Fine, Sanctions, or Waiver: Iranian Gas Will Come at a Price for Pakistan

When Iranian President Ebrahim Raisi visits Pakistan this week (April 22, 2024), experts say the two issues topmost on his mind that he will want to discuss with his Pakistani counterpart, President Asif Ali Zardari, will be border security and the Iran-Pakistan gas pipeline.

“This visit comes at the most troubling time for the region,” said Senator Mushaid Hussain Sayed, chairman of the Islamabad-based Pakistan-China Institute, pointing to the war in Gaza and the resurgence of terrorism from Afghanistan, which borders both Pakistan and Iran.

Added tension comes after retaliatory strikes by Israel and Iran. A suspected Israeli strike on an Iranian consulate in Syria at the beginning of the month was followed by a retaliatory attack by Iran on Israel on April 13. US officials say Israel responded, despite a plea by UN Secretary-General António Guterres for restraint.

The gas pipeline will be an uneasy conversation to hold for Zardari, but with the lives and livelihoods of over 240 million Pakistanis tied to this fuel, finding a solution is of paramount importance for the rulers.

Pakistan needs gas more for residential, commercial, and industrial purposes now than for power generation, said energy expert Vaqar Zakaria, heading the Islamabad-based Hagler Bailley Pakistan, the environment consultancy company.

“Domestic consumers will be the immediate beneficiaries from the Iranian gas supply,” agreed leading sustainable development practitioner Abid Suleri, heading the Islamabad-based Sustainable Development Policy Institute. He also said the country’s economy will flourish manifold if the industry receives a steady supply of this gas.

Zakaria had been part of the negotiations some 25 years ago, in the 1990s, when conversation on importing gas from Iran through an Iran-Pakistan gas pipeline first started due to the fact that “our gas reserves were fast depleting because we were using up this finite resource as if there was no tomorrow. People would leave the stove on for hours instead of turning off the gas,” Zakaria said, blaming the lackadaisical attitude of the people and the visionless government policy of selling it at “dirt cheap rates to keep the voters happy.”

There was a third partner, India, which decided to exit in 2009, “citing pricing and security issues, and after signing a civilian nuclear deal with the United States in 2008,” Zakaria recalled.

“Iran has huge energy reserves such as crude oil and natural gas and is ready to meet the needs of friendly and neighboring countries,” said Hassan Nourain, the consul general of Iran in Karachi, in an interview to IPS. In 2021, it was estimated that Iran had close to 1,203 trillion cubic feet of natural gas, the second largest after Russia.

Pakistan and Iran continued negotiating, and on May 24, 2009, the project was signed by the Pakistani president, Asif Ali Zardari, and the Iranian president, Mahmoud Ahmadinejad, for the supply of gas ranging from 750 million ft3/d to around 1 billion ft3/d, for 25 years, from the South Pars gas field in Iran and delivered at the Pakistan-Iran border, near Gwadar.

The project, having a pipeline length of 1,150-km within Iran and 781-km within Pakistan, was to be constructed by each country in their respective territories. Iran completed its side of pipeline construction by 2012 and was ready to transport gas to Pakistan by 2015, the Nourain said. Pakistan did not start until 2013.

A year later, in 2014, Pakistan’s petroleum minister, Shahid Khaqan Abbasi, told the Iranian government that due to sanctions on Iran, banks and contractors were unwilling to go ahead with the project on Pakistan’s side.

Ten years later, Pakistan is toying with the idea of building the pipeline again and in February of this year, Pakistan’s caretaker government approved the construction of the first 80-kilometer stretch from the Iranian border to Gwadar in Balochistan.

Donald Lu, US Assistant Secretary of State for South and Central Asia, immediately censured Pakistan for its plans to import gas from Iran, as it would expose Pakistan to US sanctions.

“If a neighbor is giving us gas at competitive rates, then it is our right [to buy it],” Pakistan’s Defense Minister Khawaja Muhammad Asif told the media earlier this month.

“The threat of these unilateral sanctions imposed on Iran by the US is illegal,” said Nourain. “In 2006, the United Nations Security Council demanded Iran halt its uranium enrichment programme and imposed certain sanctions but after monitoring it, in 2016, most sanctions were lifted for at least ten years.”

But, pointed out Arif Anwar, an international development practitioner: “The US is entitled to do what it wants with USAID and or any banks, businesses and insurance companies that operate in the US. The sanctions on Iran and on countries trading with it have been around for decades and may even have some UN legitimacy cover.”

Moreover, warned Anwar, given that Pakistan needs support from the International Monetary Fund, which would also require US support, “Pakistan needs to tread a careful path.”

“Pakistan needs gas,” said Lahore-based lawyer Ahmad Rafay Alam, terming the US warning “an unfair US policy.”

“The pipeline is pivotal for Pakistan’s energy independence,” pointed out Sayed. “It cuts costs as it is 40 percent less than imported LNG (liquefied natural gas),” he said.

“The US no longer has the moral authority to impose sanctions on either Iran or Pakistan if both countries exercise their sovereignty and agree to buy and sell anything to one another, not after its support of the Gaza genocide,” Alam said, echoing the sentiments of a vast majority of the South Asian nation of over 240 million that remain staunch supporters of Palestine.

This is an IPS UN Bureau Report and has been reproduced with permission