President Asif Ali Zardari will leave for Iran on Tuesday (today) to sign the Pakistan-Iran Gas Pipeline Project (PIGPP) agreement.
According to media reports, Zardari will proceed to Tehran to sign the agreement despite mounting pressure from the United States against the deal with Iran.
Under the agreement, Iran will extend a loan of $500 million to Pakistan for laying the pipeline within its boundaries. Availability of investors for the project has also emerged as a major issue due to fear of economic restrictions by the US. Iran will also build an oil refinery in Gwadar. The installation will refine 400,000 barrels of oil every day.
The Foreign Office (FO) spokesman, during his weekly press briefing on Thursday, had brushed aside US pressure, saying the PIGPP was very critical to Pakistan. The country is facing energy crisis at present and taking forward the PIGPP is in national interest, he added. The US State Department said on Saturday that Pakistan had better options than the PIGPP to meet its energy needs.
Last week, the Iranian oil minister visited Islamabad and announced that his country would start supplying gas to Pakistan from December 2014.
Sources said Zardari’s visit to Iran would play a crucial role in determining Iran’s role in meeting Pakistan’s energy needs. Petroleum Minister Dr Asim Hussain said the president would ink the gas pipeline project on February 27. In addition, he will also hold talks on importing Liquefied Petroleum Gas (LPG) from Iran and on building the oil refinery in Gwadar.
Iran has hinted at providing 10,000 tonnes of LPG daily to Pakistan, with the promise to increase the supply in future.
The agreement is being signed at a time when the US is reiterating its reservations and could possibly show stern reaction on the deal. India has already pulled out of the project under US pressure. It seems as if assistance from Iran could partly offer a solution to the energy problem.
While the existing energy crisis is a perpetual source of embarrassment for Pakistan, the options suggestions by the US are time consuming and expensive. The US insists Pakistan to import gas from Turkmenistan and Qatar instead of Iran. It is extending cooperation to Pakistan in hydropower projects, but that would take several years to generate power.
Dr Ashfaq Hassan, economic advisor to the previous government, says the energy crisis is leaving a negative impact on the GDP growth rate of the country which remains on the lower side by 3 to 4 percent.
Analysts say the lack of growth in GDP rate has led to increased unemployment and poverty. Investment in the country has come to a standstill, and the industries have either been closed down or are operating below their capacity. Riots and demonstrations have become a common phenomenon due to the prevailing energy crisis in the country.
Gas shortfall has touched two billion cubic feet a day, and the country will be able to secure 750 million to one billion cubic feet gas daily from Iran under this project. The gas will be utilised for power generation, ranging between 4,000 to 5,000 megawatt daily. By the time the project completes, the supply-demand gap might have been widened.
Dr Ashfaq says the energy crisis is so deep that Pakistan should meet its requirements no matter where it gets energy from. The PIGPP is a viable project at present, he added. When asked if Pakistan would be able to bear US pressure, he said Pakistan would have to fight its case effectively.
As per international media reports, the US said that if Pakistan made headway in importing gas from Iran, it could face economic embargoes.
Analyst Dr Jaffer Ahmad says this is a complex issue and Pakistan’s track record is not ideal in taking courageous, timely and correct decisions in national interest. But this is an opportunity for which Pakistan should tailor its policy to serve its interests.
He was of the view that Pakistan had not played its cards well so far, while others had capitalised on the situation. He said a prudent and visionary leadership was needed to take such decisions, and “we cannot estimate if such leadership is available in the country or not”.
The analysts opined that under the prevailing situation of the region, China would not allow US to take any extreme step. If the US demonstrates lack of prudence then it will have to pay a heavy price for it.