Faced with the prospect of owing as much as $1.8 billion to Iran, Pakistan, through the Cabinet Committee on Energy, has decided to brave US sanctions and go ahead with the construction of the 80 km of pipeline which would connect Gwadar with the pipeline from Iran’s South Pars gasfield. The foreign legal firm which advised that Pakistan would lose its case in the International Court of Arbitration also advised that the Pakistani entity executing the pipeline construction in Pakistan, the Interstate Gas Systems (Pvt) Ltd, wholly owned by the Pakistan Ministry’s Petroleum Division, would probably have US sanctions imposed it, it had very limited international exposure. In other words, it would not face significantly because of this. While the present caretakers as well as the future government value the US relationship, they seem not to value it enough to take a hit of $1.8 billion.
Besides, Pakistan has had previous experience of entities being placed on US sanctions lists, and didn’t allow that to stop its nuclear programme. At the same time, Pakistan still has bitter memories of the $6 billion awarded to Barrick Gold because of the cancellation of the Reko Diq mining lease. It was only with some difficulty that the matter was settled and Pakistan got out of that penalty. This decision must also be seen in the light of the recent exchange of missiles between Iran and Pakistan. Pakistan and Iran both needed a way to show that normalcy was being restored. This pipeline is not bilateral. The Iran-Pakistan pipeline is supposed to be just one leg in the pipeline linking Iran to India. A Pakistan-India pipeline would open up a whole different dimension in that troubled relationship. However, now that India and Iran are facing difficulties, that might not be a factor. However, there is still China to be considered. There is a Gwadar-China gasline link, which depends on Iranian supply. Then there is the prospect of liquefaction at Gwadar and shipping from there to China.Pakistan’s own needs are presently about 4300 million cubic feet per day. The pipeline is part of an agreement for the supply of 750 miilion. Obviously, the project does not depend on third parties.
In principle, this is a decision that should have been left to the new government, because it was not merely an economic decision, but one involving China, India, the USA as well. However, it is difficult to see how any other decision could be reached.
