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    South Asia
     May 27, 2009
Pakistan, Iran sign gas pipeline deal
By Syed Fazl-e-Haider

QUETTA, Pakistan - Officials from Pakistan on Sunday finally signed a gas pipeline accord with Iran, without India's participation, after 14 years of on-off negotiations over what was initially framed as the Iran-Pakistan-India (IPI) gas pipeline project.
Under the gas sale purchase agreement signed between the Iranian National Oil Company and Interstate Gas System of Pakistan, Iran will provide 750 million cubic feet of gas per day to Pakistan for the next 25 years. Officials in Islamabad termed the deal a major breakthrough and an achievement that would greatly help Pakistan meet its energy needs.

The two countries will sign the formal agreement for the multi-billion dollar gas pipeline project, to be completed in five years, in

 

a third country within the next 15 days.

The project, when initially mooted in 1994, was intended to carry gas from Iran to Pakistan and on to India. New Delhi withdrew from the talks last year over repeated disputes on prices, transit fees and security issues. China has shown interest in joining the strategic gas pipeline project and last year said it would import about 1 billion cubic feet a day from Pakistan if India opted out.

Pakistan has faced severe criticism from the US over any kind of economic deal with Iran. The change of stance from the Pakistani government and the pace of developments at the project suggest that the strong US opposition has softened, Dawn newspaper reported, citing official sources.

The former George W Bush administration in Washington strongly resisted the IPI and had exerted considerable pressure on both India and Pakistan to abandon the project. The Bush White House instead supported purchase by South Asian nations of energy from the Central Asian republics contiguous to Afghanistan. Geopolitical considerations and continuing security issues in Afghanistan work against that from materializing. The present US administration of President Barack Obama has not yet given its views on the IPI project.

Some analysts in Pakistan had suggested the government in Islamabad should shelve the multibillion-dollar IPI project and instead invest in domestic resources such as coal, wind and water to meet energy requirements.

Beijing has been pressuring Tehran for China's participation in the pipeline project and Islamabad, while willing to sign a bilateral agreement with Iran, has also welcomed China's participation. According to an estimate, such a pipeline would result in Pakistan getting $200 million to $500 million annually in transit fees alone.

China and Pakistan are already working on a proposal for laying a trans-Himalayan pipeline to carry Middle Eastern crude oil to western China. Pakistan provides China the shortest possible route to import oil from the Gulf countries. Even so, passage over the Himalayas would be an expensive and challenging engineering feat, and once the oil reached China it would have to be shipped thousands of kilometers further east to coastal areas, where most energy demand is centered.

The pipeline, which would run from the southern Pakistan port of Gwadar and follow the Karakoram highway, would be partly financed by Beijing. The Chinese are also building a refinery at Gwadar. Imports using the pipeline would allow Beijing to reduce the portion of its oil shipped through the narrow and unsafe Strait of Malacca, which at present carries up to 80% of its oil imports. Islamabad also plans to extend a railway track to China to connect it to Gwadar.

The port is also considered the likely terminus of proposed multibillion-dollar gas pipelines reaching from the South Pars fields in Iran or from Qatar, and from the Daulatabad fields in Turkmenistan for export to world markets.

While India maintains that only issues over the IPI pipeline project are pricing and its commercial viability, Pakistan accuses India of adopting delaying tactics in signing a gas sales purchase agreement involving Iran, Pakistan and India. Iran has also got tired of waiting for New Delhi to come to terms on the proposed IPI project and last year it warned that China was eager to step in on the deal in India's place.

Syed Fazl-e-Haider (sfazlehaider05@yahoo.com) is a Quetta-based development analyst in Pakistan. He is the author of six books, including The Economic Development of Balochistan (2004).

(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)


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