No money in Pakistan budget for Iranian gas pipeline U.S. opposed

McClatchy Foreign StaffJune 12, 2013 

— Pakistan’s newly elected government Wednesday unveiled its first budget, which gave the go-ahead for buying two new nuclear power plants from China but made no allocation for a long-proposed natural gas pipeline from Iran that had sparked complaints from the United States.

In not budgeting for the Iranian pipeline, agreed to by his predecessor in February, Prime Minister Nawaz Sharif tactfully sidestepped a potential diplomatic clash with the United States, which had warned that the pipeline, if it were ever built, could lead to sanctions on Pakistan. The deal also was criticized as a trap for the new administration by Sharif’s brother and de facto deputy, Shahbaz Sharif, the chief minister of Punjab province.

The $35.5 billion budget, which was presented to Parliament by the new minister for finance, Ishaq Dar, suggested that the new government would follow through on Sharif’s plan to resolve the country’s power shortages that Dar said had cut the country’s economic growth by 2 percent in the outgoing fiscal year, which ends June 30.

Dar’s budget would switch Pakistan’s power generation plants from expensive imported fuel oil and gas to much cheaper coal sourced partly from undeveloped reserves in Pakistan’s southern Sindh province. The rest probably would come from huge mines in India, Pakistan’s traditional foe, with which it has fought two wars since both gained independence from Britain in 1947.

The South Asian neighbors opened talks Tuesday about the planned import of Indian electricity via cross-border cables near the eastern Pakistani city of Lahore.

The budget also sets aside about $430 million for new nuclear power plants from China, a project that the United States and India have both objected to at meetings of the Nuclear Supplier Group, one of the international groups that attempts to prevent nuclear proliferation. But Pakistan insists that the plants are unconnected to the country’s nuclear weapons program and are regularly inspected by the International Atomic Energy Agency. Pakistan possesses between 80 and 120 nuclear weapons, according to estimates by Western analysts.

A Cabinet minister, speaking to McClatchy on condition of anonymity because he was not authorized to discuss the project with a reporter, said the Iranian gas pipeline hadn’t been altogether dropped, largely because that would invoke a penalty payment to Iran. Instead, he said, Pakistan’s new government would procrastinate by trying to haggle lower prices from Tehran, based on the comparison with coal.

Analysts also said Sharif could forgo the Iranian pipeline because of the prime minister’s good relations with Saudi Arabia. Sharif spent six years in exile in the Persian Gulf kingdom as part of a deal for his release from jail in Pakistan negotiated by the Saudi royal family, after he was overthrown in a military coup staged by Gen. Pervez Musharraf in October 1999.

Pakistani news outlets have reported that Sharif’s administration has since last month quietly been holding talks with the Saudis for a steady supply of crude oil and refined products on a deferred-payment basis, a step that would considerably ease pressure on the country’s treasury, which registered a record 8.5 percent fiscal deficit in the waning fiscal year.

Analysts said the new energy proposals are consistent with Sharif’s plan to stay focused on solving problems at home. They expect him to continue to adopt policies different from those favored by the Pakistani military, which has pursued an ambitious strategy of involvement in Afghanistan.

"Sharif is a man who views matters in very simple terms," said Habib Akram, executive editor of Dunya, a popular cable news channel based in Lahore.

"He is completely focused on fixing Pakistan’s internal problems, and believes developments in Afghanistan are somebody else’s indigenous problem that doesn’t concern Pakistan as long as the violence there doesn’t spill over its borders," Akram said.

Hussain is a McClatchy special correspondent.

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