US threatens sanctions over Iran gas deal

[longbrained]

One more good thing about the gas is the reality that Pakistan already has an effective gas infrastructure installed in the country, distribution system and all.

 

[Mumbai Man]

Pakistan's search for energy could run afoul of US Iran sanctions

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. U.S. officials have 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 last 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.

Despite Pakistan's huge hydroelectric potential, it hasn't built a big dam project since the 1970s. Since the U.S.-backed government of President Asif Ali Zardari was elected in 2008, a mushrooming chain of "circular" debt has enveloped the power sector.

The government has assumed $3.6 billion of the power industry's debt. The government-owned power grid owes another $2.5 billion to private-sector generators, even as the government, according to Finance Ministry figures, spent at least $7.4 billion on electricity subsidies during the 2008-2010 period.

Washington and international lenders such as the International Monetary Fund have repeatedly urged Pakistan to cut subsidies, which anemic government finances cannot afford.

Critics say that the government hasn't added to the electricity infrastructure in its 31/2-year term, while sinking billions of dollars into unproductive subsidies and taking on debt.

Of the $3.6 billion debt the government assumed, half were bills the government itself hadn't paid, said Ejaz Rafiq Qureshi, the spokesman of the Pakistan Electric Power Co., the state-owned national electricity grid. The rest is owed by private consumers.

At the end of August, a group of nine private power plants demanded that the government pay them within 30 days $540 million it owed for power generation.

Roughly half of Pakistan's current electricity output of 13,000 megawatts comes from the private generators. But there is more capacity that the government doesn't use. Government-owned equipment that could generate another 2,000 megawatts has been sidelined because of poor maintenance. Private equipment that could generate another 2,500 megawatts has been taken out of service because the government hasn't paid its bills, said Abdullah Yusuf, who represents the private producers. Combined, that amounts roughly to the entire immediate shortfall.

"If you had this capacity available, straight away your problem would be solved," Yusuf said.

A longer-term energy project is Pakistan's proposed $12 billion Diamer Basha dam, which would add 4,500 megawatts to Pakistan's electricity generating capacity. Washington is considering providing significant funding to the project. Separately, the U.S. Agency for International Development is currently working on projects that will add 900 megawatts to the Pakistani grid next year.

Pakistan's search for energy could run afoul of US Iran sanctions | CharlotteObserver.com & The Charlotte Observer Newspaper

Bad news for pakistan !!

 

[longbrained]

Pakistan's search for energy could run afoul of US Iran sanctions



Pakistan's search for energy could run afoul of US Iran sanctions | CharlotteObserver.com & The Charlotte Observer Newspaper

Bad news for pakistan !!

The problem with private generators is that almost all of them are using liquid fuel for power generation which makes it extremely expensive and that is why the circular debt. Liquid fuels are the most expensive way to produce power. Hopefully when this pipe line is built all these generation units are going to be converted to gas fired ones, which is technically very simple. Gas fired power plants are very cheap to operate and clean for environment. On average a modern gas fired power plant fuel cost is less than a quarter that of an oil fired one since gas is both cheaper and is more efficient than liquid fuel. Pakistan has the potential to produce some 40,000 MW of hydro electricity and today only a quarter of that has been harnessed. Though hydro power can never power entire Pakistani economy but it can play a very important role by complementing other power sources. The problems with hydro in Pakistan are also many. Some dams have political problems, others have environmental and generally all dams are very expensive to build. Though once built they produce cheap electricity.

 

[longbrained]

A well placed official accompanying Gilani to Iran has said that the visit was to give a "strategic message" to US and Iran has in turn offered to open up Iran's petroleum, gas and energy reserves to Pakistan. Also he has disclosed that Gilani was staying at the former Shah's palace as a guest during the visit. Pakistan engaging Iran despite US pressure | Pakistan Today | Latest news, Breaking news, Pakistan News, World news, business, sport and multimedia

 

[longbrained]

A new development in News:

The government has apparently decided to use Washington’s opposition to the Iran-Pakistan gas pipeline as a bargaining chip to persuade the United States to grant Pakistan a civilian nuclear deal similar to the one between the US and India.

Iran gas pipeline: Pakistan uses US opposition as bargaining chip – The Express Tribune

Finally the government has demanded what it is due. India "sinned" and got forgiven and now it is time Pakistan's "sin" is also forgiven and a nuclear deal exactly like India be offered to Pakistan. After all Pakistan has been a US ally since 1950's while India only normalized its relations with US after Soviet Union broke up. Nevertheless, it has been mentioned in the report that Pakistan is losing something like 2.5% of GDP every year because of inadequate availability of energy in the country. This amounts to 13 billion dollars (in real PPP terms) losses each year in economy and it is getting worse.

 

[muse]

Won't happen - just will not! WHY not? Because the US policy has already aligned itself with it's regional ally's goals and ambitions - The role the US has in mind for Pakistan is as Transitistan, that too, just isn't going to happen.

Not until the politicians and the military are on the same policy page will Pakistan make any kind of progress on these issues. And the US nuclear exemption is just a non starter regardless of whether the politicians and the army are on the same policy page or not.

 

[longbrained]

Won't happen - just will not! WHY not? Because the US policy has already aligned itself with it's regional ally's goals and ambitions - The role the US has in mind for Pakistan is as Transitistan, that too, just isn't going to happen.

Not until the politicians and the military are on the same policy page will Pakistan make any kind of progress on these issues. And the US nuclear exemption is just a non starter regardless of whether the politicians and the army are on the same policy page or not.

Have some hope dear. Germany and Japan were in worse conditions in 1944, but they recovered. Vietnam has had the highest economic growth rate for some years now and you know what was their condition. Pakistan can recover too. Who knows maybe the next government is going to do some good stuff including building this pipe line.