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The Iran-Pakistan Pipeline: Pressler 2.0?

Sushant Sareen is Consultant, Pakistan Project, at the Institute for Defence Studies and Analyses, New Delhi.
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  • March 12, 2013

    Almost as though he is thumbing his nose at the United States, Pakistan’s President Asif Zardari has ignored all warnings about crippling US and UN sanctions being imposed on his country and jointly inaugurated the Iran-Pakistan gas pipeline project with his Iranian counterpart Mahmoud Ahmedinejad. While many analysts even in Pakistan are deeply sceptical about the project, speculation is rife over what Asif Zardari is playing at. Is this an act of ‘strategic defiance’, economic desperation, political gamesmanship on the eve of elections, or simply some old-fashioned diplomatic brinkmanship to gain more economic assistance from the United States and its European and Middle-Eastern allies? Given Zardari’s style of operation, he could well be trying to kill all these birds with one stone.

    Just as likely is the possibility that Pakistan might once again be making a miscalculation for which it will pay a very heavy price, as it has done in the past by ignoring US red lines. Pakistanis often accuse the Americans of perfidy and quote the arms embargo after the 1965 war, the US failure to intervene on Pakistan’s side in 1971, and the nuclear sanctions imposed under the Pressler Amendment in the 1990s to complain that they have been ‘the most sanctioned ally’ of the United States. These instances have been played up inside Pakistan to a point where anti-Americanism has almost become part of the belief system and suspicion and distrust of the United States is deeply embedded in the Pakistani psyche.

    Of course, very conveniently the Pakistanis ignore the fact that they never lived up to their side of the bargain in each of these instances. The US arms supply to Pakistan pre-1965 was under the express condition that these weapons would not be used against India. Having violated that condition, Pakistan was really in no position to complain against the embargo that was subsequently imposed. In 1971, the United States did intervene on Pakistan's behalf – remember the threat of the 7th Fleet to India? In fact, short of intervening militarily, the United States tried to help Pakistan. Only it was such a hopeless situation both diplomatically and militarily, that the Americans were in no position to do anything more than ensuring that West Pakistan remained intact.

    The Pressler Amendment was passed in the US Congress with the full knowledge and agreement of the Pakistanis who never tired of assuring the Americans (wrongly as it turns out) that they had no nuclear weapon. Once the Pakistanis crossed the nuclear threshold (and declared they had done so – AQ Khan interview in 1987) it was only a matter of time before the Pressler sanctions would kick in. Clearly, the US president was no longer in a position to continue certifying that Pakistan did not possess a nuclear weapon. True, the United States chose the timing of the imposition of the sanctions keeping in mind its own interests and let the axe fall after the Afghan war against Soviet occupation had come to an end. But isn’t that entirely understandable?

    Once again, the Pakistanis have decided to cock a snook at the United States on the issue of the IP pipeline, knowing full well that the project could lead to severe economic sanctions. The Americans have been consistently warning the Pakistanis against the project. And yet, if the Pakistanis go ahead with it, then surely they are doing it keeping in mind the consequences that could follow. Part of the problem, of course, is that the Pakistanis tend to blithely ignore the US red lines, and when the consequences of their actions manifest themselves they resort to cries of betrayal. This is precisely what is happening on the IP pipeline.

    The way the Pakistanis assess the situation is that the United States is unlikely to take any precipitate action immediately, at least not until the end of 2014, by when the troop withdrawal from Afghanistan will be complete and US requirement for ground lines of communications through Pakistan will reduce substantially. This gives Pakistan a two year window of opportunity to make the IP pipeline operational. In these two years, a lot could happen that might validate the decision to go ahead with the pipeline project. For instance, the international community might strike a deal over Iran’s nuclear programme and lift the sanctions. Or else, the international situation could develop in a way that the sanctions become meaningless because other countries (for example, China and Russia) start violating them – there are some plans to extend the IP pipeline to China. The Pakistanis would also be banking upon the possibility that in order to dissuade them from going ahead with the deal, the Americans might start coughing up more money and also lean upon their allies in the Middle-East (the Saudis and Qataris, for instance) and Europe to do the same. The ultimate sweetener for Pakistan will of course be the prospect of a civilian nuclear deal, something that they will grab readily to junk the IP pipeline.

