State of relations with the US

NOW that the initial government-encouraged euphoria over the recent offer by Washington to sell F-16 aircraft to Islamabad has subsided to some extent and the heady feeling of being a major non-NATO ally of the US is being replaced by growing concerns over the fast developing US-India strategic partnership as evidenced by the US-India Defence Pact signed at the end of June and the subsequent Indo-US nuclear deal, time has come to take an objective and detached look at Pakistan-US relations.

Historically speaking, Pakistan’s relations with the United States have gone through several phases of close cooperation and estrangement. The current phase of close Pakistan-US relations began with the U-turn in Pakistan’s pro-Taliban policy in the wake of the events of 9/11 leading to the full resumption of the US economic and military assistance to Pakistan and its designation as a non-NATO ally.

Pakistan-US relations have seen many ups and downs, and there is no guarantee that the future course of this relationship is going to be any different despite the reassuring statements made from time to time in both Washington and Islamabad. The strength of this relationship obviously will depend on the convergence of the national interests of the two countries: the greater the convergence, the stronger with this relationship be.

Let us see what the US global and regional interests in South Asia are and the extent to which they converge with Pakistan’s national interests.

The over-arching US strategic objective since the end of the cold war and the collapse of the Soviet Union is to remain the predominant global power as it is now and to prevent the rise of another power capable of challenging its global supremacy. President Bush couldn’t have said it more unequivocally when he declared at West Point on June 1, 2002, “ America has, and intends to keep, military strengths beyond challenge, thereby making the destabilizing arms races of other eras pointless, and limiting rivalries to trade and other pursuits of peace.”

In other words, the main US strategic objective is to keep this world unipolar as long as possible and to block or at least to slow down the emergence of a multipolar world. US strategic objectives in various regions basically flow from the main goal of establishing the US global hegemony or Pax Americana.

Although it has almost become a cliche to say that the 21st century would be the Asian century, it still is a valid statement. Asia, currently with the second largest economy in the world (Japan), the fast growing economy of China with the estimated GDP of $1.78 trillion, with two of the biggest countries in the world in terms of population (China and India), with the fast growing military muscle of China, Japan, India and South Korea, with most of the world oil and gas reserves, and with the dynamic economies of the Asean and South Korea, is a continent which is destined to play an increasingly important role in international politics in the 21st century.

It is understandable, therefore, that the US would like to be actively involved in the security architecture in Asia. According to a senior US official quoted recently in New Delhi, “The worst outcome for the US is an Asia from which we are excluded... The key challenge for the US over the past 100 years has been to remain engaged everywhere and not allow any other industrial power to dominate a given region. If I were China, I would be working on kicking the US out of Asia. Right now, we have a lot of alliances but there is no architecture embedding us in Asia. This worries us.”

The US views China as posing in due course a challenge to its power and influence in Asia as the latter’s economic and military power grows further. Washington is therefore engaged in building up a security structure aimed at containing China. The US alliances with Japan and South Korea will play this role in the Far East. The developments of the past few years clearly indicate that the US has decided to build up India in the hope that it will ultimately emerge as a counterweight to China on the Asian continent and help in containing China on its southern periphery.

Conversely, India needs the support of the US for building itself up as a major global power and establishing its hegemony in South Asia. The fast growing strategic partnership between the US and India neatly dovetails the strategic objectives of a global hegemon and an aspiring regional hegemon. (In view of the recent Indo-China agreement establishing a strategic partnership between them, it remains to be seen how India will play its cards in dealing with the two contradictory partnerships.). India is also a big market for the US exports and armaments.

The landmark event in the fast developing US-India strategic partnership, in the wake of the announcement from Washington in March this year that the US intended to help India become a “major world power in the 21st century” was the signing in Washington on June 28, 2005, of “the new framework for US-India defence relationship” by the defence ministers of the two countries. This defence pact, which talks about the common belief of the two largest democracies in freedom, democracy and the rule of law, will support, and will be an element of, the broader US-India strategic partnership.

