The Pakistan-Iran pipedream
Due to external pressures, Pakistan may well abandon the pipeline project altogether.
For a government often accused of indecision and weakness, Islamabad has been strikingly defiant about its determination to pursue a natural gas pipeline deal with Iran.
Pakistan’s strident tone has not changed in light of Washington’s heightened sanctions regime vis-à-vis Iran, which bans countries from having commercial transactions with Tehran. The foreign ministry has declared that the sanctions do not affect the pipeline project. Other Pakistanis, however, fear that the sanctions may well present problems. One prominent lawyer has suggested Islamabad go so far as to lobby the UN to ensure the pipeline project stays alive.
Underlying Pakistan’s hearty embrace of the pipeline is the perception that the deal will ease the country’s crippling energy crisis. In reality, the pipeline is no silver bullet for energy insecurity – and it may well not even be consummated.
To be sure, in a country with a daily gas shortfall of one billion units per day, the pipeline would provide desperately needed supply. As I wrote last year, the project is expected to furnish 750 million cubic feet of natural gas to Pakistan daily, with power generation capacity projected at 5,000 megawatts – roughly equivalent to Pakistan’s entire energy shortfall. Additionally, despite what Washington may think, there are no better pipeline alternatives. The US constantly pushes for the TAPI pipeline, a project that has gathered steam lately with Turkey’s decision to come on board and recent India-Pakistan negotiations on the scheme. Still, given the security situation in Afghanistan, it is hard to imagine the pipeline not getting blown up by insurgents somewhere along its envisioned route.
That all said, one must pose a critical question: whose energy security would be enhanced by those added 750 million cubic feet? Not the masses of impoverished Pakistanis – and half the entire country - who rely on traditional, non-commercial fuels such as biomass and firewood. All the talk you hear about Pakistan’s need for natural gas? It’s all tied to the commercial sector; it’s in this sphere where natural gas constitutes 50 percent of the total energy mix. In essence, the energy woes of millions will not be affected – much less alleviated – by an increase in natural gas supply.
And then there is the issue of demand management. Suppose that natural gas suddenly courses into Pakistan. While the expectation is that this would instantaneously light up homes, fire up factory machinery, and boost a flagging economy, the reality is very different. Unless this new infusion of supply is managed properly, it would simply be squandered, wasted, and stolen – just as precious supply often is today. One can make the same argument about water - if the western rivers of the Indus Basin were to triple in size, sending water cascading into the parched nation, benefits would not materialize so long as it was siphoned off by wealthy landowners; lost to leaky canals; and wasted in irrigation. This is a basic reality: without good resource governance, supply boosts will yield few dividends. So far, Pakistan’s chief efforts at improving energy governance have consisted of scoff-inducing measures such as bans on neon billboards and an end to all-night wedding parties.
Keep in mind the geopolitical context as well. Due to external pressures, Pakistan may well abandon the pipeline project altogether. Washington has intimated that it may offer Pakistan cheap gas in an effort to wean Islamabad off the pipeline. While this may seem a silly strategy, don’t forget the media reports from last September revealing that Washington was making headway in getting Pakistan to scupper the deal. Yes, Pakistan-US ties have grown tenser since then, yet one sobering takeaway from the troubled relationship is that Washington typically gets what it wants.
Pakistan may also succumb to pressure from Riyadh – Iran’s chief regional rival, and not only a close ally of Pakistan, but also a chief exporter of oil to Pakistan. One cannot rule out the possibility of Washington leaning on the House of Saud to pressure Pakistan to distance itself from the Iran pipeline.
Make no mistake; Pakistan is in fervent need of energy, and ample amounts will need to come from abroad. Yet it may behoove Islamabad to look elsewhere – such as India, where momentum is building for enhanced energy cooperation. A deal was reached last fall to export a modest quantum of Indian electricity over the border, while just days ago the two sides agreed to establish a Joint Working Group on Petroleum to explore energy trade.
For all the heady talk about the Pakistan-Iran pipeline, Pakistan has yet to begin construction of its 700-kilometer portion. It has made much more progress laying the groundwork for energy activities with India. It’s high time that this latter opportunity be seized.
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A very biased and one-sided analysis.