    Clearly, the Pakistanis are playing a high-stakes gamble, one in which they think the odds are stacked in their favour in a way that while they stand to gain a lot, even if things don’t quite work in the way they imagine, they won’t end up losing too much. As things stand, the Pakistanis are hardly investing any of their own money to build the pipeline. This is so because they just don’t have the money to spend. Knowing the keenness of the Iranians to bust the sanctions, the Pakistanis are playing along and letting the Iranians fund the pipeline. So it is Iranian money at stake and the risk is therefore also Iran’s. And if, in the meantime, the Americans and their allies open their purses for Pakistan to wean it away from Iran, Pakistan comes out the winner.

    But as is often the case, the Pakistani capacity for miscalculation is enormous. A civilian nuclear deal makes no economic sense for Pakistan because it just doesn’t have the money to fund such a programme to a level where it takes care of Pakistan's energy needs. Equally, the gas that will flow in the IP pipeline will also be unaffordable. Pakistan intends to use the Iranian gas for electricity generation. Currently, Pakistan uses its own domestic gas which it buys at around US $3.5 per MMBTU. The Iranian gas will however be available for only around $13 per MMBTU. This means that the power generated from this gas will be very expensive and perhaps unaffordable. What is more, Pakistan will have to generate the foreign exchange to pay for this gas, which, given the state of the economy, seems very iffy. In short, the IP pipeline is certainly not a panacea for Pakistan's energy problems.

    Aside the possibility that the United States might not wait until the end of 2014 to impose sanctions on Pakistan – partly because Iran’s nuclear programme poses a far more potent and strategic threat than a Taliban resurgence and the need for a successful reconciliation in Afghanistan, and partly because the Pakistan GLOCs are being used very sparingly and it is actually the Northern Distribution Network that is being used intensively to take equipment out of Afghanistan – there are other serious problems that Pakistan will have to contend with if it goes ahead with the IP pipeline project and which make the project unlikely.

    One reason why Asif Zardari has been pushing for closer ties with Iran is because of the Shia factor – Zardari is supposed to be a Shia and has been more or less shunned by the Saudis who refused to open their purse strings for his government; he in turn is also believed to be keen not to be overly dependent on the Saudis. If after the general elections Nawaz Sharif comes to power, this equation will no longer be relevant. Nawaz Sharif is likely to go with the Saudis and if this means junking the IP pipeline, then so be it. Any such realignment could lead to an Iranian backlash, and Pakistan could well become the battleground for the Arab versus Ajam conflict or, if you will, Shia versus Sunni proxy war. On the other hand, this sectarian conflict could be fuelled even if the pipeline project is not cancelled, only this time by the Saudis and their Wahabi brethren. There is also the issue of the Baloch insurgency that threatens the pipeline. With Balochistan becoming a battleground both for sectarian warfare as well as for Baloch separatism, the pipeline could become a tempting target for the saboteurs and insurgents.

    Finally, there is a domestic political angle to the pipeline. In a sense, Asif Zardari has bowled a very difficult googly by going ahead with the project, confronting the next government with a fait accompli. If the next government goes ahead with the project, it will have to face the ire of the United States and Saudi Arabia; if it junks the project, it will be seen to be kowtowing to the US diktat. And of course, the sectarian and proxy war that could result in either case will also have to be factored in by the next government. As far as Asif Zardari is concerned, he will politically milk the project going to the hustings and present himself as the defiant and visionary leader who, against all odds, initiated a project that was in Pakistan’s supreme national interest. Whether this will be enough to win him the votes he needs to retain power is another matter.

    With the die having been cast, it now remains to be seen how the United States reacts to this ‘provocation’. If things don’t work out the way Pakistan calculates, then it will have to face stiff sanctions that its economy, which is already on the ropes, cannot sustain. Pakistan will surely cry foul and scream and shout but the fact remains that like Pressler 1.0, Pakistan knows that it will have to contend with Pressler 2.0, which, like any upgrade, is far more robust than the previous version.

    Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India

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