Context

With the date of US withdrawal from Afghanistan approaching, the focus of Pakistan, as well as that of other stakeholders, has shifted towards envisioning the future beyond 2014. There is obviously an optimistic and a pessimistic picture. More than anything else, the major determinant of the direction of future events will be the ground reality and the public buy-in.

Analysis

The optimistic view envisions a trade and energy corridor that extends from Central Asia to South Asia. As energy shortages worsen in Pakistan, the nation is not only stagnating presently but the prospect for meeting future needs is not any brighter. According to a World Bank estimate, widespread load shedding and the economic impact of the energy crunch are estimated at upward of 2 percent of GDP. The State Bank of Pakistan claims that by year 2016, the country will face an acute gas shortfall of 3.021 bcfd (billion cubic feet per day).After years of delay, the country is working on a number of energy projects and approaches simultaneously, with special emphasis on regionalism. Nonetheless, political complications and instability have hindered exploiting of both the internal energy resources as well as the external ones.

The list includes the Iran-Pakistan (IP) gas pipeline project, the Turkey, Afghanistan, Pakistan and India (TAPI) pipeline project, and Central Asia-South Asia (CASA) 1000. Surprisingly, regional rival India has offered to export liquefied gas to Pakistan. One of the recent successes came in the form of a World Bank approval for $1.1 billion worth of Agro projects.

As economic and trade ties between India and Pakistan warm up, India’s state-owned oil and gas company GAIL wants to provide Pakistan liquefied natural gas (LNG). This would be done through an extension of gas pipeline to Lahore. The company has plans of bringing gas to Gujrat, and then will transit this gas through the Dahej-Vijaipu-Dadri-Bawana-Nangal-Bhatinda pipeline to Indian Punjab, and onwards to Pakistan. As opposed to building an LNG terminal that takes longer time, supplying gas through extension of pipelines is being considered more feasible for this venture.

On the other hand, India is also exploring a Pakistani route for the transport of iron ore from Afghanistan. The project worth $11 billion and involves a consortium of 7 states and many private firms. The companies in the consortium include: state-run miner NMDC Ltd, steelmaker Rashtriya Ispat Nigam Ltd (RINL), private sector steelmakers JSW Steel Ltd, JSW Ispat Steel Ltd, Jindal Steel & Power Ltd, and Monnet Ispat & Energy Ltd.

Chairman of the Steel Authority of India, CS Verma said Hajigak mines and a 6 million-tons steel plant are being developed for this purpose. The Hajigak deposits contain about 1.8 billion tons of ore, with an exceptionally high iron concentration ranging from 61 percent to 64 percent.

The contract, to be signed in about two months, will be the biggest capital-intensive investment in Afghanistan, outweighing China’s $4.4 billion investment in Aynak Copper mine. Mining work is expected to begin in 2014 as the Afghan forces take over the security responsibility of the country. However, there are concerns whether Afghans will be able to provide the needed security.

As compared to using the longer Iranian route via Charbhar, Verma elaborated that India would prefer Pakistan for transporting the ore out and for building a slurry pipeline. While Pakistan recently approved the trade and transit treaty that allows Afghanistan to send goods to India, it has remained concerned about losing influence in Afghanistan as Indian economic clout increases there.

The above listed projects, including Pakistan-India trade cooperation, have tremendous economic potential for the region and Pakistan. For example, transportation, mining, construction, hospitality, agriculture and dairy sectors are all likely to substantially benefit. Additionally, the prices of basic consumer items, including medicines, are also expected to drop. However, in the absence of broad political consensus, the above vision is unlikely to be realized. In other words, a convincing public case has not been presented on what brought about a change in the long-standing government security concerns in Pakistan. In absence of this, the change in traditional policies might be perceived as a sign of weakness and present fuel to be used by hard line elements for further manipulation.

Driven by profit motives, the business community and traders have long been proponents of regional trade. However, since the start of the war on terror and due to poor governance, the liberal space has consistently shrunk while the nationalist and religious forces have constantly gained. None of the above approaches and projects will resolve the nation’s immediate energy and economic crisis. The success of these initiatives is dependent upon stable FATA, Balochistan, and Afghanistan, and that does not seem to be in sight. Moreover, achieving the above vision will require easing of international tensions over Iran’s nuclear program, which is also ultimately linked to the state of ties between Russia, China and US.