It commits the two countries to cooperation in missile defence, combating terrorism and violent religious extremism, preventing the proliferation of weapons of mass destruction, technology transfer and defence trade. It also mentions that the US-India defence cooperation in a short span of time had advanced to unprecedented levels unimaginable in 1995. There are already reports of the offer by the US to sell to India F-16 and F-18 aircraft, and the Patriot PAC-3 anti-missile system.

The US-India defence pact was soon followed by a nuclear agreement between the two sides, concluded during Prime Minister Manmohan Singh’s visit to the US. This would enable India to acquire nuclear reactors and technology for peaceful purposes in disregard of the restrictions imposed by the US Nuclear Non-Proliferation Act and the guidelines of the nuclear suppliers’ group. Interestingly, the US officials commenting on the Indo-US nuclear deal have indicated that the Bush administration is unlikely to offer a similar deal to Pakistan.

In short, the US is developing its strategic partnership with India in pursuance of its grand design for Asia in which India is expected to play a key role. The concept of a strategic partnership implies an element of equality between the two partners. Consequently, India will expect the US to be sensitive to its ambition of emerging as a great power — something which the US has already conceded in the hope of establishing its hegemony in South Asia and the Indian Ocean region.

It is also likely, despite the assurances given by the US secretary of state to our foreign minister and by president Bush to our president, that the US in its efforts to build up India as a counterweight to China will ignore the requirements of a strategic balance in South Asia.

In contrast with the US-India strategic partnership, which is based on the convergence of the long-term fundamental interests of the two countries, the current Pakistan-US relationship has a shaky foundation. As far as common beliefs are concerned, Pakistan’s track record in practising democracy is far less appealing than that of India as we still appear to be groping for a democratic system which suits the genius of our people. Pakistan’s all-weather friendship with China has been a pillar of strength and security. It has neither the capacity nor the desire to counter China in any way. Therefore, it cannot help in fulfilling the most fundamental US strategic objective on the Asian continent of containing China.

The US willingness to build up India as a major power runs contrary to Pakistan’s consistent efforts to oppose Indian hegemony in South Asia. The wave of religious extremism, which has fractured and brutalized our society in the aftermath of the Afghan jihad against the Soviet occupation and the subsequent militancy in Afghanistan and Kashmir, remains a source of concern to the US as numerous articles and stories in its media indicate. As for the peaceful settlement of Kashmir, which is the core issue for Pakistan in its relations with India, the US interest does not go beyond mere verbal encouragement to the two sides to try to reach a negotiated settlement of all their differences as the recent pronouncement by President Bush during the visit of the Indian prime minister to Washington indicates. Its real objective is to prevent Pakistan from doing anything which would raise tensions in Pakistan-India relations.

It is true that the US appreciates the important role that Pakistan is playing in the war against terrorism and has rewarded us with economic and military assistance as well as the status of a major non-NATO ally. However, going through the articles and commentaries appearing in the US, one gets the uneasy feeling that Washington regards Pakistan both as a problem and as an important ally in the war against terror.

No wonder there is constant pressure on Pakistan to do more than what it has already done in ridding its society of the scourge of violent religious extremism, in combating which both the US and India are committed to cooperate under the US-India defence pact of June, 2005.

By now it is crystal clear that behind the facade of “dehyphenating” US relations with India and Pakistan as Secretary of State Condoleezza Rice described it or having “individual relationships” with these two countries as US Under-Secretary of State Nicholas Burns recently put it, Washington has decided to place its relations with India at a higher plane in terms of priority and importance than those with Pakistan.

The current US-Pakistan relationship, therefore, suffers from serious limitations and uncertainties. First of all, there is no question of an element of equality in an alliance between a superpower and a middle-ranking country like Pakistan. The grant of the non-NATO ally status to Pakistan basically means that it has accepted a subordinate role in the service of the US strategic interests in return for economic and military assistance. Secondly, the convergence of their strategic interests is currently limited to the war on terror in which we are playing a key role in collaboration with the US instead of Pakistan being a part of any grand US strategic design.

