In a move widely expected, the US has cautioned Pakistan that because of sanctions on Iran, Pakistan should be careful of committing to the Iran-Pakistan Gas Pipeline. However, it is important to note the context of this caution that needs to be exercised.
Whenever sanctions are placed by a nation or by the UN Security Council against a certain country, they are specific to a certain sector. They can be diplomatic sanctions; economic sanctions like typically a ban on trade, possibly limited to certain sectors such as armaments, or with certain exceptions (such as food and medicine); Military sanctions or Sports Sanctions. What the US is planning to do is to impose economic and military sanctions which are going to include the energy sector of Iran. What Richard Holbrooke has suggested that “Pakistanis not to over-commit themselves until we know the legislation (in the US Congress)”.
Now this is a catch-22 situation for our country. On one hand we have a crippling energy requirement which will only grow with time and Iranian gas will be a part of the strategy to overcome our energy shortfall while on the other hand the agreement to build the Iran-Pakistan Gas Pipeline has taken more than a decade and half to be finalized. It is also important to note that the more difficult part for Pakistan would begin now which would include the Financial Close i.e. seeking finances from international financial institutions and banks and then the tendering of such a huge project. On the administration side, Pakistan will have to commit resources by creating a new division in the Ministry of Petroleum and Natural Resources while being a huge project, Ministry of Finance and State Bank’s support will also be required. The cost of not having this project is potentially huge as we do not have substantial projects in pipeline that can aid our energy requirements.
Without doubt if I was heading the Pakistan government, I must be seeking a way out. The impact of this caution needs to be analyzed thoroughly and strategies made to overcome them. I feel that there are many fronts that we have to open. Some of them are:
- First and foremost, lobby aggressively with the US State Department, US Congress and other Think Tanks in the US that the Iran-Pakistan Gas Pipeline Project must be given an exemption. How that will be done is by giving assurances as well as demanding this as a right for being the foremost partner in the war on terror. One must also aggressively counter any Indian influence which may hamper the project due to sanctions
- Discuss with legal experts both in Pakistan, EU and US that if Pakistan commits to the project, how can the sanctions be bypassed. A way forward can be creating Special Purpose Vehicles that are specific to the project and have no cascading effects on the state of Pakistan. EU will be important as companies from Eurozone will be interested in building the pipeline.
- Aggressively play up to the international investors into luring them into the project. Considering the huge size of the project and potentially high economic gains, economics of the project should overcome the politics of the project
- Start a media campaign by getting the public on board for this project
- Tell the US that by giving exceptions to the project, it will be promoting its own soft image with Pakistanis who consider US to be the cause of most evils.
These are some suggestions that we have for the government. It will also be the test of our Foreign Office, Ambassador in US and overall government machinery to get a favorable exception in these potentially daunting circumstances.
US cautions Pakistan on Iran pipeline
ISLAMABAD, June 20: Pakistan should be wary of committing to an IranPakistan natural gas pipeline because anticipated US sanctions on Iran could hit Pakistani companies, the US special representative to the region said on Sunday.
Richard Holbrooke told reporters that new legislation, which targets Iran’s energy sector, is being drafted in the US Congress and that Pakistan should “wait and see”.
“Pakistan has an obvious, major energy problem and we are sympathetic to that, but in regards to a specific project, legislation is being prepared that may apply to the project,” he said, referring to the pipeline.
“We caution the Pakistanis not to over-commit themselves until we know the legislation.” Pakistan is plagued by chronic electricity shortages that have led to mass demonstrations and battered the PPP-led government.
US Senator Joseph Lieberman said last week he expected Congress to finish shortly the legislation tightening US sanctions on Iran that would include provisions affecting the supply of refined petroleum products to Tehran, and add to sanctions on its financial sector.
Lieberman, an independent, is a member of a House Senate committee of negotiators working on final details of the bill and said it could pass by July 4.
The $7.6 billion natural gas pipeline deal, signed in March, doesn’t directly deal with refined petroleum products and was hailed in both Iran and Pakistan as highly beneficial.
The US has so far been muted in its criticism of the deal, balancing its need to support Pakistan, a vital ally in the global war against Al Qaeda, with its desire to isolate Iran.
But the legislation could be comprehensive enough to have major implications for Pakistani companies, Holbrooke said. “We caution Pakistan to wait and see what the legislation is.” This was Holbrooke’s tenth trip to Pakistan since President Barack Obama appointed him special representative to the region. His visit followed a series of working group meetings this week that are part of the USPakistan strategic dialogue, which both countries say will lay the groundwork for a new relationship.
Afghanistan was on the agenda in meetings with the Pakistani leadership, Holbrooke said, including talks on a Pakistani role in talks between the Afghan Taliban and the Kabul government.
Regardless of what happened in Afghanistan, he said, the United States would remain engaged with Pakistan.
“Pakistan matters in and of itself. Whatever happens in Afghanistan, the US cannot turn away from Pakistan again,” he said.
“We are not going to repeat the mistakes that occurred — at least not on our watch — in the last 20 years.”—Reuters