Secretary Ministry of Petroleum and Natural Resources Abid Saeed informed the Senate Standing Committee on Petroleum that the Ministry of Foreign Affairs had reviewed the Iran-Pakistan (IP) gas pipeline project and concluded that the Iran P5 plus one nuclear deal does not provide Pakistan with any guarantee that it would not face sanctions from the P5 as soon as gas begins to flow in the proposed pipeline. The permanent five members of the Security Council namely United States, the UK, France, China and Russia plus Germany signed a six-month agreement with Iran on 24th November that envisaged freezing the bulk of Iran’s nuclear programme in return for the lifting of Western sanctions, including trade in energy products; for example gas, that would have allowed a cash-strapped Iran to generate billions of dollars. Two major powerful opponents of the deal – Israel and Saudi Arabia – deeply concerned with what they consider as Iran’s continuing hegemonistic designs within the region, have reportedly exerted considerable pressure on the P5 plus one to revisit the contents of the deal. Cracks have begun to appear in the deal though reports indicate that P5 plus one and Iran have agreed on January 20 as the date to begin implementation of the deal though Baeedinejad, who heads the Iranian delegation of experts, recently stated that “there is agreement in principle on this date, which has yet to be approved by politicians.”

In Pakistan, there has been much debate on whether from a strictly legal standpoint Pakistan is bound by sanctions imposed by the P5 plus one given that the sanctions are not UN approved. The PPP-led coalition government never tired of arguing that Pakistan was not bound by Western sanctions, but did not inaugurate the project till 11th March 2013, less than a week before its term ended leading many to argue that it was a political decision which would be deferred in the event that the PPP won the general elections. The reasons for deferment were patently evident: Pakistan would be negatively impacted severely if the P5 plus one imposed sanctions that would affect external assistance inflows, trade volume as well as non-availability of resources (both in terms of domestic and external) to finance the project.

In the briefing to the cabinet and the media by Federal Finance Minister Ishaq Dar it was revealed that the country is relying on one billion dollars from Eurobond floatation, another one billion dollars from remittance-based bond floatation, one billion dollars from global rupee bond, one billion dollars from shares divestment, and 1.2 billion dollars from auction of spectrum licences (borrowings and sale that are highly unlikely as it is, given the state of the Pakistan and global economy but would be impossible if the P5 plus one imposed sanctions on Pakistan). In addition, the 1.54 billion dollars pending from Coalition Support Fund since October 2012 would be further delayed. In other words, heavier reliance on unlikely sources of borrowing and sale of public sector entities by the PML-N government makes the IP project even more unlikely to be implemented in the context of the present government.

The Petroleum Minister informed the committee that the construction of the import terminal for LNG imports has begun but a tender had not yet been issued for LNG supply. LNG is an expensive fuel source and belies the PML-N government’s energy strategy that seeks to bring the per unit of electricity cost down through using economical sources of energy. Be that as it may, it is pertinent to note that reliance on domestic coal cannot begin for another four to five years and therefore the government is focused on importing coal, a project supported by multilaterals on the grounds that our domestic coal is not environment-friendly; however, the necessary infrastructure to convey the imported coal to power houses is simply not in existence. No studies have been done as to the internal and economic rate of return of focusing on domestic coal and abandoning the project for coal imports or relying on imported coal and laying expensive infrastructure is higher. This needs to be done before decisions approving multi-billion dollar projects are taken.