Written by Shivam Shekhwat
Nearly two months after relations between the two countries plummeted to a new low, President of the Islamic Republic of Iran Ebrahim Raisi was in Pakistan on a three-day trip. From April 22 to 24, he held talks with the Prime Minister, Chief of Army Staff, Pakistan’s local leaders, and with his Pakistani counterpart.
The timing of this visit is important. It is the first visit by a head of state since Pakistan’s controversial general elections on February 8 and comes against a backdrop of developments in the Middle East (West Asia), Iranian attacks and tensions. That has characterized bilateral relations between Pakistan and Iran in recent months.
Maximize the potential of your relationship
The focus of the visit was to strengthen cooperation on both economic and security fronts since relations hit a historic low in January. Eight agreements were signed between the two countries, with optimistic promises on expanding bilateral trade. Iran deplored the dire state of bilateral economic partnership, called for further economic cooperation, and resolved to increase bilateral trade to US$10 billion over the next five years. Raisi also emphasized the role of the border region in expanding trade by opening more border markets, following the Mando Pisin market that functioned last year. The meeting included discussions on the feasibility of a barter system to compensate for the lack of efficient banking channels between the two countries, as well as facilitating negotiations on free trade.
The 28-point joint statement noted the presence of terrorists in Afghanistan, but made no mention of terrorist groups proliferating within the country’s borders. The two leaders also briefly mentioned the “retaliatory” attacks that have taken place, suggesting that both Tehran and Islamabad are concerned about how to move forward. The interior ministers of both countries agreed to ban terrorist groups from within each other’s borders and to strengthen cooperation in border control and intelligence sharing. In a meeting with the Iranian president, Pakistan’s military commander defined the border between the two countries as a “border of peace and friendship” and urged the political and military leadership to ensure that other groups do not endanger Iran’s borders. They promised to hold regular consultations. Bilateral relations.
Refueling an old dream: restarting the Iran-Pakistan gas pipeline
Although no concrete agreements were reached on economic cooperation or cooperation in energy and infrastructure projects during this visit, the Iran-Pakistan Pipeline was mentioned in the joint statement, and the project, which had been suspended for a long time, was announced. This has sparked speculation about the possibility of it being reopened. Back in February, then caretaker Prime Minister Anwar-ul-Haq Kakar gave the green light for construction of the first 80 kilometers of pipeline from Gwadar to the Iranian border. Shehbaz Sharif also called for the establishment of an inter-ministerial committee to facilitate the project. Although expansion into India was also initially planned, the two countries began discussions on the project in the 1990s. India decided not to formalize it in 2009 due to multiple reasons, including price issues, security concerns given the history of bilateral relations between Pakistan and India, and pressure from the United States, which had a civil nuclear agreement at the time. announced his withdrawal. Iran and Pakistan signed a framework agreement worth US$7.5 billion in 2009. The 2,775-kilometre-long pipeline stipulates to supply between 750 million and 1 billion cubic feet of natural gas from Iran’s South Pars gas field over 25 years.
Since its inception, the project has been marred by a number of issues inherent in both Pakistan’s structural setting and external environment. Progress on the project has been delayed for years due to India’s withdrawal from the pipeline, U.S. sanctions over Iran and Pakistan’s dependence on the pipeline, Islamabad’s rapidly dwindling energy reserves, and the search to secure construction funding. There is. The Iranian government has completed construction of the 900 km long pipeline at a cost of $2 billion, but construction on the Pakistani side has stalled. The company hosted a ceremony and began construction of the pipeline in 2013, but the project still didn’t get off the ground. In 2014, Pakistan first asked for a 10-year extension, but then abandoned the plan fearing U.S. sanctions. In 2019, it was informed of possible legal action if Iran did not comply with its obligations. Last year, Pakistan presented Iran with a “force majeure and disclaimer” notice to avoid contractual obligations, which Iran rejected.
