vain.

Fortunately, for Pakistan there are possible alternatives to finance the project. The second-lowest bidder for the contract, which is a consortium that includes local firms and foreign firms with experience working in Pakistan, can be a possible alternative to finance the project. Although this option will end up costing the government more, the Iran-Pakistan pipeline is so vital to the country’s energy needs that the extra cost can be overlooked. Other options available include cutting out the middlemen and dealing directly with friendly governments or even coming to a barter agreement with Iran where we would exchange wheat in return for construction help for the pipeline. A gas levy is also reportedly being considered but, given recent gas price increases, that option may not be palatable to the Pakistani people.

As for China, we need to prepare for a time when our alliance with them is severely undermined by growing relations between China and India. Trade between the two countries has now reached nearly $50 billion a year and is only expected to increase substantially in the next few years. For an alliance that started only because the two countries shared a mutual suspicion of India, this spells trouble. Relying on only one ally is never a good idea, and in the case of China, it is becoming increasingly problematic.

Published in The Express Tribune, March 15^th, 2012.