This makes the relationship extremely fragile and uncertain, especially keeping in view the internal societal convulsions through which Pakistan is passing and the past US track record. Thirdly, the promised sale of F-16 aircraft and other US military equipment to Pakistan may meet our essential needs for maintaining a credible deterrent. However, looked at more closely from the US point of view, it is meant to keep Pakistan, especially its military establishment, on a tight leash in the service of the US strategic interests in the foreseeable future.

This is the reality that we face behind the smokescreen of empty rhetoric and assurances which are full of sound and fury signifying nothing. It is time to face the realities as they are so as not to be confronted with disappointments and unpleasant surprises down the road. Our objective should be to adopt a new mix of internal and external policies which would safeguard our national interests and provide a more solid and durable foundation for our friendship with the US as we cannot afford to be on less than friendly and cordial terms with it.

It is axiomatic that we must keep our national interests supreme in the management of Pakistan-US relations. Therefore, while there are several factors relevant to Pakistan-US relations which we cannot change, there are others that we can modify to our advantage in strengthening this vital relationship. The promotion of a stable democratic order in Pakistan, based on national consensus, is one such factor which is not only desirable in its own right but would also help in bringing the two countries closer together. The same is true of improving the performance of the economy, raising the standard of human development in the country, particularly through increased attention to education and health, and ridding ourselves of the scourge of obscurantism, retrogression and religious extremism.

In the realm of foreign affairs, we need to broaden our options at the regional and global levels while persisting in our policy of friendship with the US. However, we should not develop our relations with it, marked as it as by serious limitations and uncertainties, at the expense of our friendly relations with neighbours such as China and Iran.

As the saying goes, one can choose one’s friends but not one’s neighbours. A coherent regional policy should be the central element of our over-all foreign policy. In particular, we should avoid a repetition of the strategic blunders of the 1990s when we pursued the pro-Taliban policy in Afghanistan which isolated us regionally and globally besides encouraging religious extremism and klashnikov culture in our society. We are still living with the disastrous consequences of that ill-conceived policy both internally and externally.

The writer is a former ambassador.

Commercialization of the press

MANY years ago, Krishna Menon, who later became defence minister, said that it was the jute press that India had. The remark generated a lot of heat. It was not a wild one. Indeed, what constituted the opinion then was the writing by half a dozen English dailies which were in the hands of businessmen dealing in jute.

The remark has rubbed off on the press. It has got linked to industrial or other interests that many newspaper proprietors have. This thought might have rankled Prime Minister Manmohan Singh when he said a few days ago, while inaugurating a Mumbai English daily in Delhi, that “the convergence of corporate interests and the control that market men have come to acquire on editorial policy can militate against pluralism and even the freedom of the press.”

His fears are not unfounded. The media has been commercialized. Newspapers reflect more of industry’s thinking than of people’s afflictions. A wit says that news is what is written on the back of an advertisement. A couple of leading English dailies have even begun to sell the editorial space to a hic provided he has the money to buy. The purpose is not so much to earn revenue as to throw down the gauntlet to democratic political machine. What it can do is the challenge. There has not been even a whimper from professional bodies or the Press Council of India which was established to safeguard press freedom.

I recall there was a time when a Business Must (BM) chit coming along with a write-up on some commodity was thrown into the wastepaper basket by the editorial desk. But it has become a must now. Journalists can ignore it at their peril. In fact, many of them have ingratiated themselves with the newspaper’s business department so much that they eat from its hand. The publicity to a commodity apart, there are write-ups to promote it. Information is slanted to suit business interests. The disconcerting part is that unfavourable or negative stories are suppressed to placate business houses, a source of advertisement revenue.

