Pak-Iran pipeline: Sanctions and Pressure
The American officials are holding vigorous negotiations with the Pakistani leadership convincing the latter to backtrack from the Pakistan-Iran gas pipeline project. As an alternate, they have offered to sell Liquefied Natural Gas, or LNG, at a discounted rate to Pakistan. While such economic altruism from the United States is welcoming, any decision to this effect will have major legal, economic, and political consequences for Pakistan. Therefore, before taking a decision on the American offer, it is essential that Pakistan critically examines the repercussions of backpedalling from its commitments under the Iran gas pipeline project.
The shortage of energy, and particularly the shortage of gas, is playing havoc with Pakistan’s economy. Industrial establishments across the country are operating substantially below capacity, resulting in loss of production and elimination of jobs. The shortage is such that even domestic customers or consumers are receiving reduced supply and are directly affected. In such a situation, it was a positive development when in May 2009 Pakistan and Iran entered into an agreement to build a gas pipeline. This pipeline was set to alleviate, albeit only partially, the energy concerns of Pakistan. However, in June 2010, the Security Council of the United Nations passed Resolution No 1929. This resolution prohibits states from having any financial dealings with Iran, which may result in the proliferation of its nuclear programme.
In addition, the US Congress has passed the 2012 National Defence Authorisation Act, which aims to curtail the financial dealings of various countries with Iran. As a result, Pakistan is under considerable pressure, particularly from the United States, to abandon the Iran gas pipeline project. In turn, the US has expressed its willingness to facilitate the sale of gas to Pakistan at somewhat modest rates. This is not surprising, since America has significant gas reserves, which with rising natural gas prices have become economically viable to produce.
This offer is surely enticing not only to the Pakistani government, but also to its people. It is quite refreshing that the United States, after an extensive hiatus, is talking about economic cooperation with Pakistan. This is a positive development, even if the underlying motive, according to certain quarters, is to financially undermine Iran. The Americans entering into such discussions with Pakistan is a sign that the former may, perhaps, be thinking of a long-term strategic partnership with the latter - one that is not limited to the war on terror, but is based on a desire to ameliorate the economic situation of Pakistan and promote trade between the two countries. The Americans are also set to benefit significantly, if Pakistan accepts the offer.
In addition to the financial benefits to the American companies, this gesture will be a huge diplomatic success. It will be a signal to the masses that the United States is there to assist Pakistan in overcoming its energy crises: An issue that touches every single household. The average man, who is unable to cook his dinner meal due to lack of gas, will surely be grateful to the United States. And so will be the labour, as well as the industrialist, who continue to suffer due to the shortage of gas.
On the other hand, entering into such a partnership with the United States has adverse consequences for Pakistan. If such an agreement is reached on the condition that the Pak-Iran gas pipeline project will be scrapped, it will not only be a violation of Pakistan’s international law obligations, but will also incur huge financial losses in the form of damages and restitution to Iran.
Additionally, and more importantly, Pakistan will significantly damage its relationship with Iran; a risk Pakistan ought not to take. While the United States may come and go depending on its interests in the region, Iran is here to stay and it is in Pakistan’s interest to have a long-term and reliable strategic partnership with it. It, therefore, goes without saying that Pakistan is in the midst of quite a conundrum.
The two options, however, are by no means mutually exclusive. Pakistan must go ahead with building the pipeline that in any event, cannot be completed until 2015, and consequently, there will be no violation of the UN Security Council’s resolution until then.
In the meanwhile, Pakistan must aggressively engage with the United States for finalisation of the terms under which American companies would be willing to sell gas. Pakistan must ensure that it is able to secure the most favourable deal. That is, not only should it insist on gas at a lower than market rate, but it must also seek a broader programme of economic cooperation, wherein the Americans commit to investment in other areas.
Unfortunately, details of consultations between the two countries are shrouded in mystery. It appears that like all major decisions of Pakistan, this crucial economic package is also negotiated behind the scenes by individuals who are not necessarily trusted by the people. The initial reaction among Pakistanis to the reports of such consultations was that the Americans are once again imposing a financially adverse package on us, and stopping us from reaping the benefits of cheap Iranian gas. It would be premature to comment on whether the option presented by the Americans is economically beneficial to Pakistan or otherwise. What is certain, however, is that the Americans do not owe us a duty to sell cheap gas, nor are they obliged to share details of the economic discussions. It is for the Pakistani officials to apprise the nation about the details of the consultations.
Needless to emphasise that any agreement with the United States must be thoroughly studied, not only by those sitting in the upper echelons of power, but also by skilled professionals, including economists, petroleum policy experts, international law experts, businessmen etc. There should be a widespread opinion-seeking exercise, which is transparent and involves a diverse range of professionals before entering into a long-term agreement with the United States.
The ongoing gas crisis has provided an incredible opportunity for Pakistan to enter into a long-term commercial relationship with the US. This occasion must not be wasted. However, cooperation with it does not have to come at the expense of a strained relationship with Iran. Pakistan must go ahead with building the gas pipeline, while simultaneously engaging with the United States on reaching an agreement to solve its energy crisis. There are ways in which Pakistan may enter into financial transactions with Iran, while not violating its international law obligations, for example, by arriving at an agreement wherein the proceeds of the gas sale are not utilised for nuclear proliferation by Iran. Such an arrangement can be monitored by an independent body, to the satisfaction of the United States and the United Nations, so as to ensure strict compliance.
Pakistan will have to utilise all possible means to solve its energy crisis, and this includes engaging with all countries on the economic front, including both Iran and the United States. Ultimately, it must be remembered that for Pakistan it is a purely commercial and economic matter, and the powers that be ought to ensure that our strategic decisions reflect our development goals, and not necessarily our friend’s strategic interests.
Source: The Nation