Rouhani’s visit brings pipeline under spotlight


WEB DESK: The Iranian President Rouhani’s two-day visit to Pakistan was marked by the signing of a number of Memoranda of Understanding (MoUs) in the fields of health, insurance, culture, diplomatic training, research, trade and commerce as well as the decision to open two additional border crossings between the two nations.

The visit has been hailed as a landmark visit for two reasons: it was the first by Rouhani after assuming the office of the President and the first after the US-led sanctions were lifted on Iran after its nuclear deal with G5+1.

Pakistan’s relevance to Iran is two-fold. First, in terms of her geographical contiguity, of particular relevance in terms of trade, given the reduced cost of transport of goods/natural resources, including gas in comparison to making the purchase from other countries. And second, in terms of her concerns with respect to the recently-established Saudi-led military alliance, of which Pakistan is a member, (though the Foreign Office has requested the Saudis to clarify the terms of reference of this coalition) – a coalition perceived by Tehran as anti-Shia and an anti-Iran bloc.

The most obvious gain for Pakistan in terms of the lifting of sanctions would be the start of the implementation of the Iran-Pakistan (IP) gas pipeline project that would go a long way in meeting our seriously deficient energy sector. The IP gas pipeline is scheduled for completion in three years, once work on it begins, as stated by the Minister for Petroleum and Natural Resources, Shahid Khaqan Abbasi, on the floor of the House on 25th February 2014: “in the absence of international sanctions the project can be completed within three years.”

While a 15-year agreement to import LNG has been signed with Qatar, yet given our energy deficit the two projects would absorb domestic demand. What is of additional significance to Pakistan’s industrial and commercial sectors as well as households, was Rouhani’s offer to increase sale of electricity from the existing 100MW to 1000MW which, he added, could then be raised to 3000MW. And in a business meeting that he co-chaired with Prime Minister Nawaz Sharif, the Iranian President went so far as to state that Iran could take the responsibility for “the provision of Pakistan’s energy security.” Rouhani stated that Iran was also interested to have connectivity between Gwadar and Chahbahar seaports through roads and shipping lines which would doubtless be a win-win situation for both the countries. These offers are extremely tempting and one would hope that the government would deal with all mitigating factors in the implementation of these offers.

The Iranian and Pakistani leadership also agreed to enhance trade to 5 billion dollars by 2021 and this is an objective that forms an integral component of our recently announced Trade Policy 2015-18. The short-term strategy, Commerce Minister Khurram Dastgir recently noted, would target three markets (Iran, China and Afghanistan) and focus on four products (horticulture, meat and products, jewellery and basmati rice). While it is not clear whether Iran will be willing to buy these products, yet it is relevant to note that during the recent high-level visit, Iran did agree to end non-tariff barriers to trade as well as to begin discussions on a Free Trade Agreement (FTA) by June this year and finalise the draft by end 2017. The FTA framework will deal with subjects such as trade in goods, trade facilitation, rules of origin and dispute settlement. It also envisages establishing modalities for tariff reductions on 80 percent of tariff lines.

Be that as it may, it is commonly known that the United States government had severely objected to the implementation of the IP pipeline when sanctions were in place. However, it is equally well known that the Saudi government, with which Pakistan has traditionally had very close ties, remains opposed to not only the deal struck with Iran by world powers but also to the IP project. In this context, Rouhani stated that the ball is now in Pakistan’s court. In short, it would be remiss not to acknowledge that impediments to the realisation of the MoUs signed remain and Pakistan has to deal with them in its national interest.

Source: Business Recorder