One of Pakistans closest friends, the USA, has now officially offered friendly advice to not go overboard with the Iran-Pakistan (IP) gas pipeline project. In other words, the US wish list now seems to have extended to donts, in addition to the long list of dos that keep coming every now and then.
The fact that Richard Holbrooke, Americas Special Representative for Afghanistan and Pakistan, had to change his stance within 24 hours of saying that the US has
o concerns over the IP deal is worth mentioning, but least surprising. It was always on the cards and was just a matter of when and not if.
Almost overnight, Americas stance shifted from "Pakistan is an independent state and it is Pakistans own decision on the project" to "We cautioned the Pakistanis to try to see what the (congressional) legislation is, before deciding how to proceed because it would be a disaster if... we had a situation develop where an agreement was reached, which then triggered something under the law".
This must have caused panic amongst Pakistans energy managers.
The proposed pipeline, of which 800 km is supposed to be laid in Pakistan, requires capital investment of approximately $1.5 billion. To generate a huge amount of nearly Rs120 billion in four years, is not a walk in the park for any government.
"Potentially there are two options to finance the capital cost; one is to follow the IPP model of financing, which is done by many countries in the world," an energy official, who prefers to be unnamed, told BR Research. "The other option is that both SSGCL and SNGPL can jointly construct the pipeline" he added.
But then, the balance sheets of both these companies are weak and fragile, which would not make it any easier for the banks to lend huge sums of money.
It should be understood that the new set of sanctions, whenever imposed, will not directly imply a freeze on the IP gas deal, or any legal binding on Pakistan under international law.
The US sanctions is seen being planned in a way to make conditions tough for potential investors. "The new set of sanctions would restrict big lenders to finance the deal, which would increase the risk profile of any potential investor", the expert said. As a natural consequence, the project may fast move towards abandonment, which is what the US wants in order to isolate Iran in the region.
If and when that happens, an energy-starved Pakistan could find itself in hot waters; the solution, however, can be found by looking towards the east.
No matter how many times, the US says that it sympathizes with Pakistans current state of energy problems, real help could only come from the dear old friend China.
The big brother of the east has already expressed its interest in investing $2 billion; now, it is time for the government to act and actively involve China in the gas project. Rest assured, the Chinese would not be pushed hard by the Americans in this case.
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