Pakistan Reader# 568, 8 March 2023
On 7 March, The Express Tribune quoting officials reported that another litigation threat worth USD 18 billion looms over Pakistan as it could not initiate construction of the Iran-Pakistan gas pipeline in its territory. The inter-governmental framework inked in 2009 has witnessed periodical agreements. In August 2019, a third agreement was signed between Iran and Pakistan in Turkey which mandated the pipeline project to be completed by 2024 and Pakistan to buy 750MMCFD (million cubic feet per day) of Iranian gas produced from the Farzad gas field.
According to Pakistan Today-Profit, a national daily in Pakistan, the agreement also mentioned the possibility of filing the case and claims to be filed by Iran in a French international litigation court if Pakistan failed to fulfil its commitment. On 3 March, a National Assembly Standing Committee on Foreign Affairs also reminded the government to expedite the pipeline project. Recently, the Foreign Minister of Pakistan, Bilawal Bhutto Zardari was invited to Iran by the President of Iran. The joint statement mentioned strengthening close ties between Iran and Pakistan in the order of geography, culture and people-to-people linkages. Yet, the gas pipeline project remains a pipedream wish.
Three factors explain the why Iran-Pakistan pipeline project may remain shelved for a long time.
1. Weak foreign policy with Iran
Pakistan has been unable to get waivers like other countries in its trade with Iran and even Russia. Pakistan has a sizable population and it is a net importer of energy. Countries, like Saudi Arabia, India and even Turkiye have managed to take a stand on their foreign policy objective which was in contravention of the US legislations like Countering American Adversaries Through Sanctions Act (CAATSA). However, Pakistan has a robust informal trade relationship with Iran. The latest visit by the foreign minister of Pakistan to Iran also discussed the operationalisation of barter trade and border sustenance marketplaces. The bilateral relationship between Iran and Pakistan is cloaked even though both share a physical border indicating that either the long-term foreign policy goals of Pakistan with Iran have not yet tanked or the priorities with Iran remain secondary.
2. Lack of Iran focus in Pakistan’s energy diplomacy
The conversion of natural gas to liquified natural gas is a patented technology not accessible to developing economies. That nudges the preference for pipeline projects in landlocked and developing economies. Recently, Pakistan restarted negotiations with Russia on Pakistan Stream Gas Pipeline Project. The USD 2.5 billion project is speculated to ensure affordable gas infrastructure in Pakistan. Pakistan is also a stakeholder in Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas project. One can observe that such gas projects can become successful if the gas transits from Pakistan to further South Asian economies. The transit nature of Pakistan’s geography makes it a default partner in any energy drain project in the post-colonial states of Asia. Pakistan's government is not running out of options rather it is constrained in financing and sustaining the projects at a pace expected by partners.
3. Pakistan's limited success vis-a-vis international litigations
According to Hasnaat Malik, a generous approach by authorities at maximum risk to keep investments flowing has proven to be counterproductive. Litigation rewards in the RekoDiq dispute, independent power producers, Hyderabad fund case have all gone against Pakistan’s interests. The litigation case of the Iran-Pakistan (IP) gas pipeline may as well cause some damage to the financial planning of the government in the coming years. One can not help but notice the self-inflicting tendencies of the state institutions in Pakistan and wonder how weak the implementation process has lived its day. The IP gas pipeline may not be the last litigation Pakistan will face but it will be the first one in the current emerging bipolar world.