Problems in the Pipeline

Iranians work on a section of the Iran–Pakistan pipeline after the project was launched during a ceremony with presidents of Iran and Pakistan on March 11, 2013. (ATTA KENARE/AFP/Getty Images) Iranians work on a section of the Iran–Pakistan pipeline after the project was launched during a ceremony with presidents of Iran and Pakistan on March 11, 2013. (ATTA KENARE/AFP/Getty Images)

Iranians work on a section of the Iran–Pakistan pipeline after the project was launched during a ceremony with presidents of Iran and Pakistan on March 11, 2013. (ATTA KENARE/AFP/Getty Images)

In Pakistan’s feverish election season, politicians in the country are promising an array of solutions to an excruciating crisis: its acute energy shortage. There seems to be a broad national consensus that importing Iranian natural gas via a 1700-mile pipeline could go a long way to lessening the pain of the power shortage. The United States, however, is firmly against this project, which Washington regards as a breach of the sanctions imposed on Tehran. Both Islamabad and Washington are seemingly determined to stick to their guns, creating another headache for the already-turbulent American–Pakistani relations. The Iranians, too, are still quietly unsure about Islamabad’s commitment to the multi-billion dollar deal.

What Iran can do for Pakistan

Travel to any region in Pakistan and you will experience the energy shortage first hand. In urban areas, electricity is often unavailable for eighteen hours a day; in rural regions, the daily blackouts can last as long as twenty-two hours. While the Pakistani government states that the power shortages cost the economy an estimated 2% of its GDP per year, independent estimates place the figure higher, around 4–5%. Businesses are taking the unprecedented step of placing full-page announcements in daily newspapers warning about more dire consequences to come if the crisis is not corrected. Those who can afford it have backup generators to lessen the impact of the disruptions, but they constitute a tiny minority of the country’s 180 million residents. The power calamity has, unsurprisingly, become one of the hot political issues as Pakistanis prepare to cast their votes in the parliamentary elections on May 11.

Despite the fact that the energy crisis has been brewing for years, President Asif Ali Zardari and the ruling Pakistan’s People’s Party are widely blamed by the public for having let the power crisis worsen during the five years he has been in power. There is little doubt that Zardari is looking for ways to prevent the power crisis from further tarnishing his political his legacy—he reaches the end of his presidency in September. Many skeptical Pakistanis have therefore viewed the president’s recent actions on the power crisis as more grandstanding than any real heavy lifting on the part of the president.

In early March, Zardari went to Iran to launch the much-delayed USD 7.5 billion Iran–Pakistan pipeline together with Iranian president Mahmoud Ahmadinejad. Zardari’s critics back home said the highly publicized ceremony was a political stunt that served both presidents but would not do anything to ameliorate the immediate power crisis in Pakistan. The pipeline still needs to be built—and the project has been in the planning stages since 1994, so there is little reason to believe it could be developed quickly enough.

Such voices say that Zardari was merely chasing a public relations win by closing a major strategic deal. In Pakistan, politicians are often measured against the number of big-ticket economic projects they launch: many in the country still fondly remember the big projects that were completed during the rule of General Pervez Musharraf, from motorways to dams.

In the case of Iran, Ahmadinejad wanted to use the occasion as a high-profile opportunity to demonstrate that American attempts to isolate Tehran will not work. As with Zardari’s motives, many feel that the Iranians are driven less by the economics of the pipeline and more by its timely symbolism, as Iran continues to wrangle with the US.

The American factor

Critics have every right to be skeptical: this project has, after all, had many ups and downs. It is also very true that the gas deal would hardly be a quick fix for Pakistan. While the Iranians have finished the construction on their side of the border, there is another 488 miles of pipeline still to be laid by the Pakistanis. At best—and if Iran’s promised USD 500 million loan to Pakistan materializes—gas could potentially flow from end of 2014.

Still, plenty of officials and academics in Islamabad are convinced that time is ripe to move ahead with the Iran gas pipeline and that this will not be another abortive launch. They point to hard facts: at the moment, Pakistan needs some 15,000 megawatts of electricity daily but generates only around 10,000–11,000 megawatts. The Iran gas pipeline could feed electricity power plants, which in turn would generate an additional 4,000 megawatts per day. In other words, the Iranian gas is more than just a stopgap.

Even further, the Pakistani supporters of the pipeline do not stop there. They argue that the Iran–Pakistan pipeline could become the catalyst for the larger flow of Iranian natural gas from its giant South Pars gas field on the Gulf—not just to Pakistan, but to the rest of the subcontinent as well. After all, the pipeline was originally called the “Peace Pipeline” and was meant to transfer Iranian gas to Pakistan and then onwards to India and perhaps other destinations in East Asia.

Although India has held varying attitudes to the pipeline, largely due to US pressure but also over price and security concerns, Tehran maintains that India is still interested and can rejoin the project if it wants. Tehran has always eyed the Indian energy market as the big prize, and would be delighted to see an Indian U-turn on this matter. For its part, Islamabad recognizes that transit fees from gas flowing through its territory to India would be a nice addition to the Pakistani state’s often-empty coffers.

For now, however, it is only Iran and Pakistan that are committed to the pipeline. Even if the two countries can overcome this project’s checkered past, they will still have to overcome another fundamental obstacle: vigorous American opposition to the plan. In fact, the US has already suggested it would resort to sanctions against Pakistan if Islamabad goes ahead with the deal. From Washington’s point of view, building a pipeline with Iran would represent sanction busting, and the oil would become a revenue source for Iran at a time when the US wants to squeeze Tehran in an attempt to change its nuclear policy.

Washington is also making the argument that the pipeline is not economically attractive, arguing instead that Pakistan is better off to look to the gas producers of Central Asia—Turkmenistan in particular—and transport its needed gas south through Afghan territory. The Pakistanis are largely dismissive of such suggestions, stating that Afghan instability makes such projects unfeasible at this time.

Instead, Pakistani officials point out that the US is victimizing them in its fight against the Iranian regime. The hope in Pakistan is that Washington will eventually accept that Islamabad needs to look to Iran for energy supplies and give it a sanction waiver. The US has already taken this step with some of Iran’s key trading partners, such as Turkey, China and India. Alternatively, the Pakistani side wants the US to provide far more attractive alternatives to the Iran gas pipeline. What they have in mind specifically is US nuclear technology for electricity generation—in other words, a package similar to what the United States offered India in 2005.

Skeptical future

Meanwhile, it is exactly this kind of Pakistani openness to US counter-offers that has left the Iranians perennially skeptical about the dependability of Pakistan. There appears to be a subtle consensus among observers in Tehran that if given the right package by Washington, Islamabad will once again put the Iran–Pakistan pipeline on the backburner. Tehran is under no illusion that the US is Pakistan’s key strategic ally, regardless of the turbulence in the relationship.

For now, however, the two departing presidents—Ahmadinejad, who leaves office in August, and Zardari, who leaves office in September—have been happy to simply use the occasion for some political theatre. This pipeline was under discussion long before they came to power, and could remain on the drawing board for years to come.

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