Iran
renews support for Pakistan
pipeline By Syed Fazl-e-Haider
KARACHI - Iranian President Mahmud
Ahmadinejad has vowed to complete the
Iran-Pakistan (IP) gas pipeline project by 2014
despite United States opposition. Ahmadinejad, who
attended the summit of the Developing-8 (D-8)
countries held in Islamabad last week, told a
press conference in Islamabad that Iran was
extending financial assistance to Pakistan to help
towards completion of the project.
He
pledged a US$500 million loan to Islamabad for
laying the portion of the pipeline inside
Pakistani territory, which is estimated to cost
$1.5 billion. Tehran has however sought assurance
from Islamabad that it will not back out under US
pressure and that it
will complete the project on time.
Last
week, the Iranian president attended the eighth
summit of D-8 countries - Pakistan, Turkey,
Malaysia, Iran, Bangladesh, Indonesia, Nigeria and
Egypt - which aims at enhancing trade and
cooperation between the member states.
Ahmadinejad downplayed the financial
constraints and US pressure on Islamabad to scrap
the IP deal, and vowed to complete the pipeline
project within the scheduled timeframe. The
pipeline is projected to start supplying 750
million cubic feet of gas per day (MMCFD) starting
from December 2014.
"America cannot affect
this project ... God willing, this project will be
completed soon and gas will reach Pakistan," AFP
reported Ahmadinejad as saying at a press
conference in Islamabad. "The portion of pipeline
on [the] Iranian side is about to be completed
swiftly, while on [the] Pakistan side the work
will be completed soon."
Pakistan has so
far failed to arrange the fund required to lay the
pipeline, either from any country or international
donor agency, due to international sanctions
imposed on Iran. Iran has agreed to provide $500
million for the project, with $250 million
provided by Iran on a government-to-government
basis and the remaining $250 million to be
arranged by Iranian commercial banks.
"We
have assured the Iranian president that the funds
will be utilized for construction of the gas
pipeline in Pakistan and it will be completed in
time," The Express Tribune reported official
sources as saying. "Now all issues have been
settled to move ahead on the project."
Pakistan plans to arrange the remaining
amount of the IP project through collection of a
gas infrastructure development cess, or tax,
levied on domestic gas consumers. Pakistani
authorities are confident of collecting 30 billion
rupees (US$312 million) of cess from gas consumers
in the current fiscal year, which ends next June.
Germany-based firm ILF has completed the
engineering design of the pipeline in Pakistani
territory.
Islamabad and Tehran have also
decided to lay the pipeline using Pakistani and
Iranian gas companies because foreign companies
have lost interest in any Iranian project amid
sanctions pressure from the US, which has warned
foreign firms of possible sanctions if they
participate in the project. A Chinese bank backed
off from financing the pipeline project in March
amid pressure from the Washington. If the pipeline
is completed, India and/or China might join at the
project at a later stage.
The IP pipeline
has the potential of being an energy lifeline for
Pakistan, which suffers chronic gas shortages that
affected industry and daily life. The government
has warned that the country's whole energy system
faces collapse, as the gap between demand (at 6
billion cubic feet) and supply (3.8 bcf) now
amounts to 2.2 bcf.
The IP pipeline
project would help generate around 5,000 megawatts
of electricity, almost equivalent to the present
peak power shortage.
The US embassy and US
aid agency USAID have sought to convince the
Pakistani authorities to shelve the pipeline
project, offering financial and technical
assistance to materialize a plan to import
liquefied natural gas (LNG) from Qatar and
construction of the Bhasha dam to help address the
country's energy woes.
Pakistan and Qatar
in February signed a Memorandum of Understanding
for importing to Pakistan 3.5 million tons per
annum of LNG. Qatar has authorized US energy giant
ConocoPhillips, which has a stake in the North
Field (aka North Dome) gas project along the
Qatar-Iran border, to finalize the LNG plan. The
US company and Pakistan's state-run gas
distributor Sui Southern Gas Co (SSGC) are
reportedly close to signing an agreement.
"ConocoPhillips has submitted a draft of
the MoU to SSGC, which is being reviewed by the
gas utility," The Express Tribune reported, citing
unnamed official source. Senior Pakistani
officials "have held several meetings with the
representatives of ConocoPhillips in Dubai and
England, aimed at clinching a deal. The company
has refused to export LNG through middlemen and
wants to strike a direct deal with a state-run
enterprise like SSGC."
The Asian
Development Bank (ADB) has refused to finance the
$13 billion Bhasha dam project in the country's
north, but the US has pledged to play a role in
generating funds for the dam's construction by
becoming part of a consortium, led by the ADB.
Washington has committed to provide $200 million
for the project. Last month, the US reaffirmed
at a meeting between US embassy officials and
Federal Water and Power Minister Ahmed Mukhtar in
Islamabad its pledge to help construct the dam.
The three-member US team led by US Counselor for
Economic Assistance and Development Richard
Albright also suggested that Mukhtar securitize
assets of different dams, including Tarbela and
Mangla, in order to seek funds from international
donors for Bhasha dam.
The World Bank has
asked Pakistan to seek a no-objection certificate
from India for the construction of dam in Gilgit
Baltistan region, which is the part of the larger
Jammu and Kashmir dispute between the two
countries, while the ADB has linked its funding
for the dam project with the much-needed reforms
in Pakistan's power sector.
Local
analysts, however, believe that though the US
commitment to financing the Bhasha dam may help
the country to persuade institutions like the
World Bank to become financing partners in the
project, US participation would be linked to
Islamabad backing away from the IP pipeline.
Security is also a key issue facing
construction and running of the pipeline, as it
will cross the restive Balochistan province.
Talibanization is growing in several areas of the
province and security forces might be patronizing
militants, turning Quetta into a haven for
militants, according to a recent report of the
Human Right Commission of Pakistan. It stated that
militants have managed to establish training camps
in the province.
The report says the
government and security agencies have completely
failed to deal with militants, insurgents, and
other criminal elements. NGO workers fear
abduction, and development agencies have abandoned
the troubled area.
Syed
Fazl-e-Haider
(http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author
of many books, including The Economic
Development of Balochistan (2004). He can be
contacted at sfazlehaider05@yahoo.com.
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