It is not difficult to trace the time when the editorial side took a back seat. After the end of the emergency (1975-77) there was such an outlet of pent-up emotions and ideals bottled up because of censorship, that newspapers themselves were taken aback by the freedom they could exercise. Whatever skeleton they could find in the government cupboard, they brought it out and wrote candidly about the crime and corruption committed during the emergency.

This is when the owners got the idea that if mere government fiat could make pressmen surrender, they (owners) have a bigger whip to crack: the job. They took over the reins to tell journalists what to report and what to hide. Editors were asked to comment on a particular subject, especially concerning Indian politics, in the way they (owners) wanted. Indira Gandhi’s return to power in 1980 signalled their hold. On the one hand, they fell upon one another to make up with her and on the other, they “disciplined” journalists. She liked the scenario. She had herself suppressed the press.

It was during her regime that the owners introduced the contract system that restricted journalists’ tenure to a particular period, to be renewed after two or three years. This was like a Damocles’ sword hanging over the head of journalists. Her father, Jawaharlal Nehru, had given the working journalists permanent appointments. Owners could not dismiss them under the law.

Nehru thought that the security of job would enable them to resist pressure and to write objectively. It is another matter that most of them have made peace with proprietors. Journalists generally write what the owners would like to read. Still worse, they anticipate owners’ interests and argue a point accordingly in their leaders and columns. They normally shut out the other point of view.

A handful of proprietors have gone out of the way to humiliate editors to “bring the journalists down to earth,” as one of them puts it. “I made them sit on the floor and write addresses on invitation cards for a social function.” When journalists had caved in during the emergency because of comforts and perks, they had no gumption to stand up now. Owners have expected obedience, and they have turned to be right. Ninetynine per cent of Indian newspapers are today owned and edited by the same family. Leaving a few of them apart, others are run like any business. The son inherits it, passes it on to his son and so on.

Owners’ name appears as editor. The old, classical type of editor is vanishing. Journalists generally do what takes to stay in the good books of owners. Their freedom is limited to the extent an owner gives them. This is how market men have come to acquire control on editorial policy because owners interests are in the money they make, not in the quality of newspapers they produce.

People who control the press in the country think that a newspaper is just like any other commodity. It should be nicely packaged. And their idea of “nice packaging” is to fill the pages with semi-nude colour pictures of models and actresses and trash. The shallow, unthinking attitude gets reflected even in the news stories and articles that are printed.

Reporters do not always crosscheck the information they get. They often write one-sided versions of events and about people who do not matter — absolute non-entities. Often good stories are not followed up properly. Planted stories make the front page. Even factual information given in a newspaper is often incorrect.

Yet, the press, by and large, has acquitted itself well in the field of pluralism, one of the key elements the prime minister underlined in his speech. The press has risen to the occasion when secularism has been sought to be replaced by fundamentalism. Take the demolition of the Babri masjid and the Gujarat carnage. On both occasions the press took the BJP, the culprit, to task and made it apologize.

The remedy that the prime minister has suggested to remove deficiencies in the press has been tried and found wanting. The Press Council has been a washout because it has become another court of law. The ombudsman appointed by a leading English daily found that the entire newspaper was not open to him. He could give his opinion only on the matters referred to him.

It is time to look at the entire media, print and electronic. A media commission — on the lines of the two press commissions since independence — should be appointed to find out the relationship between owners and journalists, newspapers and TV networks and radio and online media. Only then will the prime minister find out whose interests lay where.

The writer is a leading columnist based in New Delhi.

Gas pipeline project: price factor

SINCE my last article on the subject appeared on Wednesday, Iran has threatened to reopen its uranium gasification plant, albeit under IAEA supervision, because the European offer on economic and other concessions expected on July 31 was not made. The Iranians had, instead, been informed that the offer would be made by August 31.

The actual opening has not materialized yet since the IAEA has asked for time to get inspectors into place. The Europeans, while expressing concern on the Iranian move, have also apparently undertaken to convey their offer by August 7. In the meanwhile, the American assistant secretary of state, during a closed circuit TV interview with Pakistani journalists, reiterated American opposition to the Iranian pipeline and said that the US intended passing further laws against investment in Iran’s energy sector.