The pipeline from Iran is the best option and the most critical to alleviate Pakistan’s energy crisis. It is such a no-brainer, one is amazed how one can argue against it. Most of the piepline all the way upto the border is already built and the rest is shovel ready. Recommend
Iran pipeline is not the silver bullet for our energy needs for sure. We should not limit our options to Iran alone and work with regional players, including China and India. We must work closely with these governments to decrease our technology gap, to help attract investment in the energy sector. We must build dams, work on coal conversion and improve our natural gas supply security (imports) simultaneously. More importantly, accountability around projects already commissioned should be our focus to reduce impact of corruption, may it be policy making or implementation of energy policy! Recommend
Michael is this once again a State-Dept-Assigned-Let-me-explain-America’s-intentions article? Once again a patronising tone telling Pakistan what to do, as if we can’t weigh our own facts.Recommend
I don’t believe anyone ever said the IP pipeline is a “silver bullet”. It is needed alongside a host of other energy sources (Thar Coal, hydel, nuclear, green, lng, biomass) to meet the growing demand. Natural gas will also help due to the increased pressure Musharraf’s gas policies put on the economy. Pakistan switched its industries and vehicles over to gas without taking into account domestic availability. This will go a long way in covering the demand which includes the rural and urban poor. Seems to me Kugalman is knocking over his own goalposts in order to continue ranting. The present government has made strides in relations with Iran in the fields of energy, economy, security, and geo-politics. It’s one of their few fp “wins”.Recommend
Both india and pakistan need all the energy they can get and both the options of IPI and TAPI pipeline must be explored.
The IPI pipeline definitely seems better, but the irrational behaviour of the iranians in seeking conflict with the west and israel, and trying to develop nukes is definitely worrying, and is preventing the development of these projects.Recommend
While the author is right in laying weight to leverage the Saudis might exercise in pressuring Pakistan to give up the project but he ignores the alternative available to Pakistan in the form of purchasing oil from Iran (@ favorable payment terms). Additionally the Saudis would not want to appear as western proxies at the cost of sabotaging relationships with the Islamic world.
Also not sure if “Lobbying the UN” is right phrase here since Pakistan would aim to challenge the sanctions on legal grounds. On a second thought it may be valid given UN is actually US. Recommend
I like the proposal about strengthening energy trade with India, but the article was mostly unconvincing.
Pakistan would practically have to be USA’s vassal to abandon the 700-km PI pipeline, in favour of the 1700-km TAPI pipeline. The former is much cheaper, and more reliable than a pipeline involving four countries, including the war-zones of Afghanistan.
The point about Pakistan not being able to manage the resources properly is too general, and can apply to any kind of energy trade whether it involves Iran, India or Turkey! There’s nothing to suggest that only the gas from Iran will be managed poorly while that from other countries won’t be.
Ultimately, Pakistan cannot be blackmailed into restricting its development by the geopolitical atmosphere. Americans may be disappointed to know that we’re putting our own country’s interest ahead of theirs, but sometimes that’s how it needs to be.Recommend
None of the comments have anything logical which actually disproves what the Author has said.
India and China are still buying Iranian Oil, but it is important to note how they paying for it. They are paying with their own currency. With the World’s 2nd largest and 4th largest(PPP) Economies, you can take their currencies knowing fully well they can used at any point in time. But, why will Iran take Pakistani Rupees?
Plus, any financial institution dealing with Iran will automatically come under US and EU sanctions. No financial institution inside or outside Pakistan would be foolish enough to act as a conduit for payments. Even Iran is not naive enough to give Pakistan Oil for promise of later payments. That means no Oil, nor gas for Pakistan.
If Countries like India and China are facing difficulty in paying Iran, imagine how difficult it must be for Pakistan.
US and EU constitute more than half of World’s GDP, well more than half infact. If they sanction someone, it means the World has sanctioned them.
Pakistan will know its effects probably after 2014.Recommend
The very first sentence smacks of arrogance, something the Americans just do not seem to handle well.
Stephen P. Cohen writing on this ET web site in his ‘Future of Pakistan’ article clearly says that this pipeline is a good idea for Pakistan and he could not understand the U.S’s opposition to it. Recommend
Washington has intimated that it may offer Pakistan cheap gas in an effort to wean Islamabad off the pipeline.
Seriously Michael, everyone knows how America’s so called promises to Pakistan eventually turn out.Recommend
Wow, article so blatantly biased and sugar coated that it insults the Pakistani readers intelligence.
