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Pakistan search for energy could run afoul of U.S. Iran sanctions

 

McClatchy Newspapers

ISLAMABAD — Pakistan's power supply network is in deep crisis, pounding the economy and making life miserable for average Pakistanis. But one of the solutions that Pakistan has proposed to fix the problem, a natural gas pipeline from Iran, faces objections from the United States. This week U.S. officials warned Pakistan not to depend on Iran.

There is no place where the country's energy shortage isn't profound. Rural areas are without electricity for up to 16 hours a day while towns often go without for as many as 12 hours daily, forcing factories to close and plunging homes into darkness.

Natural gas supplies are rationed, with factories in the country's most populous province, Punjab, going without two days a week.

Pakistan's economic output is cut by at least 4 percent because of the shortages, the government estimates, something that hampers the country's hopes to battle extremism by creating more economic opportunities. The outages also feed political discontent, triggering frequent, if local, street protests.

Solving the energy problems is a top priority for the United States' aid program, with a State Department delegation here this week, led by Ambassador Carlos Pascual, the Obama administration's special envoy on international energy affairs.

But Pakistan's plans for a 1,700-mile natural gas pipeline from Iran, which would provide Pakistan with a cheaper source of fuel for electricity generation, is a stumbling block.

Mark Stroh, a spokesman for the U.S. Embassy in Islamabad, described the talks as constructive and collegiate but confirmed that U.S. officials told the Pakistanis that the proposed Iran-Pakistan pipeline would run afoul of U.S. sanctions on Iran. Such deals "undermine the international community's effort to pressure Iran into meeting its international obligations" regarding its nuclear program, Stroh said.

"The proposed Iran-Pakistan pipeline, if it is built, could raise concerns," Stroh said. "We have raised this issue with the government of Pakistan and we are encouraging the government to seek alternatives."

The Iran Sanctions Act, originally passed in 1996, prohibits U.S. investment in Iran but also applies to other foreign investors. The Pakistan government this month gave the go-ahead to the Iran pipeline, though it remains unclear how Islamabad would finance its $1.65 billion share of the cost.

An alternative, preferred by the U.S., would be for Pakistan to import the gas from Central Asia, via a pipeline that passes through war-torn Afghanistan.

Pakistan's biggest export earner by far, the textile industry, is concentrated in Punjab province, which has been badly hit by the power shortage, throwing thousands out of work. Many factories simply close when there's no piped gas, which runs boilers and other machinery.

Ejaz Gohar, chairman of the All Pakistan Textile Mills Association, which represents the big textile manufacturers, said that shutting off gas for two days a week meant a 21 percent increase in costs.

"Our industry is bleeding," Gohar said. "A lot of companies have not been able to sustain the increase in costs. How can we be competitive in this situation?"

Pakistan's electricity generating problems go back decades, with critics saying the industry is badly mismanaged, is loaded with debt and isn't making use of the generating capacity it has.

McClatchy Newspapers 2011
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