Clearly, the Iran nuclear issue has entered a phase of intense manoeuvring. It has not, despite appearances, reached a crisis stage and it is difficult to believe that in these circumstances America’s European partners will countenance the further sanctioning of Iran’s energy sector. If things do deteriorate and fresh sanctions are imposed with or without UN Security Council approval, the Iran pipeline will certainly become more problematic.

For the moment, however, I will look at some other facets of the pipeline on the assumption that this and or other pipelines will be built using Pakistan as the transit route.

The Indian oil minister, while in Karachi had stated that India would need to import 500 million cubic metres of gas a day by the year 2020. This is about 17.5 billion cubic ft per day. This may be exaggerated and may not take into account gas discoveries such as the one made on the east coast of India but there is no doubt that even currently there is sufficient Indian demand to support at least one pipeline.

The Pakistan demand, according to the figures provided to the ADB and used by an ADB official in his speech at the Pakistan oil and gas conference in May 2004, was that “under a moderate GDP growth rate scenario of 3.8 per cent, Pakistan’s estimated shortfall by 2010 is 0.2 billion cubic feet per day (bcfd)., going up to 1.4 bcfd by 2015 and 2.7 bcfd by 2020”. Obviously our growth rate has in the last two years far exceeded 3.8 per cent and our demand should theoretically be higher. Even so Pakistan’s demand would not be enough to support an economically viable pipeline from Iran.

There are, moreover, many in Pakistan, this writer among them who believe that this assessment underestimates the indigenous gas production potential within the country. My own estimate, subject to correction by expert comment, is that even with the current rate of exploration we should find enough gas to keep us self-sufficient until 2020 or 2025. In one sense this is academic. It is clear that the pipeline will be viable only if there is Indian consumption.

As regards the price payable for the gas the Indian newspapers have said that they hope to be able to buy the gas from Iran at the highly subsidized price at which it is supplied to the Iranian consumer. This is clearly wishful thinking. More realistically, we have to look at prices that prevail in our neighbourhood and domestically. The Iranians had contracted to sell to Turkey at $110 per 1,000 cubic metres or $3 per 1000 cubic ft (mcft) in a contract signed in 1996.

The Turks apparently reneged on the contract in 2002 and, according to one report ended up buying from Russia at $75 per 1,000 cubic metres through the Blue Stream gas pipeline laid under the Bosphorus. This is approximately $2.05 per mcft. The contract with the Iranians was also renegotiated with Turkey buying far less than originally contracted for and paying a far lower price. One news item suggested that the cut was 20 per cent to match the Russian Blue Stream price.

Turkmenistan was selling gas to Russia and the Ukraine at extremely low prices $42 per 1000 cubic metres up to 2003 and $44 thereafter. Only in January this year was the price raised to $58 per 1,000 cubic metres which is less than $1.70 per mcft. In the discussion of prices with regard to the Qatar pipeline between Pakistan and Crescent Petroleum the pricing formula was said to have been 10 per cent less than the fuel oil equivalent. I would assume that in offering this price the Pakistanis had also indicated as they have done in their petroleum policy of 2001, discussed below, the ceiling for fuel oil prices.

The other price comparison that could be used is the price paid for LNG. According to information available India has contracted to buy LNG from Qatar at $2.50 per million British Thermal Units (btu) — the equivalent of one mcft of gas and from Iran at $3 per million btu. To this would need to be added the cost of transportation and the carrying costs for the capital expended on creating a LNG terminal and the storage capacity. I am not sure but these costs, I am told, could amount to as much as an additional $1 or more.

The third element that could be used to determine the price would be the domestic price. In Pakistan, the price paid to foreign and domestic investors in new gas fields on which they hold concessions is determined by the location of the field. Most new fields are in Zone 3 where the price is 67.5 per cent of the equivalent amount of crude oil drawn from a basket of Persian Gulf varieties. A ceiling on crude oil prices which, in the current circumstances with the crude oil price being about $55 in the Gulf, would be about $26 + $6 (20 per cent of the difference between $26 and $55) or $32.

