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| March 11, 2006 | Saturday | Safar 10, 1427 |
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Oil pricing: a correct decision
Punjab ban
Challenges ahead in Sino-Pakistan ties
LAST month, President Musharraf visited China to celebrate 55 years of Pakistan’s diplomatic relations with its most valued ally. His focus was on securing energy assistance and bringing “our economic ties in consonance with our excellent political and diplomatic ties.”
THE Nuclear Non-Proliferation Treaty (NPT), which has at no time been on very solid grounds since it was launched in 1970, is now in danger of meeting its end. Two developments that have taken place concurrently underline the paradoxes that have made the NPT so vulnerable. One is the India-US accord on the supply of American nuclear technology to New Delhi. The other is the stand taken by the nuclear powers that Iran should not be allowed to have a uranium enrichment programme — even for research — because it could allow Tehran to develop nuclear weapons. If the treaty were to be followed strictly in letter, the US cannot supply nuclear technology to India which has not even signed the NPT and is not governed by IAEA safeguards. At the same time, Iran has the right to enrich uranium under the NPT for peaceful use.
There are other issues too that point to the contradictions created by the treaty. It has been suggested that by signing the technology transfer accord, the Bush administration has recognized India as a nuclear weapon state under NPT. The US has rejected this suggestion, saying that it does not plan to amend the treaty. There is the case of North Korea which developed a nuclear weapon programme in spite of being signatory to the NPT, renounced the treaty and then announced its nuclear status. Then there is Israel which is known to possess atomic weapons but because it has not announced that formally, it enjoys the advantages of not being an NPT signatory. All other Middle Eastern countries that have signed the treaty are expected to live up to their treaty obligations.
What emerges from all this is that the NPT has divided the world into the nuclear haves and the nuclear have-nots in perpetuity. Initially this division was expected to be of an interim nature because the NPT not only sought to prevent nuclear proliferation by imposing safeguards and checks on the non-nuclear states, it also created an obligation for the nuclear powers to work towards nuclear disarmament by dismantling their weapons. The ultimate goal was to enhance global security by making the world nuclear weapon free.
Ironically, the restrictions on the nuclear have-nots have been enhanced over the years to the extent of denying them their right to have a nuclear programme for peaceful purposes, while the nuclear powers have not even made a beginning towards nuclear disarmament. Take the case of the United States itself. It has unilaterally abrogated the ABM (anti-ballistic missile) treaty it had signed in 1972 and has proceeded to develop and test new generations of missiles, such as the SM-3 and new bunker-busting nukes. Moreover, the row Washington has been engaged in vis-a-vis Iran and North Korea, while it turns a blind eye to Israel, simply proves beyond doubt that the NPT has already become a dead letter. Small wonder, the last five-yearly NPT review conference that was held in New York in May 2005 ended in failure. It seems that legal instruments have ceased carrying weight now. It is political and military power that determines the fate of international politics. This is a regrettable trend because it reverses the pattern of international relations that had been developing since Dutch philosopher and jurist Hugo Grotius wrote his book on international law in the 17th century advocating the principle that relations between states should be governed by universal principles based on morality and justice that had been recognized in the Treaty of Westphalia, marking the beginning of the state system.
THE government’s decision to take away the pricing of petroleum products away from the Oil Companies’ Advisory Committee (OCAC) from April 1 and hand it to the Oil and Gas Regulatory Authority (OGRA) is the correct thing to do, though the regulator should have been the one to set oil prices all along. The oil marketing companies have understandably reacted sharply to this decision which will take place along with the introduction of a new pricing formula that will reduce their profit margins. As protected industries and cartels often tend to do, one of their main arguments against this decision is that it will send the “wrong signal” to investors. The oil companies say that Pakistan State Oil’s planned privatization may suffer since lower profits for it will mean a potentially lower bidding from prospective buyers. The All Pakistan Petroleum Dealers Association, whose commissions will also be reduced when the new formula comes into effect, has expressed disapproval as well.
