Pakistan: Shortage of gas causing US$2 billion losses to economy

Just the other day Shahid Khaqan Abbasi, Pakistan’s Minister for Petroleum & Natural Resources claimed that the country was bearing an annual loss of US$2 billion. His statement, “We are focusing on LNG import, Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects to overcome the energy crisis” looks completely out of place because of funding issues. However, he surprised many by declaring that Iranian gas was cheaper than LNG. Please read and share my latest blog Pakistan: Shortage of gas causing US$2 billion losses to economy visit shkazmipk.com

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Pakistan: Opposite views on negotiations with Taliban

According to media reports the negotiations between the Government of Pakistan (GoP) and notorious banned outfit Therik-e-Taliban (TTP) had commenced. Providing no other details about who was taking part or what would be discussed, Prime Minister Nawaz Sharif said talks have started with the TTP. One can recall that during the election campaign PML-N enjoyed support of TTP, which otherwise attacked election meetings of ANP, MQM and Taliban. Sharif was elected mainly by promising to negotiate with militants who have killed thousands of civilians and security personnel.

Many in Pakistan are frustrated that years of military operations in the tribal areas, where the militants have their safe havens, have failed to end the violence. They see negotiations as a necessary step. However, others strongly believe that stringent actions should be taken against the perpetrators. This clear split in thinking became evident if one looks at the proceedings of the meetings of two religious factions held on the same day but in two different cities.

Before going into details of these two proceedings it is necessary to look at the stance of Pakistan Tehrik-i-Insaf (PTI), headed by Imran Khan, who has threatened to cut off Nato supplies moving through Pakistan if the US launches any drone strikes during the talks. Khan went to the extent of saying that his party had the capability to stop the Nato supplies and warned that his words must not be taken lightly. His party controls the provincial government in Khyber Pakhtunkhwa province in northern Pakistan where one of two routes handles supplies in and out of Afghanistan. Pakistan had suspended Nato supplies in the past.

The Pakistan Ulema Council (PUC) has urged the government to set the agenda of dialogue with Taliban and inform the nation about it. The demand was made at the Istehkam-i-Pakistan Conference held in Multan on Sunday. It was presided over by Hafiz Allama Mohammad Tahir Mehmood Ashrafi, the chairman of the PUC. Various leaders attending the conference demanded that the dialogue process should start without delay and the talks should be initiated through tribal elders and notables.

As against this an ‘Azmat-i-Wilayat’ Conference held in Karachi on the same day under the auspices of Majlis-i-Wahdat-i-Muslimeen (MWM) opposed any dialogue with the Taliban and demanded a Swat-like military operation to eradicate terrorism. A resolution adopted at the conference pointed out that neither the US nor the terrorists could be friends of Pakistan because both of them had been attacking Pakistan and Pakistanis, including civilians and military personnel, and their property and installations. 

It was also stated, “A fixed match is being played between the terrorists and the US to prolong their two-pronged anti-Pakistan terrorism”. MWM Chief Allama Nasir Abbas Jafari stressed the need for forging Sunni-Shia unity. He said the unity of Shias and Sunnis of the subcontinent had created Pakistan and now their unity could save the country.

Allama Sahib said the terrorists are free to move about and no action was being taken against them. "There should be no talks with the Taliban...we will always support the oppressed," Abbas said. He also alleged that PML-N was afraid of confronting the terrorists and of tackling them. Another MWM leader Amin Shahidi said engaging the Taliban in dialogue was unconstitutional.

Is there anything for Pakistan in Nawaz Obama meeting?

Pakistani Prime Minister Nawaz Sharif has already landed in United States, held a meeting with John Kerry, as preamble to Nawz Obama meeting. Prior to the meeting a ‘lollypop’ has been offered to Pakistan in the shape of release of US$1.6 billion assistance with emphasis on resumption, with military assistance amounting to paltry US$300 million.

Many Pakistanis wonder, is this what the country looks forward? The reply is certainly in negative. The super power has to treat Pakistan and India at par be it economic relations, trade with Iran or assigning role in Afghanistan and Indian Ocean. Pakistan should not be made subservient to India.

Earlier, to finalize the agenda of the meeting US special envoy for Pakistan and Afghanistan James Dobbins came to Pakistan and met Sartaj Aziz, Adviser to the Primer Sharif on Foreign Affairs and National Security but the focus remained on items which may be important but vital issues were never talked about.