Since a barrel of oil is equal to 5,610 cubic feet of gas, and since most gas discovered in Pakistan will be subject to 32.5 per cent discount, the price of 1,000 cft would be about $3.8. On this, however, the producer or concession holder would pay a royalty of 12.5 per cent, a windfall levy of 50 per cent on the amount that exceeded $30 per barrel and income tax on net revenue at 40 per cent. The net price for the Pakistan economy would probably come down to about $2.10 or less (our experts should be able to provide more accurate figures). It should also be remembered that this price arises at a time when there has been an astronomical and probably unsustainable increase in crude oil prices.

By all the determinants spelt out above, it would seem that the price of gas from Iran when it reaches consumption centres in Pakistan should not exceed $2.10 or $2.15 and when it reaches Indian consumption centres should remain below $3.

What should be the transit fee payable for the use of Pakistan territory for the pipeline? For the Baku-Tbilisi-Ceyhan oil pipeline, the transit fee rises from $0.12 per barrel in 2005 to $0.17 in 2021 for the 249 kms for which it passes through Georgia. If the higher transit were to be applied to the gas equivalent (0.18 barrels is equal to 1,000 cft) given that the distance is three times as long the transit fee chargeable by Pakistan would become about $0.091 cents per 1,000 cft.

If the pipeline carries, as expected about three billion cft a day, the transit fee generated would amount to $270,000 a day or abut $100 million a year. It is, of course, possible that Georgia has lowered the transit fee to be able to gain access to the oil flowing through the pipeline for its own domestic consumption. It is also possible that these rates are not in sync with practice elsewhere in the world. That is for our experts to say but certainly it does not seem that the much bruited about figure of $500 million transit fee is close to reality.

For the BTC, BP estimates that it will charge as transport costs some $2.80 per barrel for the 1,700 km. long pipeline. Using this guideline the transport cost in the Pakistan section of the pipeline would come to about $ 0.20 cents per 1,000 cft given that the length of the pipeline in Pakistan will be about 700 kms or about two-fifth the length of the BTC. This would amount to more than $200 million a year and could easily pay for security while giving a decent return on the capital invested in the pipeline and the development of storage sites.

What about availability? The South Pars offshore field from which the gas is to be supplied is enormous in size. According to one estimate, it has some 500 trillion cubic feet of gas as against 900 trillion cubic feet of gas in the adjacent Qatar part of the field. It has been estimated that when fully exploited South Pars could yield 20 billion cubic of gas a day. The cost of extracting gas, even offshore, is low and even after processing for pipeline quality remains below $0.50 per mcft. It is the conversion to LNG that is expensive.

To sum up, there is a real chance that a further deterioration of Iran’s relations with Europe on the nuclear issue may make the pipeline problematic. The pipeline is otherwise viable but only if the Indians buy the bulk of the gas supplied. It must also be clear that Pakistan will buy little or none of the gas at least for the first few years. Both Pakistan and India are in a buyer’s market but if forced Iran may choose to use its entire gas production for re-injection into old oilfields. The buyer’s market is more likely to materialize in the case of supplies from Qatar (extension of the Dolphin Line) and Turkmenistan.

Within Pakistan the pipeline’s cost should not exceed $1 million per km, calling for a comparatively modest investment of $700 million. The pipeline cannot be owned by one entity in all segments. Only in the Pakistan portion is there a need for joint investment. Pakistan must pitch its expectations of transit fees at a reasonable level but must insist that both the seller and the principal buyer as the main beneficiaries contribute to the construction of the pipeline in Pakistan territory and for the development of storage sites. A decision has to be made on whether this should be owned by a consortium of Indian, Pakistani and Iranian investors or whether such Iranian and Indian investment should represent advance payment of transit fees and transport costs. In any case the management must be Pakistani.