View from Islamabad: Pipeline project with Iran could remain a pipe dream

This week's visit to Pakistan by the Iranian President Mohammed Khatami, has once again coincided with both countries expressing a renewed interest in building a new regional pipeline to transport Iranian gas first to Pakistan and then possibly to India.

It is not the first time that the idea of transporting gas or oil from Central Asia to the outside world through a new pipeline has been brought up as an example of what more could be done to promote cooperation among the countries of this region.

Ever since the formerly Soviet Central Asian states became independent more than a decade ago, the world's oil industry has been fascinated with the idea of transporting Central Asian gas and oil to the outside world.

For many analysts, the fulfillment of such a project could provide the world with the assurance of substantially cheaper fuel. With prospects for such projects assumed to be bright, there are indeed compelling questions over what is it exactly that has so far been the main obstacle. To begin with, the exorbitant cost of such pipeline projects, remains a key issue.

The Iran-Pakistan pipeline which is eventually proposed to travel to India is estimated to cost up to $4 billion. Globally, there may be few institutions in the financial sector which on their own would be willing to finance such a project.

Then comes the issue of physical security. At least one of the pipelines from central Asia is proposed to run through Afghanistan where even the installation of a U.S. backed regime has failed to bring in assurances of improved stability.

With Afghanistan promising to remain insecure in the face of such challenges as the activism of its warlords, the hope for pulling together long-term securities to finance this project, must remain a distant prospect.

Besides, the fulfillment of such a project may well remain an unfulfilled dream unless relations between Pakistan and India improve. For Pakistan, the idea of a number of pipelines running over its soil, must be very appealing. The country could benefit from the large volumes of investments and the subsequent royalties.

For Pakistan and Iran, a new economic partnership, however, could still emerge from the promise of cooperation in three vital areas.

First, both countries with a long shared border, continue to substantially under-utilise their potential for promoting bilateral trade.

As Khatami remained a state guest in Islamabad, Japanese consumer durables sold in large stocks at the city's main commercial district, where even consumer goods which are produced in Iran and are competitively priced, have never made their mark.

Second, Pakistan and Afghanistan for too long have remained competitors in Afghanistan where a long civil war has only added to the miseries of that country without any benefits for external players.

A new relationship must therefore be based on Pakistan and Afghanistan promising to remain loyal to their pledge of non-interference in Afghanistan's internal affairs.

Finally, Pakistan and Iran could benefit from greater cooperation among their industrialists and businessmen.

However, many entrepreneurs have suffered not only because of the failure of their governments to push them towards new business alliances but the presence of complicated bureaucratic networks which have not helped facilitate cooperation.

Ultimately, building a new pipeline project may be a distant hope but Pakistan and Iran still have the choice of opening a new chapter in their relationship.