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By Tom Wright
Source: The Wall Street Journal
March 16, 2010
ISLAMABAD—Iran and Pakistan signed a deal in Turkey on Tuesday paving the way for construction to start on a much-delayed natural-gas pipeline connecting the two nations in a move that has been opposed by Washington as undermining sanctions efforts against Tehran.
Pakistan has argued the pipeline, which will connect Iran’s South Pars gas field with Pakistan’s Baluchistan and Sindh provinces, is crucial to averting a growing energy crisis that is already causing severe electricity shortages.
“It’s in our legitimate economic interests,” said Abdul Basit, a foreign ministry spokesman. Construction on the pipeline should begin this year and be operational by 2014, he said.
Iran and Pakistan signed an initial pact in June last year and reached agreement on pricing in September. Under the terms of the final deal signed Tuesday, Iran will supply 750 million cubic feet a day of gas to Pakistan for 25 years.
The pipeline has been on the drawing board since the mid-1990s, when Iran and India signed a deal to transport gas through Pakistan. Dubbed the “Peace Pipeline” because of hopes it would lead to a détente between rivals India and Pakistan, the $7 billion, 2,700-kilometer pipeline project was stalled as the two nations almost went to war in 2001.
India dropped out last year amid continued security concerns in Pakistan’s Baluchistan province, home to a militant Islamist separatist movement, and over disagreements between the parties on pricing.
The scaled-down project could still face further delays. Militants blew up another gas pipeline in Baluchistan in August, highlighting the difficulties Pakistan’s government faces in operating in the poor but resource-rich province. Some details of the Iran-Pakistan pipeline also remain unclear, including how much it will cost and how the countries will finance the project given U.S. opposition.
The U.S. held out the promise of a civilian nuclear agreement with India, enacted in 2008, as a carrot to stop India from pursuing the pipeline, said Moeed Yusuf, a South Asia adviser to the United States Institute of Peace, a Washington-based think tank.
The U.S. Congress is unwilling to offer a similar deal to Pakistan, a nuclear power which is battling a domestic al Qaeda-linked Islamist insurgency, U.S. and Pakistani officials say. Washington had hoped to push another delayed pipeline linking Turkmenistan, Afghanistan, Pakistan and India as an alternative. But fighting in Afghanistan has kept that project on hold.
“Clearly the Americans are not happy about it. They don’t want Iran getting this opening. But at this point they’re not in a position to offer anything that will stop Pakistan,” Mr. Yusuf said.
The U.S. imposes sanctions on any entity that invests more than $20 million per year in Iran’s energy sector.
Pakistan relies on natural gas for about half of its energy needs, but domestic supplies are declining, forcing the country to import more. Poor infrastructure, including limited ability to handle liquefied natural gas imports make pipelined gas more attractive.
With gas shortages, the country’s total power generating capacity is currently about 4,000 megawatts short of demand, causing rolling electricity blackouts and hurting businesses.
The Asian Development Bank is working with Pakistan on a report, set for release in June, on how to restructure Pakistan’s energy sector to improve efficiency and stop common problems such as power theft.
Write to Tom Wright at tom.wright@wsj.com