The OCAC chairman is reported to have appealed to the prime minister to settle the issue “amicably” to the “satisfaction of all stakeholders”. This is illogical, considering the fact that all these years that the OCAC has been in charge of oil pricing, the views of the biggest stakeholder of them all — the oil consumers — have been continuously ignored. One would like to ask the OCAC: why has it not never passed on to consumers any benefit when oil prices in the world markets have fallen? Oil marketing companies also need to be asked whether or not their profits have increased manifold after the government allowed them to fix prices of their products via the OCAC. Even from the point of view of economics, this was a wrong decision because it gave official sanction to the formation of a price cartel. Prices will always be on the high side when an industry is dominated by a cartel and these prices will come at the expense of the consumers, who would otherwise benefit if the industry is not cartelized. The decision by the government to ask OGRA to determine oil prices, although belated, is a correct one because it should stop a cartel from dominating the oil sector and could benefit common consumers.
THERE goes Basant in Punjab — thanks to a handful of bigoted killjoys and a rapacious group of metal-string manufacturers and their gambling patrons. The latter group, by persisting in making their deadly string and using it, contributed to several deaths and provided fresh ammunition to the former. The provincial administration failed to prevent string manufacturers from employing glass and metal coating, with the police making a hash of it as usual. Perhaps the administration had all along wanted to appease the Basant-haters, and finally buckled under their pressure. Punjab is now being forced to abandon one of its most graceful festivals, which was managing to attract a large, joyful crowd of spring revellers to Lahore. Perhaps the government should never have got into the act at all: it tried to hijack the festival as part of its ‘soft’ image. This only led to crass commercialization, media hype and the entry of the so-called liberated set, which made it easier for the religious right to step up its opposition. Big money came with Basant, and the happiness flew out. Kite-flying competitions turned ferocious.
The point is: is banning the only option to solve problems? There are numerous traffic deaths daily, but you don’t shut down traffic. Bombs explode in places of worship, but you do not close down these places. Better organization, better law enforcement and intelligent public education campaigns provide the more sensible alternative. It should be hoped that there’s still time for the Punjab government to reconsider its decision, and let the people enjoy their spring — all too brief in years filled with autumnal mournfulness.
The usual abundance of rhetoric and agreements, however, must not distract from three fundamental, though far from existential, challenges facing the relationship: internal security concerns in Pakistan, warming Sino-Indian ties, and China’s increasingly global orientation and commitments. Pakistan must cut through the “all-weather” emotion in its China talk and coolly appraise these issues as it looks to China to literally and figuratively fuel its economy.
During his trip, President Musharraf solicited civil nuclear assistance to meet Pakistan’s energy needs as per plans to expand nuclear power production from 437 MW to 8,800 MW by 2030. Prior to the visit, one Pakistani official noted that the issue was to be raised as one of “paramount importance” for Pakistan’s economic growth. Two of Pakistan’s three civil reactors have been built with Chinese assistance. Current international unwillingness to bend nonproliferation rules for Pakistan has left only the Chinese door ajar.
Yet the sole statement to emerge was President Musharraf’s claim that peaceful nuclear cooperation would continue. Whether this refers to existing facilities or jointly building new ones is unclear. Meanwhile, Beijing’s silence is unsurprising. Between its Nuclear Supplier Group commitments and the AQ Khan affair, there are clear sensitivities involved in airing a view for or against Pakistan’s case for now. Still, anonymous official statements have trickled in from Pakistan that “initially China is expected to provide us two more nuclear plants of 325 MW each preferably in 2006.” Whether this materializes remains to be seen.
President Musharraf also highlighted Pakistan’s strategic location and the Gwadar port as a “trade and energy corridor” to western China. He called for increasing the current $4 billion trade and advancing free trade zone negotiations. Along with 13 official agreements and memoranda of understanding in areas such as energy, trade, and defence, private firms concluded agreements for joint ventures worth $500 million. President Musharraf pledged to continue expanding exclusive economic zones for Chinese investors while Premier Wen Jiabao stated that China would encourage its enterprises to increase investment. Yet on the heels of the premier’s remarks came “I hope Pakistan will adopt measures to guarantee the personnel safety and property of Chinese in Pakistan.”