Nawaz-Obama meeting is being held at a crucial time when date for withdrawal of US-led Nato troops from Afghanistan is getting closer. After marathon talks in Kabul between Afghan President Hamid Karzai and US Secretary of State John Kerry this month, it was decided that a long-delayed security deal on the future of US forces in Afghanistan is close to being completed. In this regard Dobbins had already acknowledged that Islamabad had increased its support to the Afghan peace process.

United Sates recognized Pakistan’s role in facilitating direct talks between the Afghan government and the Taliban.  It was also acknowledged that Pakistan particularly over the last six months or so, become active in supporting an Afghan reconciliation process and urging the Afghan Taliban to participate in the process.  It may be encouraging that Pakistan’s role in establishing sustainable peace has been acknowledged but behind the scene India is still a devil’s role in Afghanistan. Indian activities are aimed at establishing its hegemony in the region.

It is necessary to mention that the focus of Nawaz-Obama meeting may be Afghanistan but a few points pertaining to Pakistan also needs to be included in the agenda. The item on top of the agenda should be completion of Iran-Pakistan gas pipeline before 2014 ends. About US$2 billion have to be raised for financing of the project, which can’t be unless United States gives a clean signal. If United States can grant permission to India to continue to buy oil from Iran, why should there be an embargo on Pakistan on buying gas from Iran?

The meeting must also focus on resolution of Kashmir, which has already led to three wars between Pakistan and India. Both the countries are spending billions of dollars annually on the procurement of conventional and non-conventional weapons. In this regard India has to give people of Kashmir a chance to decide their fate. They have been living in siege for decades and thousands of people have been killed by the Indian security forces.

Though, Hindu extremists say, “We will not allow another division of India on the basis of religion”, division of Indonesia and Sudan provide a precedence for giving people of Kashmir a chance to decide their fate. India has been blaming Pakistan for ‘state sponsored terrorism. Pakistan has also been accusing India for infiltration in Baluchistan. There are growing concerns that Baloch militants are being supported by some of the US Senators, who are pleading for an independent Baluchistan.

After having witnessed role being played by United States in Libya, Iraq, Syria and rest of the Middle East and North Africa and particularly in Iran, many Pakistanis strongly believe, the super power first creates rebel groups; provide them funds and arms only to create unrest in those countries. They also believe Pakistan is also going the same turmoil. Lasting peace can’t be restored in Pakistan and Afghanistan.

Pakistanis also have no doubt that militant groups operating in Pakistan are getting funds and arms from outside Pakistan. The sole agenda of these militants is to keep the country under turmoil so that it can’t make economic progress. However, the US administration tends to forget that economic progress can help in maintaining peace in the world in general and turmoil areas in particular.

Pakistan seeking loan for Iran-Pakistan gas pipeline

At present Pakistan is suffering from two contentious problems: 1) precarious balance of payment position and 2) acute shortage of electricity and gas. The recent agreement with the International Monetary Fund (IMF) for US$6.6 billion has not brought any respite. Despite receiving the first tranche of US$544 million the Government of Pakistan (GoP) has to borrow another US$625 million for one year at LIBOR plus 5.3% from the local and international banks, lending were demanding LIBOR plus 7.77% initially.

Disbarment of US$1.00 billion (to clear circular debt) among the companies belonging to energy chain was likely to add about 1,700MW electricity as against prevailing shortfall of about 4,000MW. The most disturbing fact is that circular debt amounting to US$20 million has again piled up within a very short span of time. 

The harsh reality is that the country has total installed capacity of around 24,000MW but actual generation hovers less than 16,000MW, mainly because of inability of power generation companies to buy fuel. Persistent increase in electricity tariff is becoming punitive because of running of power plants on furnace oil.

One of the recent announcements is that in Punjab, where 65% of Pakistan’s total population lives, all the CNG stations will remain closed for three months, starting 1st November 2013. Along with this, fertilizer plants getting gas from SSGC and SNGPL networks will face 60-days mandatory closure. Even those fertilizer plants getting gas from Mari gas field will face 20% curtailment in gas supply.

With rising crude oil prices, hovering around US$110/barrel, oil import bill is becoming unsustainable for Pakistan. Even the IMF package will not be enough to pay for additional oil import bill in winter.  In the prevailing scenario Pakistan has two options: 1) switchover thermal power plants to coal from furnace oil and 2) make earliest arrangement for the import of gas from Iran.

One of the problems is that multilateral financial institutions are not willing to finance Iran-Pakistan gas pipeline project due to pressure from the United States. In the prevailing scenario Pakistan will have to mobilize US$2 billion to complete the portion of gas pipeline in  its own area, Iran has already completed its portion and has also offered Pakistan assistance up to US$250 million.

