June 02 - 08, 2008

Prime Minister Syed Yousuf Raza Gilani has reportedly assured Balochistan government that the province would be represented in every meeting of the $7.5 billion Iran-Pakistan-India (IPI) gas pipeline project as one of the stakeholders. Some MPAs in the former Balochistan assembly had demanded a higher royalty for the province because the greater part of the IPI gas pipeline would pass through the province. The provincial assembly had unanimously admitted a motion seeking debate on the issue. Some former MPAs viewed that prospects for the success of the IPI project were bleak if Balochistan's demands were ignored.

This April, Pakistan and Iran decided that the agreement over IPI gas pipeline project would be signed soon. While stressing that the project would help promote peace and friendship in the region, both sides removed the hitches that had stalled the accord on the IPI project at a meeting between President Pervez Musharraf and his Iranian counterpart Dr Mahmoud Ahmadinejad in Islamabad. The foreign ministers of the two countries will decide a date for the signing of the agreement after a meeting between their petroleum ministers.

There are two main issues concerning the province: 1) Balochistan needs to be assured of a royalty that will satisfy the people of the province; 2) the local people must be ensured greater employment opportunities in the IPI project. Present government is committed to resolve the Balochistan problem through political reconciliation. As apart of the reconciliation process, former chief minister Sardar Akhtar Mengal was released after all cases against him had been withdrawn by the government. A volatile Balochistan will only serve the interests of some regional actors in the geopolitics that are opposed to the execution of IPI gas pipeline project. It is worth mentioning that the proposed plan for laying Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline could not be materialized due to the prevailing political instability and the uncertain security situation in Afghanistan.

India recently called the proposed gas pipeline from Iran across Pakistan "a risky venture" that would be difficult to finance. It viewed that security for any pipeline was a concern because it would run across volatile areas of Pakistan where other pipelines have been attacked in the past. Islamabad has however repeatedly been rejecting the India's concern contending that it can effectively handle the security of the proposed IPI gas pipeline. Pakistan claims that it has been looking after the 6,000-kilometer-long domestic pipeline network that provides gas countrywide. But it is a fact that the incidents of targeting gas installations and blowing up of gas pipelines have become a routine in the province. The acts of sabotage have made Balochistan an unsafe resort for foreign investors and tourists discouraging business groups for holding long-term stakes in the province. The terrorist acts have several times forced the gas company to shut off the main compressor plant, thus suspending gas supply to parts of Balochistan, Sindh and Punjab. For the last two years, province's share in gas royalty has been reduced to Rs1.5 billion due to reduction in gas production as a result of blasting of gas pipelines.

A major breakthrough was recently achieved when India returned to the talks after about a year and sorted out its differences with Pakistan on transit fee. Talks on the IPI pipeline project have been inconclusive due to the differences among the three countries over tariff, transit fee and security issues. Some local sources claim that several contentious issues still remain to be addressed in this regard. While India maintains that only issues over the IPI pipeline project are pricing and its commercial viability, Pakistan accuses India of adopting delaying tactics in signing the landmark tripartite Gas Sales Purchase Agreement (GSPA), involving Iran, Pakistan and India. Following the US-India agreement on nuclear energy cooperation, Indian Prime Minister had cast doubts over the Iran-Pakistan-India gas pipeline project during his visit to the US in July 2005. Due to its nuclear stand-off with Tehran, Washington is opposed to the IPI project, which will accrue great economic benefit to Iran. On the other hand, India sees its deal for the civil nuclear technology transfer with US in danger if it goes ahead with IPI project against the US will. Local analysts believe that India's position on the IPI project has so far been that of running with the hare and hunting with the hound.

The economics of laying gas pipeline from the Pars gas field in Iran to India via Pakistan is significantly related to the politics of extracting concessions by the major stakeholders. Equally important are the strategic interests of big powers and the shenanigans of their energy giants like Unocal and Gazprom. Whatever be the new great game, the reality is that a stable Balochistan is essential for the success of any trans-regional gas pipeline project, as greater part of the pipeline will have to pass across the province. In case the normality is not restored in the province, the IPI project is likely to meet the same fate of TAP project, which is still in doldrums due to uncertain security situation in Afghanistan.

Inclusion of Balochistan as a stakeholder in the IPI gas pipeline talks is a welcome decision by the present government. It will help building the confidence of the local people and promote reconciliation process in the province. The decision makers should exploit the geo-strategic location of the province making its people the primary beneficiary of the economic gains expected to be earned by the country in terms of transit fee for trans-regional gas pipelines. If the government ensures due royalty and job opportunities for local masses in the IPI project, then the Balochistan and its people will directly be responsible for the security of the pipeline traversing the project. The provincial government needs to get involved in the pipeline issue taking up the matter with the federal government and raise the royalty issue with Islamabad.

It is after all peace and stability that will bring this mega gas pipeline project and multi billion dollar investment in the country. Islamabad must acknowledge the harsh reality of energy economics and materialize the plan of IPI gas pipeline that promises enormous economic benefits the country. It can prove economic bedrock promising regional stability.