ECO and Pakistan

President Zardari while meeting with Iranian President Ahmedinejad on the sidelines of the Economic Co-operation Organisation (ECO) summit in Azerbaijan capital underscored the need for initiating work on the Iran-Pakistan (IP) gas pipeline project, electricity transmissions projects and rail and road schemes. All the schemes have been in the pipeline for several decades and one would hope that their implementation would begin anytime soon.
However, the fruition of these schemes has, in more recent times, remained hostage to the US strategic interests in the region focused on sanctioning Iran for alleged violation of nuclear proliferation concerns. Pakistan to date has been susceptible to US influence for three major reasons. First and foremost, the US is the sole superpower and it is no longer politics for any country given today's global interdependence to alienate the US. Iran has paid a heavy price for alienating the US and the recent erosion of its currency is widely seen as reflecting the fact that sanctions have begun to bite.
Secondly, the issue of financing has surfaced given the fact that the sanctions disallow financial corporations from investing in Iran-linked projects. Pakistan's macroeconomic indicators are too poor with the 67 percent decline in Foreign Direct Investment in the first quarter of the current fiscal year - a further harbinger of how foreign investors view our economy. This has narrowed access to finance required for implementing the IP project. Russia, however, has indicated interest in financing and laying the pipeline for the IP project, yet there are other impediments in the way, including the high cost of borrowing for the project. And finally the US government has been extending significant grant assistance to Pakistan for over a decade - assistance that includes disbursement under the Coalition Support Fund as well as under the Kerry-Lugar bill which has not yet reached the pledged amount of 1.5 billion dollars per annum; however, there have been some releases under this head.
It is therefore not yet clear whether the Pakistan government would be able to withstand the considerable pressure that can be exerted on us on a range of issues by the US if we proceed with the IP gas pipeline. Additionally, it is unclear whether Pakistan has bothered to undertake a cost-benefit analysis that would quantify the cost of proceeding with economic projects with Iran. One thing, however, is crystal clear: the sanctions against Iran are Western-backed and the United Nations has yet to impose them because of Russian and Chinese opposition or in other words Pakistan will not be violating its international commitments if it does decide to implement economic projects with Iran.
Be that as it may, it is necessary to acknowledge that the ECO is the most viable regional organisation for Pakistan. Saarc remains subjected to Indian hegemony to a large extent with India being the only regional country with contiguous borders with all the member countries yet refusing to allow passage of trade destined for and from Pakistan through its borders. It is a measure of lack of reciprocity on India's part that Pakistan allowed the Afghans to trade directly with India through the Wahgah border - a facility that India has not considered with respect to our trade with other Saarc member countries. Critics argue that the reason is US pressure for this particular clause of the Afghanistan-Pakistan Transit Trade Agreement and it is the failure of our relevant negotiators to insist on a similar deal in our trade with Saarc member countries that allow for the non-reciprocity on this count.
However, with ECO the issue is one of restive Afghanistan which has so far delayed implementation of several energy projects as the cost of laying the pipeline or distribution network are just too high given the ease with each Taliban continue to destroy infrastructure. Pakistan needs to remain engaged with the ECO and enhance trade co-operation as well as work towards energy imports from Central Asia. At this juncture given the geopolitical map of the world, ECO does appear to be a more doable venture as opposed to IP gas pipeline. This is not to suggest abandoning the latter but simply to accept that it is more of a diplomatic challenge than the ECO.