Economic gain over ideology

Our national interest of rebuilding the economy must precede all other imperatives.

Raza Rumi June 08, 2013
The writer is Director, Policy & Programmes Jinnah Institute, Islamabad. The views expressed are his own

The new government faces the immediate crisis of fixing Pakistan’s power outages and living up to the promises it made during the election campaign. The new prime minister (PM), Nawaz Sharif, dwelled considerably on this issue in his inaugural speech in parliament and his subsequent meetings have also focused on how to fix the energy crisis. Our current installed power generation capacity stands at around 24,000 megawatts (MW). The actual generation is far less and does not exceed 10,000 MW, largely due to the Rs1 trillion circular debt, which prevents the government from making timely payments to the independent power producers (IPPs). Needless to say, the energy crisis has crippled the economy and caused much public discontent. The election results are a testament to the extent the Pakistani electorate voted in favour of a party that may solve this crisis.

A missing feature from PM Sharif’s speech was the mention of the Pakistan-Iran gas pipeline project, which was agreed on by the previous government. The PPP government also did not do much in its first few years largely due to its fear of annoying the US and Saudi Arabia, which do not view Iran favourably.

It is ironic that since the recent wave of the energy crisis started in 2006, we did not think of extending regional cooperation, given that Iran has vast reserves of oil and gas. Once again, we might be on the verge of squandering this opportunity. All efforts to restructure the economy require medium-term initiatives. In the short term, the pipeline from Iran can considerably alleviate our woes.

Currently, Pakistan purchases 34MW of electricity from Iran daily. In 2008, we agreed to purchase a total of 1,000 MW from it. There are Iranian companies involved in two power projects in Sindh and helping out with power management in Balochistan. However, the landmark agreement came in the shape of the Pakistan-Iran gas pipeline. The Pakistani part (750 km) of the 1,600-kilometre pipeline will cost $1.5 billion to build and will facilitate the export of 21.5 million cubic meters of Iranian natural gas to Pakistan on a daily basis. The capacity of this project is above 4,000 MW. Iran has even completed the 900 km of this pipeline on its side of the border and is ready to help us in completing our part rapidly.

The proposed pipeline can add up to five per cent to Pakistan’s GDP and during the construction phase will create 10,000 jobs. Once it is built, there will be thousands employed. Iran has accepted a major share of the financial burden for its construction and financing. So, why are we still reluctant?

Iran faces US-led international sanctions due to its nuclear programme. It is also well known that Nawaz Sharif enjoys the confidence of Saudi Arabia, which has backed these sanctions. There is immense pressure which Pakistan faces. The US believes that the pipeline violates sanctions, despite the statements from President Asif Zardari where he termed the pipeline a “peace pipeline”. Both Iran and Pakistan claim that the pipeline has no relationship with Iran’s nuclear programme and thus is beyond the remit of sanctions.

In his recent guidelines to missions abroad, premier Sharif has mentioned Pakistan’s quest to achieve a delicate diplomatic balance by pursuing “close cooperative relations” with Saudi Arabia, Turkey and Iran. Here comes the test for the new government as to how well it can advocate its cause and the urgent need of energy to sustain the economy as well as quell growing social unrest. It would require even more vigorous diplomacy with the US to make the argument for the pipeline. Our national interest of rebuilding the economy must precede all other imperatives.

An overwhelming majority of Pakistanis hold a favourable view of Iran. Nawaz Sharif’s backing of the pipeline will pay him political dividends as well. Most importantly, it will discontinue our historical failure to guarantee policy continuity when governments change. It is time to focus on our priorities and keep our self-interest above all other considerations. This pipeline will also reset our foreign policy with regional economic cooperation at its core. It is time we gave up “ideology” in favour of pure economic gains.

Published in The Express Tribune, June 9th, 2013.

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unbelievable | 8 years ago | Reply

This pipeline will also reset our foreign policy with regional economic cooperation at its core. It is time we gave up “ideology” in favour of pure economic gains. . Rubbish - the pipeline is the the classic definition of "ideology". You made the decision without weighing the overall economic gains/losses - even made the decision without knowing the cost or how to pay for it. Using the IP as an example of makings economic decisions is ludicrous.

Ali Abbasi | 8 years ago | Reply

We cannot afford to go ahead with Iran pipeline at the expense of Saudi or Arab states. Look at it rationally.

Millions of Pakistanis work in Gulf, who end up sending Billions of Reserves to Pakistan which is a big factor in the Foreign Reserves the gov gets. Besides this, aggrevating Saudi means aggrevating the whole Gulf, which includes UAE, Qatar, Kuwait, Bahrain, Oman. All these countries do as what Saudi tells them. They are greatly influenced by them. And not just these countries Europe and USA are also close to Saudi. While getting too close to Iran will get us away from all the above countries. Can we afford this?

We should also remember that Iran is almost a Bank rupt country with hardly any reserves, due to its stubborn and bullish attitude with the west. So if Iran with all the Fuel and Gas is in such a bad economic condition, can Pakistan afford upsetting the west and Arab?

Having said this it will be upon Nawaz Sharif how well he strikes a Diplomatic mission to keep all the mentioned international players happy. I'm counting highly on his Diplomatic skills, cause Bill Clinton said him a "Diplomatic Wizard" (quoted by Reuters)

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