New Pakistani mission: Converting pipe dreams into pipelines
Starved of resources for growth and seeking to repair its doddering economy, Pakistan is shaking off the stupor on two key energy projects by taking a strategic approach to revitalizing them. This involves aligning its regional foreign policy around energy diplomacy, especially focused on India, Iran, Afghanistan, and Central Asia.
Three indicators are giveaways. A new draft energy policy has been tabled before the federal cabinet for approval and handover to the incoming new government after next month’s general elections. The policy aims at doubling gas exploration nationally to compensate for dwindling in-country resources and expansion of the gas processing capacity to handle growing imports and distribution.
Secondly, Pakistan’s powerful civil-military apex decision making authority, the Special Investment Facilitation Council (SIFC) that skirts traditional red tape has just green-lighted fast-tracking of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. A delegation just visited Ashgabat, Turkmenistan, to discuss next steps.
Thirdly, Islamabad and Tehran are reopening discussions on bringing the Iran-Pakistan-India (IPI) gas pipeline back on track. Ambassadors expelled by Pakistan and Iran after a startling missile exchange against each other’s territories in January are already back to their posts to resume the more serious business of economic engagement.
Pakistan has been facing an energy crisis for several years, which has had a significant impact on economic growth and development. One official estimate says crippling energy shortages, record prices and mounting circular debt of the energy sector has cost Pakistan nearly four percent of its GDP in three years.
Because its energy mix is dominated by gas – nearly 40 percent, compared to 30 percent oil, 15 percent hydroelectric and 10 percent coal – Pakistan has decided to tackle the largest segment first. Which is where the two long-gestating international gas pipelines come into play.
The $10 billion and 1,800 km TAPI pipeline project was signed among Ashgabat, Islamabad, Kabul and New Delhi in 2010. Construction began in 2015 but unrest in Afghanistan halted it. The project has a capacity of delivering 33 billion cubic meters of Turkmen gas per annum to the other three countries.
The $7.5 billion and 2,800 km IPI project was agreed among Islamabad, New Delhi and Tehran in 1995. It has a capacity of delivering 60 billion cubic meters of Iranian gas to Pakistan and India per annum. Continued global sanctions against Iran have, however, prevented Pakistan from building its portion of the pipeline even though Iran has completed its part. A 10-year clause preventing Iran from suing Pakistan for breach of accord will expire shortly, forcing Islamabad back to the table.
Going back to the negotiation table with new work plans is the easy part for Pakistan. The harder part is repairing testy ties with Kabul even though peace has returned to Afghanistan and it is more ready than ever to allow construction. The trouble is formal non-recognition of the Taliban regime by all countries in the region. How do you enforce sovereign guarantees from a government not recognized?
With New Delhi, Islamabad does not even have full diplomatic ties. These were downgraded by both countries to sub-ambassador level in 2019 after an Indian warplane intruded into Pakistani airspace that was shot down and its pilot captured. Tehran and Islamabad downgraded their diplomatic ties a fortnight ago but restored them within a week after their bizarre missile exchange.
If all goes well, getting the long-stalled gas pipelines started will, potentially within two to three years, help Pakistan sustainably address the growing energy shortfall stunting its economy. Policy-restricted for over a decade on grounds of regional security situation, Islamabad has apparently come round to switching to the economic lens and policy framework to projects that have been already negotiated but which have been hampered by an oversized security centric diplomatic framework that now only offers diminishing dividends.
To convert pipelines on paper to pipelines carrying economy-boosting energy supplies, prioritizing economic diplomacy, while somewhat ambitious, should not be too difficult to deploy for Pakistan.
Even though the past few years of bitter acrimony with neighbors serve as an economic and connectivity spoiler, luckily the upcoming elections in both Pakistan and India offer a timely opportunity for new governments with fresh mandates to give trade-and-economic engagement a chance.
A boosted economic-centered connectivity and regional stability from South Asia to Central Asia will be beneficial for the Gulf too. It should be a win-win for all parties combined.