Pakistan's growing energy needs and Iran's pool of energy resources make the two states natural economic partners, and served as the impetus behind the proposed gas pipeline, initially planned to include India as well.
WPR: What are the driving interests for both parties in this pipeline project?
Harsh V. Pant: Pakistan's growing energy needs and Iran's pool of energy resources make the two states natural economic partners, and served as the impetus behind the proposed gas pipeline, initially planned to include India as well. Facing an energy crisis that is having a damaging impact on the Pakistani economy, and with its domestic supplies of natural gas declining, Pakistan has now finalized the pipeline deal with Iran, despite Washington's demands to the contrary.
Pakistan's annual royalties from this project are expected to be between $500 million and $600 million. The project, if finalized, would also represent a major boost to Iran's efforts to prevent its global isolation and economic marginalization, at a time when the West is imposing strong sanctions over Tehran's nuclear program.
WPR: What obstacles does the project still face?
Pant: The project faces a number of problems. Many in Pakistan believe that the price that Iran is charging for gas will make the project economically unviable. The pressure from the United States to abandon the project remains as strong as ever, and if the confrontation between the U.S. and Iran over the nuclear issue intensifies, Pakistan will find it difficult to move ahead with the project. The pipeline will also pass through volatile areas in Pakistan that present the threat of insurgent sabotage. Finally, without the participation of India and/or China, the deal doesn't really make sense. Iran and Pakistan are hoping that India will join the project sooner rather than later, but India has reservations over the pricing of the gas. New Delhi's concerns over ensuring the security of the pipeline in Pakistan's restive Balochistan province also makes it difficult for India to accept the deal in its present version.
WPR: What is the status of broader Iran-Pakistan relations, both economic and political?
Pant: Tehran and Islamabad sought to improve bilateral relations after the fall of the Taliban in 2001. But the economic relationship between Pakistan and Iran has largely been shaped by Pakistan's demand for Iranian oil. As a result, ties have not significantly matured. The low level of economic exchange has hurt both states, as in the absence of a broad-based economic relationship, political and security tensions -- particularly over the situation in Afghanistan -- have tended to dominate this relationship. While both Tehran and Islamabad nominally support Afghan President Hamid Karzai's government, neither neighbor has been willing to sacrifice its own interests in the country. With time, tension has increased. Iran retains its special interests in Afghanistan's western Herat region, while Pakistan considers the Pashto-speaking southern sections of Afghanistan to be within its sphere of influence. Kabul remains a contested area within that sphere.