Herein lies the most obvious thorn in the relationship. Within two years, there have been three separate attacks on Chinese nationals working on key infrastructure projects. Last month’s incident brought the death toll to seven. “Pakistan now needs to put Chinese investors at ease,” noted one Chinese analyst. “Especially with the cartoon incident, investors need to feel they won’t be threatened.”
Such attacks hit Pakistan where it hurts, jeopardizing investments and friendships. And that is precisely why they are occurring. Two of the attacks took place in Balochistan where disenchantment with the federal government has translated into a violent low-level insurgency. Indeed, there is little reason to believe that other attacks won’t happen again unless internal security improves and institutional changes occur.
A more subtle challenge is warming Sino-Indian ties. With the post-Cold War tectonic shifts, the rise of China Inc, and the Sino-Indian thaw entailing a staggering $18 billion trade, the sound logic of a relationship forged to contain India has partially unravelled. China has for example assumed a more neutral tone on the Kashmir issue. Though it will still need “the Pakistan card” as it rubs shoulders with a rising India, the relationship has lost some of its burning necessity. Of course, Pakistan and India are also plodding along with peace talks but the parallel dialogue and dealings must prompt serious thought in Islamabad.
But perhaps the most critical if least recognized factor is China itself. The fact is that the globally oriented, economically booming, and internationally acclaimed China of today is not the isolated, ideologically and militarily inclined regional power that befriended Pakistan. While Pakistan remains of strategic value to China, it has become a less vital piece in China’s ever-expanding pie of friends and markets partly due to its limited economic appeal. Driving this evolving outlook are the significant generational changes in Chinese leadership.
Premier Wen Jiabao is by no means beholden to Premier Zhou Enlai’s warm outlook towards Pakistan. As such, ties between leaders will require personal chemistry and upgrading based on current realities. President Musharraf acknowledged as much in stating that his visit allowed him to get closer to the Chinese leadership.
With China’s great power is also coming great responsibility that may limit cooperation with Pakistan. In the nuclear realm, China has been under pressure from the US to assume global commitments to curb proliferation and demonstrate responsible nuclear stewardship. Self-interest also compels China to continue doing this. These trends pose the question of whether Chinese assistance in addressing Pakistan’s nuclear deterrent and energy needs might be less forthcoming in the future.
Much depends on Pakistan’s deeds and position in the non-proliferation system, and China’s strategic calculations. The US precedent of breaking non-proliferation rules for India certainly gives China more space to manoeuvre. “Now that the United States buys another country in with nuclear technologies in defiance of international treaty, other nuclear suppliers also have their own partners of interest as well as good reasons to copy what the United States did,” noted an editorial in the People’s Daily.
The irony in all this is that even as China’s growing politico-economic clout has somewhat reduced Pakistan’s importance in Beijing’s eyes, it has made China critical to Pakistan’s economic future. President Musharraf partially understands this. His call for broadening and injecting “strategic vigour” in the relationship through trade and investment recognize the long-term imperative of anchoring the relationship not just in the politico-military realm but also in the economy. But the question that lurks in the shadows is whether and at what cost to its own economy can Pakistan so decisively contribute to the Chinese economy as to command a greater share of Beijing’s increasingly roving strategic attention?
All this is not to say that the corrosive effects of realpolitik will eventually hollow out the friendship. As the older generation of the Chinese is wont to say when meeting Pakistanis, “women shi lao pengyou” or “we are old friends.” Old friends indeed and the relationship remains a strong one from which both sides benefit greatly. India alone remains a compelling, if less potent, basis for a union. But old friendships also require continual work adapting to each other’s changing interests and needs.
Here, the onus is on Pakistan because simply put it needs this relationship more than China. It must keep in mind that when inviting old friends over, one must first ensure that one’s own house is in order. But perhaps the more crucial lesson in geo-politics is that even old friends can change.
The writer is a Fulbright scholar in Malaysia.
E-mail:ziad.haider@aya.yale.edu.