The GoP has remained reluctant in going ahead with the project. Pakistan is being warned by the United States that if it goes ahead with the pipeline project the country could also face economic sanctions, similar to those imposed on Iran. This hype has been created by those who don’t wish Iran could sell its gas to any country.

The fact is that India is not only one of the biggest buyers of Iranian oil but also constructing Chabahar port in Iran and also connecting roads and railways up to Central Asia, passing through Afghanistan. Besides India, China, Japan and some of the member countries of European Union are also buying Iranian oil, because they have been granted exemption by the United States. Therefore, Pakistan should also seek exemption from the United States for buying gas from Iran.

Mobilizing US$2 billion from the global market should not pose any problem. The GoP should float Sovereign Ijarah Sukuk and offer the pipeline as underlined asset. It must be remembered that Pakistan has to complete its portion of pipeline by end 2014 or will have to pay the penalties.

The advantage of getting gas from Iran via pipeline is that local gas transmission and distribution system is capable of handling this additional load.

One of the apprehensions is that Iran is asking higher price, but it can be renegotiated.

On top of all Pakistan will be buying maximum 500mmcfd gas from Iran as against more than 4,000mmcfd gas produced indigenously. Therefore, the average cost will still be very low as compared to furnace oil.

Let another point be also kept in mind that Pakistan can add another 1,500mmcfd gas by commencing work on a few mega gas fields over the next few years.

To further ease payment pressure Pakistan can enter into a barter agreement with Iran for the payment of gas price, against supply of wheat, rice and edible oil.

At present Pakistani oil refineries are operating far below optimum capacity utilization. Pakistan can refine Iranian oil on ‘job cost basis’ and export white oil products to Iran or any other international buyer, including India and Afghanistan.

The prevailing situation offers opportunity for the international financial institutions, particularly those offering Shariah compliant products and services to explore flotation/management of Sovereign Ijarah Sukuk on behalf of the Government of Pakistan.

Pakistan: Time to Redefine Policy towards India

Indian Prime Minister shut all the doors for negotiation by once again reiterating “Kashmir is an integral part of India and no talks can be held on the issue”. He sounded a typical extremist Hindus who says, “We will not allow another division of India on the basis of religion”. His anti-Pakistan sentiments were at its peak when he said “Pakistan is the epicenter of cross border terrorism”. In fact his speech was aimed at declaring Pakistan a terrorist state.

In the simplest words he said ‘Pakistan is sponsoring terrorism”. This is a big slap on the face of all those Pakistanis who have been signing mantra of ‘Aman Ki Asha’ for years and ignoring that India is being ruled by Hindu extremists, who are adamant at destroying Pakistan for achieving the status of regional super Power. Let this also be kept in mind that the United States is the biggest proponent of this philosophy.

India blames that Pakistan’s foreign policy is being dictated by hawks but worse is the situation in the country which claims to be a secular state and also the biggest democracy of the world. The Indian occupied Kashmir is under the siege of army/law enforcing agencies for decades and people are denied ‘right of self determination’ despite approval of resolution in the United Nations.

In this endeavor India is fully supported by the colonial rulers of yester years. They allowed creation of Bangladesh and division of Indonesia and Sudan on the basis of religion, sponsored change of regime in Iraq, Libya and are supporting rebels in Syria for last two years.

However, they are never tired of appeasing India, only because it is their major trading partner. They are supporting India because it is trying to demolish a country created on the basis of an ideology. There are only two states in the world, Pakistan and Israel that were created on the basis of ideology.

It has been highlighted time and again that Pakistan suffers from internal and external threats. While frontiers can be guarded the embedded enemies are difficult to catch. These perpetrators wear various caps and the worst display of ‘cold blooded mercenaries’ was the attack on the helicopter of Pakistan Army that went to earthquake affected areas to deliver food etc.

TTP is yet another faction of the fascists who is at war with Pakistan Army for years. However, worst is the attitude of those who are still trying to appease the terrorists, telling the government to declare ceasefire unilaterally but not asking the perpetrators that lay down arms is a prerequisite to talk.  

It is also been mention repeatedly that a proxy war is going on in Pakistan. All those adamant at destroying Pakistan have joined hands. The perpetrators may wear different caps but have a common objective, destroy Pakistan.

It is highly regrettable that many Pakistanis, particularly politicians have not been able to distinguish between friends and foes. Especially in case of India all the efforts to restore ‘friendly relations’ have been frustrated by the hawks prevailing over in India. This hawkish attitude is at its maximum when general elections are to be held in India. Often political parties try to solicit vote on the basis of anti-Pakistan stance.