Managing change requires increased level of communication between people leading it and those impacted by it, so as to handle anxiety and misinformation. In case of Pakistan, we are seeing more interaction amongst those championing trade with India while the general public is in the dark. This usually means more of the potential benefits are likely to be exploited by the few, at the expense of the public. And, in this respect, it hardly represents a change.

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Pakistan and Turkmenistan on Monday agreed to expedite their energy projects. President Asif Ali Zardari met with his counterpart Gurbanguly Berdymuhammedov and announced that the two countries would make efforts to speedup the $7.6 billion four-country pipeline project.

The pipeline which was shelved last December in Ashgabat, was expected to run through Turkmenistan, Afghanistan, Pakistan and India. The two leaders announced that direct air links would be started between Pakistan and Turkmenistan to boost economic cooperation.

The TAPI pipeline would also be set up to provide energy security. Major issues including drug and weapons trafficking, illegal immigration, regional and international stability were also discussed. President Zardari praised the Joint Inter-governmental Turkmen Pakistan Commission for its role in strengthening the relations between the countries.

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Russia announced it would publicly endorse Pakistan’s bid for full membership of the Shanghai Cooperation Organization (SCO). Russian Prime Minister Vladimir Putin was responding on Monday to Pakistani Prime Minister Yusuf Raza Gilani’s address at the Heads of Government meeting. The Russian Premier told reporters that Pakistan was an important economic and trade partner for Russia and also announced his country’s support for Pakistan’s proposed trade and energy projects.

“Pakistan is not only an important trade and economic partner but also a key Russian partner in South Asia and the Islamic world,” Putin was quoted as saying by ITAR-TASS news agency

Russia will also provided partial funding and technical assistance for:

• CASA-1000, a power transmission plant which will allow for the transfer of electricity from Central Asian states such as Turkmenistan, Tajikistan and Kyrgyzstan to Pakistan
• Expansion of Pakistan Steel Mill ($500m Grant)
• Guddu and Muzaffargarh power plants, and
• Thar Coal project

The post Russia To Support Pakistan’s SCO Membership And Energy Needs appeared first on Politact.

Pakistani Prime Minister Syed Yusuf Raza Gilani, met with Kazakh Prime Minister Karim Massimov on Wednesday to discuss bilateral cooperation between the two countries. The two leaders met at the Government’s House here in Astana to discuss ventures in economics, defense, communication and energy. Gilani said Pakistan offers excellent opportunities to the Central Asian state, especially in the matters of energy and hydro electric power. The two countries also agreed to relax visa restrictions.

This is the first visit by a Pakistani head to Kazakhstan in 16 years since Prime Minister Benazir Bhutto’s visit to the region in 1995.

The post Pakistan Seeks Kazakhstan Support In Trade and Energy Sectors appeared first on Politact.

The Chilean newspaper Diario Financiero published a report on Tuesday stating the Balochistan government is likely to approve the Reko Diq copper mining project. The mining project is joint venture between Chilean mining giant Antofagasta, Canadian Barrick, and the Pakistani government. The joint project operates under the banner of Tethyan Copper Company (TCC) and is based in Islamabad.

The project was delayed due to a standoff between TCC and the Balochistan government over the setting up of a smelting and refining facility and ownership issues. TCC has said it would not be able to set up such a facility locally. However, the Chinese Jinchuan Group has offered to construct the smelting and refining service in Pakistan, an option favored by the Balochistan government. It is now believed the project would now be split in two, the mining part (TCC) and the smelting and refining segment (Jinchuan). TCC has said it has no objections to this arrangement.

Antofagasta and Barrick control the $3.3 billion project and hold a 37.5% stake, while the government of Pakistan holds 25% in the joint venture, TCC. The TCC has offered the Balochistan government a 25% ownership in the project. According to an estimate, during the fist five years of operation, Reko Diq can produce 190,000 metric tons of copper and 270,000 troy ounces of gold a year.

The Supreme Court of Pakistan had earlier supported TCC’s claim to 100% ownership of the mines, as its efforts led to the discovery of these mineral deposits. The Court is now giving the Balochistan government 120 days to decide the future of the project, failing which, the case would be reopened.

PoliTact is following these and other developments associated with Pakistan-China and Eurasia trade and energy corridor very closely.

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