Here’s what your not telling us: US just wants to use Pakistan to transport energy to India inorder to help India face up to China. We are getting cheaper energy from Iran, something bankrupt US in no way can help us with atleast not in the long run and knowing how US treats Pakistan, US will only help us in the short term with our energy issues, once the pipeline is constructed it will start blackmailing us (through its proxy Turkmenistan) and only make us more dependent on India, US Turkmenistan to keep our gas flow intact.
You guys are the ones who have a problem with Iran not us, so once again Michael please stop telling us what to do. Why cant your op-ed instead focus on telling your own American leadership what to do.Recommend
@Anoop
Such bravado only masks the insecurity Indians feel about themselves. Its not us who need to worry about 2014 its you guys and your American allies. Your chamcha Karzai with whom you signed the strategic agreement is fast on his way out and Americans have been battered senseless in Afghanistan, with the entire NATO scrambling to run out of there even before 2014 and this entire analysis is not a Pakistan fantasy but NATO’s own assessment of how bad things are there in the recent leaked report.
You think Taliban are fans of yours who will happily swat flies while a pipeline transports oil to you. You guys will be at the mercy of Pakistan to talk sense to Taliban if you want ANYTHING done there.
and oh as for Iran, I think this is just bravado from the west to mask their emasculated confidence for the Afghan debacle which should die soon. Yes indian companies are facing difficulties in paying Iran, but they have clearly said they dont plan to look for oil alternatives or cut down on their imports from iran and that itself should tell you everything!Recommend
@Parvez
Author is affiliated with the neocon establishment favourite think tank Woodrow Wilson Institute what do you expect? The very guy Woodrow Wilson is regarded as the founding father of neoconservatism in US, and since then the Americans have been obsessed with controlling and shaping the world on their own terms.Recommend
India is itself an energy importer, how can it help Pakistan? India had just offered 1,000 MW of electricity which is not enough to power Pakistan, and that also India is itself has an energy shortage with black outs occurring daily in the country. Iran on the other hand is near and is an energy exporter and has already offered to provide Pakistan with 10,000 MW of electricity and the IP gas pipeline that has a maximum capacity of 1 billion cubic feet per day in addition to an oil pipeline supplying oil to Pakistan. Iran alone can supply the entire energy shortfall of Pakistan not India or US for that matter which are energy importing countries. US offer to supply gas to Pakistan would cost two times more than that of gas from Iran and is not economical or even can be considered a secured supply due to bumpy Pakistan and US relations. The author is well advised to try dissuade Switzerland and EU to build gas pipelines to Iran which despite sanctions are on going projects and have been exempted from all sanctions. If EU and Switzerland can buy gas from Iran and China, India and Japan can continue to buy oil from Iran why can’t Pakistan buy gas, oil and electricity from Iran? Recommend
@YeaRight:
My friend, search for hidden meanings in any statement – and the glee with which you await potential issues to a pipeline that does not even exist today is frankly rather pathetic. We do not disagree – Pakistan certainly stands to benefit from the Iran pipeline, and it would have been better for India as well – except that the pipeline, while contributing to the energy security, will add to the ‘security’ insecurity given its passage through hostile territory. At the same time, the TAPI pipeline is fraught with far more uncertainty, and I think India is viewing this from a foreign policy rather than energy security angle – this is also supported by your own statement that we intend to continue oil imports from Iran of which 45% has been agreed to be paid in INR now that the currency has begun to recover.Recommend
It’s the best option for Pakistan, and the main reason the US is against this option is because it does not want Pakistan to develop and grow into a great power, the US want’s Pakistan to be dependent on their aid, thus controlling Pakistan. If for some insane reason this deal does not finalize, then the only reason could be the Pakistani government succumbed to US pressure. Recommend
@BlackJack
Actually you too need to read the hidden meaning in my statement that was aimed at an Indian commenter as usual butting in to predict doom and gloom for Pakistan in post 2014 scenario, which btw seems to be the national sport of Indian commentors. Let me just spare such tired cliche efforts by saying that Pakistan is in the worst possible condition it has ever been in, infact the last 10 years have been absolutely disastrous for Pakistan ever since it got tangled in a partnership with the US. It cant get any worse for us, so it can only get better. So post 2014 we are pretty confident that once the US gets out and we cut our peace deal with the Talibs, things should calm down in Pak too.
As so the rest of your argument I completely agree, economically it makes more sense to get our energy from Iran vis the other dumb option that ties together 4 unpredictable countries. Recommend
@YeaRight:
“You guys will be at the mercy of Pakistan to talk sense to Taliban if you want ANYTHING done there.”