Islamabad now has time until September 2024 to complete construction, but risks paying a US$18 billion penalty if negotiations fail. Pakistan’s energy crisis has worsened in recent years, with only 19.5 trillion cubic feet of gas remaining, enough to last for 12 years. Last year, we spent nearly US$17 billion on energy imports. Such coercion may have prompted Pakistan to resume dialogue on the issue, even though the geopolitical environment makes it difficult for Islamabad to comply.
Caught between a rock and a hard place
The United States has flatly warned all countries considering doing business with Iran, reminding them of the sanctions such a deal would incur. The country expressed strong dissatisfaction with the pipeline and called on Pakistan to recognize the risks associated with it. New sanctions were imposed on Iran on April 19 after its attack on Israel. The United States has also recently sanctioned suppliers to Pakistan’s ballistic missile program, four of which are based in China and Belarus. Last month, Pakistan’s Foreign Ministry spokesperson denied the need to send a waiver request to the United States, but there are now reports that the United States has sent one. Therefore, the same reasons that previously stalled the project are now affecting its progress.
According to a report by the Islamabad Institute for Strategic Studies, financing for the pipeline will be financed by gas infrastructure under the Special Investment Facilitation Council (SIFC), a “civil-military economic forum” tasked with bringing in foreign capital. This will be done through a development project. investment in the country. The government spent US$152 million on similar costs. There are also concerns over the finalization of land in Gwadar and already growing frustration among locals over China’s actions and whether Iran will be able to supply enough gas. Even if Pakistan were able to spend this amount and cover the remaining costs, fear of sanctions would still pose a challenge. Some see support from outside parties as Pakistan’s best chance of completing construction of the pipeline and avoiding sanctions.
From 2006 to 2018, there were multiple reports in the news about China’s impending entry into the pipeline, with talk of extending the pipeline from Gwadar to China or supporting the construction of the pipeline itself. In 2019, Iran announced its intention to extend the pipeline to China. But none of them materialized. When relations between the two countries deteriorated earlier this year, China volunteered to help mediate between the two countries. Therefore, the Chinese government will likely view the thaw in bilateral relations as a positive development. Any progress on the pipeline would be viewed favorably by the Chinese government, even if China itself is unsure about how it wants to be involved in the construction of the pipeline. In 2013, Iran also promised to provide a loan of US$500 million to help Iranian companies complete the Pakistani side of the project. It has now agreed to provide “technical and engineering support.” According to a report by Third Poll, a Pakistani senator also said Russia was interested in providing an initial US$160 million for the 80-kilometre length of the pipeline. The visit did not show any significant progress in resolving the deep-seated issues facing the project. Elections are being held in the United States, and if the pipeline fails, the chances that Washington will allow Pakistan to go ahead with the pipeline are also very bleak because of the associated political risks.
Many analysts saw Raisi’s visit as a way to get support from Islamabad on what was happening in the region. Although Raisi indirectly disparaged the United States and rejected critics of increased cooperation between the two countries, Islamabad remains mired in an impasse. Editorials in Pakistani newspapers asked where Pakistan would ultimately draw the line and how long it would be before Islamabad decided to counter international pressure. At the moment, it is quite difficult to judge whether Pakistan has any room to push back. Despite being in an unenviable position, choose The choice between proceeding with the pipeline despite the sanctions or risk paying a hefty penalty is not so stark. With the country finally getting approval for the last part of its bailout package from the International Monetary Fund, and the government’s plans to work together again on new programs, there is no doubt that these projects will be fair in any case. The prospects for reaching a conclusion are not very high. So even if Iran decides to give Islamabad more time, the latter will still struggle to get the project off the ground, reeling from multiple intersecting crises. Pakistan has expanded slightly since last year’s detente between Saudi Arabia and Iran. room to maneuver And both Tehran and Islamabad have recognized that friendly relations are essential in the aftermath of the January crisis. But the strong U.S. reaction to the pipeline shows that Pakistan remains susceptible to the same geopolitical pressures that have constrained relations for years.
- About the author: Shivam Shekhwat is a Junior Fellow at the Observer Research Foundation.
- Source: This article was published by Observer Research Foundation.
