Re: Iran Pakistan Gas pipeline inaugurated
Dr Farrukh Saleem seems high on hashish or doing Lafafa journalism with lafafa full of American dollars or Saudi Rials :)
I believe project is quite feasible and is good for Pakistan in every respect. Actually, Pakistan would benefit immensely and whatever we say about present Zardari government, what they did by finalizing the project is great work.
Let see financing, needed technological expertise, availability of Gas, security, benefits to Pakistan, and sanctions ... all the issues what the article or any critic might raises.
Financing: Iran is under sanction, so they cannot use dollar to pay for imports, even though it is estimated that they have over 80 billion dollars in hard foreign exchange currencies and over 50 billion dollars of Gold as reserve. So, to say that Iran is short of money is completely absurd statement.
Problem that Iran faces when paying for import is nothing to do with them short of money but sanction. Sanction means, no bank that have businesses in western countries and especially USA can take part in transaction where Iran is involved, as if they would do so, than banks would face threat of sanction on them (they would not be able to do business in these countries and their assets can get frozen too). Thus, what Farrukh Saleem mentioned, it is nothing to do with Iran short of money (what Farrukh Saleem likes readers to believe) but it is effects of sanction.
Thus, payment for export and import to Iran can be problem. But then many countries who are trading with Iran are paying Iran in local currencies that Iran uses to buy gold and transfer that gold to Dubai, change that into hard currencies and then transfer that to Iran ... sometime Iran even transfer gold to Iran. Some countries are paying Iran in gold (like India). Until last year Turkish gold was ending up in Iran in huge quantity. That is the reason it is estimated that Iran could have over 900 tons of gold as reserve (most likely, more than that). We should know that 900 tons of gold is worth over $46 billion.
Anyhow, Farrukh raised question on financing just to make his case strong, even though present IP gas project would need no foreign hard currency or foreign expertise, thus there is no need to get worried about financing, as most work would be done locally using either Iranian or Pakistani currency.
Technology expertise: Farrukh Saleem made most stupid statement about problem in available technological expertise. He should have known that Iran has already laid down most of pipeline in Iran from Paras gas field (in Persian Gulf) to border of Pakistan.
Actually, even though the gas is under water, it is Iran that not only developed that gas field but has enough expertise to extract gas from there, as (from what I know) Iran is already extracting gas from Paras gas field, moving that gas to mainland Iran, using that gas to generate electricity, and even converting that gas to liquid gas.
That means, Iran have the technology to lay pipeline and provide gas to Pakistan, thus there would be no need to take any technological help from western countries, especially when it is agreed that Iranian company would lay pipeline in Pakistan too ... and obviously, supplying gas would be Iranian problem anyhow, that they are capable of handling.
Availability of Gas: Paras gas field is not only proven gas field, but is the largest proven gas field in the world that Qatar and Iran shares. Actually, Iran has second largest proven gas reserves in the world after Russia. So, to doubt about Iran capability to provide gas to Pakistan, that is one of the most stupid doubt one can make what Farrukh Saleem made.
Security: Pakistan is getting gas from Sui since long time under all threat and with such highly desirable gas for the country from Iran, Pakistan can easily secure the pipeline. I believe, few hundred rangers looking after the pipeline would easily secure the pipeline from any mishaps.
Benefit ... or What Pakistan could gain: Even though gas Pakistan is getting is not cheap (could have been cheaper), still it would be at 78 percent of crude oil price when one converts the energy value that can be extracted from gas compare to crude oil. Pakistan intends to replace part of crude oil that Pakistan imports with Iranian gas to produce electricity.
Pakistan imports around $17 billion worth crude oil a year (and the amount is rising). If Pakistan would manage to replace even half of crude oil Pakistan imports with Iranian gas (or around 8 billion dollar worth of crude oil), then Pakistan would save approximately $1.76 billion yearly (or 22 percent of crude oil value Pakistan would replace). This saving would be on top of transport cost and insurance that occurs and Pakistan pays when Pakistan imports crude oil, as there would be no transportation and insurance cost for gas other than whatever Pakistan would spend in maintenance of pipeline and security.
On top of that, it is expected that Pakistan would pay Iran in local currency or may export goods that Iran could not purchase and pay in open market using hard currency due to sanction, as Iran could not use foreign banks or foreign currencies they have to pay for their imports ... so it is most likely that Iran would use Pakistani rupee (Payment they would receive for gas) to import Pakistani goods.
[Note: Due to sanction on Iran, Pakistan would not be able to pay them dollars and thus only option would be gold or rupees. Since Pakistan have no capability to pay in gold, it is most likely that Pakistan would pay Iran in rupees or goods. Iran could not use Pakistani rupees to purchase goods from other countries, so they would use that rupees to invest in Pakistan or purchase Pakistani goods. That means, in financial terms, it would be win-win situation for both Iran and Pakistan. Iran exports gas and Pakistan exports their goods or receive investment]
Sanction: That is major problem. But if Pakistan would play their cards right than I do not think this should be problem. Reason is, China, India, Russia, Turkey and many other countries are importing huge quantity of oil, gas and other goods from Iran ... so why not Pakistan? USA promise of alternative energy supply to Pakistan did not materialised even after 19 of years and there is no hope that it would materialise in near future, while Pakistan is going from bad to worse situation due to shortage of energy supply at reasonable cost. (Talk on Pakistan-Iran gas project started in 1994, and since then USA is promising Pakistan to not go ahead with this project, as they would do something to provide alternative energy, but have done nothing)
So, I believe one should think logically, be realistic, ignore critics like Farrukh Saleem writing absurd, think about Pakistan and benefits that Pakistan could get from the project, give credit to those for whom credit is due, and hope for the best.
whatever makes you happy....but just few facts....back in Nov 2012, Iran's foreign reserves were anywhere between $70-80bn, but with $US25-30bn of that frozen in overseas accounts. Situation is so bad that Iranian accounts in Russia and China worth up to $US14bn have also been frozen along with dozens of others across Europe. The Chinese government has seized Iranian deposits in Shanghai, Macau and Hong Kong as security against Iranian imports of Chinese goods and to negotiate a discount in the price of oil.
So all Iran had back in Nov 2012 was close to $50-55B accessibl .... it must be worst now that 5 more months have passed...
but what is the use of foreign reserves? it is essential to pay for imports and Iran spent $US70bn on foreign imports in the first half of 2012 but has just over half that available for the second half....yes iran is cutting down on import drastically but it still need to import some stuff....
Now lets look at next 12 months...Iran’s fiscal year begins on March 21...there are even more stricter sanctions imposed on iran in feb 2013...not to mention inflation rose by 27.5% in 2012 (economists think it was 45%)..currency devalued by 60%...and sales of Iranian crude are down about 55 percent compared with last year ...Foreign reserves and sovereign gold at Iran’s central bank are used to bridge the gap in the country’s budget deficit, which has hit $45bn in the fiscal year 2012/2013, according to Gholamreza Mesbahi Moghadam, the head of the Iranian parliament’s Economic Commission. Moghadam is in doubt if Iran’s reserves and gold will be enough to cover its budget deficit and fix the financial turmoil caused by the economic sanctions.
take all these factors into account and iran is facing serious danger of balance of payment deficit by Mar 2014...and you think they will lend billion dollar or so to pakistan? last priority for them as of now...