Look at the past 20 years! Pakistan has been unstable, violent and just not growing economically. You brag of Pakistani influence in Afghanistan, but what about the Afghan influence in Pakistan? What about the gun and drug culture? The events in Afghanistan have had minimum impact in India, why? Because Pakistan gracefully acts as the buffer.
You seem to misunderstand. Either way Pakistan loses. If Taliban reign supreme in Afghanistan, Pakistan will be blamed by the West and isolated. Maybe even sanctions will be imposed, if not, at least trade embargoes.
If by any chance Taliban are kept at bay, Pakistani Military will increase its meddling in Afghanistan, thereby destabilizing the whole region, making enemies of the anti-Taliban neighbours such as Iran, and inviting West’s wrath. Oh, and in any scenario, Pakistan will push the Afghans into India’s loving embrace.
Forget 2014 Pakistan cant get loans from multilateral institution today!
http://tribune.com.pk/story/259926/no-time-and-respect-world-bank-imf-chiefs-refuse-to-meet-pakistani-delegation/
http://www.indianexpress.com/news/imf-wb-not-to-release-11-bn-loan-to-pak/778272/0
Pakistan mainly exports to the West. Imagine a trade embargo on Pakistan. It will wipe out local industry. Countries like India, Bangladesh are waiting to take Pakistan’s place, but there are no options for Pakistan.
Pakistan can get out of all this mess, but that would warrant Pakistan sincerely going after the Taliban. Pakistan will never do that. Pakistan’s fate is written.
When the Gods decide to punish someone, they first make them mad.Recommend
Thanks for the responses as always.
@Khan: I disagree that most of the pipeline “up to the border” is already built; my sense is that none of it is built, and that Pakistan rejected Iran’s offer to help build Pakistan’s portion.
@Err: I don’t take orders from the State Department. I’ve also written elsewhere that Washington is misguided for pressuring Pakistan to abandon it.
My bottom line: I never say that the pipeline is a bad idea; I just say it’s unrealistic. In an ideal world, yes, it would serve as one of many sources of energy for Pakistan. I just don’t see this happening. Especially as it’s nowhere near being completed.Recommend
Micheal
You say
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That all said, one must pose a critical question: whose energy security would be enhanced by those added 750 million cubic feet? Not the masses of impoverished Pakistanis – and half the entire country – who rely on traditional, non-commercial fuels such as biomass and firewood. All the talk you hear about Pakistan’s need for natural gas? It’s all tied to the commercial sector; it’s in this sphere where natural gas constitutes 50 percent of the total energy mix. In essence, the energy woes of millions will not be affected – much less alleviated – by an increase in natural gas supply.
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Yes it will be, as if business gets it energy the rest can be used to help non commercial customers. You then go on to say
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And then there is the issue of demand management. Suppose that natural gas suddenly courses into Pakistan. While the expectation is that this would instantaneously light up homes, fire up factory machinery, and boost a flagging economy, the reality is very different. Unless this new infusion of supply is managed properly, it would simply be squandered, wasted, and stolen – just as precious supply often is today.
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Regardless of where the energy comes from the issue of management will still be there, so, whether it comes from India, Iran or China we are still going to have to deal with this issue, BUT that does not take from the fact that we STILL need the gas. Why should a management issue stop us from buying gas from Iran or anywhere else?
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Pakistan and India both are energy deficient countries and need as much energy as possible from whichever source. Just becasue you got some beef with Iran doesn’t mean we should have to suffer!
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Like any other thinking Pakistani i am absolutely livid at you and your country’s ill advised suggestion. Recommend
@YeaRight:
I think Pakistan needs to do some hard thinking – as it believes (as you apparently do) that all its problems will disappear once the US pack up and leave. This is wishful thinking. You have a large radicalized segment sitting in areas which have never been under the writ of the state – and they have smelt blood. If you haven’t been able to deal with them till now, it is unlikely that after the Americans leave, they will all meekly surrender. I realize that you hope that they will divert their attention to Afghanistan and wreak havoc over there once again; while many of your domesticated mujahideen (Haqqanis et al) can be counted on for this purpose, I do not believe that the Pakistani Taliban is going shut shop and move – they want to create a Taliban state sans borders, espousing a version of Islam that you people refuse to deride, but which will destroy your way of life. What needs to be done is to encourage the reconciliation process and ensure that the Pashtun population gets adequate representation in a democratic Afghanistan – represent the Pashtun cause upfront through rehabilitated Taliban members, instead of hiding these ideological gangsters to be used on a rainy day. This will ensure continued Pakistani influence in the new dispensation, and bring prosperity and peace to the citizens of both countries. Once safe havens for the Pakistani Taliban across the border disappear, they may come to see reason. Unfortunately, every geopolitical equation for you guys is a zero-sum game, and if someone isn’t the loser, you just don’t want to play.Recommend
@author. Good article. However, I would like to differ from your viewpoint on two aspects:
1. Issue of supply to commercial vs. general public. I think based on the risks involved, that makes sense. Putting it short, bottom line of SMEs is really getting affected by energy issues leading to lay-offs. If general public doesn’t get the energy, we will just have sustained energy crisis; on the other hand, if businesses don’t get energy, we won’t even have food on the table to begin with. So, it is better of the two evils.
