Opinion Pipedream?
Dr Farrukh Saleem
Sunday, March 10, 2013
Capital suggestion
The good news is that the cost of the Pak-Iran gas pipeline has come down from $1.5 billion to $1.3 billion. The bad news is that neither Iran nor Pakistan has $1.3 billion. The good news is that President Zardari will be inaugurating the pipeline on Monday. The bad news is that a pipedream is being inaugurated, not a pipeline.
There are two major prerequisites to building the pipeline: money and technology. There are two sources that have the money: Chinese banks and western financial institutions. There are two sources that have the required technology: Gazprom, the Moscow-based gas giant and western pipeline entities. On March 14, 2012, the Beijing-based Industrial and Commercial Bank of China Ltd (ICBC) backed out of a deal to finance the Pak-Iran gas pipeline. On May 14, 2012, Gazprom, the largest extractor of natural gas in the world, pulled out of the Pak-Iran pipeline project.
No money, no technology. All politics. Lately, the Americans seem to be ditching our president and our president is out with a double-edged sword: annoy the Americans and when the project actually fails the next rulers in Islamabad can be conveniently held responsible for the failure.
The Iranians are completely isolated and are therefore playing along pretending that they are still interacting with other countries of the world. On February 6, 2012, Iran defaulted on payments for wheat imports from Ukraine. On February 7, 2012, Iran defaulted on payments worth $144 million for rice shipments from India. Conclusion: Iran has no hard currency left in its reserves.
The good news is that Iran is desperate to deal with Pakistan. The bad news is that South Pars gas fields reserves are yet to be ratified by a third party. The good news is that Sui Northern and Sui Southern are charging us around $3.50 per unit of gas.
The bad news is that Iranian gas price is pegged to the price of crude and at the current level Pakistani consumers would have to cough out around $13 per unit of Iranian gas. More recently, Pakistan has asked Iran to revise the price of gas downwards from 78 percent of crude to 70 percent of crude (Iran has refused to renegotiate the price downwards).
On December22, 2011, the National Bank of Pakistan (NBP), responsible for raising the rupee component of the project, informed the Economic Coordination Committees (ECC) Steering Committee on Iran-Pakistan (IP) Pipeline that it had branches in different countries of the world and therefore it feared that these branches could be closed due to US sanctions. Subsequently, the NBP pulled out of the project.
In December 2011, the Oil and Gas Development Company Limited (OGDCL) already cash constrained due to the circular debt, said that its US investors had threatened to retreat if the company financed the IP gas pipeline project. Subsequently, OGDCL pulled out of the project.
The other good news is that our second-largest source of grant assistance is Saudi Arabia (America is the largest). The other bad news is that al-Mamlakah al-Arabiyyah as-Suudiyyah does not want Pakistan to trade with Iran.
Our pipedream fantasy; End tragedy solve the riddle; And dissipate ideals of indecision pipe; Pipedreams like these will; Cease and die unleashed.
The writer is a columnist based in Islamabad. Email:
farrukh15@hotmail.com. Twitter: @
Saleemfarrukh