2. Mismanagement; Agree with you on the magnitude of the issue but that issue applies across the board for everything. That can potentially happen with TAPI as well. So I think while this needs to be addressed in the short-term, this might not matter for comparison purposes.Recommend
@Maryam:
10,000 MW? can you send me a link for that offer?Recommend
Reza Amanat said it all in the video above the deal makes economic sense for Pakistan. Of course the enemies of Pakistan and Iran wouldn’t want the deal to mature. The project is of paramount importance for Pakistan’s economic future and we should go ahead with it without getting bullied by the US. Recommend
Using natural gas as CNG is one the most commercially insensitive decision by Musharaf government.
Likes of JJVl/Iqbal Z Ahmed never let the LPG market develop just for their sheer greed and desire to make money. LPG share contribution in Pakistan energy mix is less than 1% and per capital consumption one the lowest in the world (5-6 Kgs as opposed to more than 50-70kgs in other developing countries like Thailand, Indonesia, India).
We are wasting natural gas by supplying it cheap to domestic user. No where in the world natural gas is used for domestic purposes even in Gulf countries which are rich in energy resources. GCC countries use LPG at home. Natural gas is used for industries like fertilizer, cement, power generation which add more value and benefits to economy. Recommend
NSSM 200
http://en.wikipedia.org/wiki/NationalSecurityStudyMemorandum200Recommend
let IRAN do anything thing for the completion of this project but PAKISTAN is not going to even lay one foot of the pipeline.Recommend
@Ali: Liked the way you said that.Recommend
The problem with American offer is that it is at best valid while it’s in America’s interest.
They do not do favours for anyone other than Israel, history shows you that.Look at the Republican candidates like Gingrich and Sanatorum, they are more right wing than even Netanyahu, Ariel Sharon, or Franco. The less reliant we are on America, the better.
Iran can be relied upon far more than the US.
As for the issues of gas theft, poor management etc – that’s always an issue even if the Americans supply it.
The industries are willing to pay market rates for gas, they just can’t get their hands on it. Iran is willing to sell gas.
It’s that simple.Recommend
@ Erfan,
Here is the link you asked for: http://tribune.com.pk/story/281095/more-than-a-helping-hand-iran-offers-to-provide-10000mw/Recommend
Hi guys. On the point of resource demand management — I of course agree that bad management is a problem with any energy scheme, and not just the Iran pipeline (and of course many countries, including the U.S., manage their natural resources poorly). But my focus in this article was the Pakistan-Iran pipeline, and not TAPI or any other arrangement. Incidentally, I think that TAPI is a dreadful option, as I say in the article. Washington’s pushing for it is rather wrongheaded. Recommend
TAPI- is flawed enough to be a pipe dream. To be prudent, Pakistan may use the current discourse of energy crisis. the truth is, the advantages of the project are in beng a transit country. Just as it would have been had the Afghan transit trade agreement been done timely and to the transit country’s advantage, years ago!There is enough trade off to invest in other sources of energy by the transit revenue. JUst hope thats realised for even the iranian gasfields dont come with an unlimited supply.Recommend
I have never read such an biased, ignorant and propaganda article like this before, really! 50 % of Pakistanis don’t need gas?? They use firewood?? I believe they have natural gas connections in each house hold been in smaller cities and towns. Pakistani’s need energy to ever come crisis, Management is their thing, they have been doing it, and they know how to deal with it better. India needs energy as well. Gas pipe line is beneficial to all three countries, India, Pakistan,and Iran. Pakistan should do it, and shouldnt care about crazy US sanctions in the way of its economic growth. Recommend