The ‘peace pipeline’, as the Iran-Pakistan-India (IPI) gas pipeline project was dubbed, seems to be inching forward but without a vital partner on board. India appears to have stepped out of this trilateral project but no formal announcement has so far been made to that effect. Iran and Pakistan have now decided to go ahead without New Delhi to finalise the details of the deal that has been hanging in the balance since 1993 when it was first conceived.

On Wednesday another hurdle was cleared when Pakistan’s cabinet accepted the price purchase formula offered by Tehran. This is expected to enable the two governments to sign a sale-purchase agreement later this year. India’s absence from the past several meetings of the trilateral body that has been discussing various dimensions of the project has been interpreted as its reluctance to join hands with Pakistan and Iran.

While New Delhi has been at loggerheads with Islamabad on issues of regional security, it may not be too happy about entering into an energy project in defiance of Washington’s warnings to the international community to refrain from working with Iran.

Be that as it may, the IPI has significance for Pakistan. True, it is a costly project. But the $7.4bn pipeline linking Iran’s gas fields to Nawabshah in Sindh will enable Pakistan to import one billion cubic feet of gas per day. Given the growing shortfall of gas in the country — it is expected to be 700mmcfd in 2009 — the IPI pipeline will ease some of the pressure.

However, it will take several years to complete and the government will have to find alternative sources of fuel to meet the country’s energy needs. Another major factor that may pose problems for Pakistan in the long run is the cost of the gas to be supplied. The pricing formula has been under negotiation for years. What began as a reasonable rate has been revised upwards by Tehran repeatedly.

Under the new arrangement Pakistan will pay 80 per cent of the oil price in the international market that could work out to be a hefty amount. It will also be foregoing the transit fee of $200m India would have paid had it been a partner. There is also the additional cost of securing the pipeline from attacks by insurgents which is not unlikely. Given the law and order situation in Balochistan where installations are blown up regularly what safety will there be for this pipeline?

It is the foreign policy and security implications of IPI that carry great significance for Pakistan. At a time when it is in the grip of a grave security crisis Pakistan’s interest lies in working out a regional strategy. In this context an understanding with Iran, which the IPI would promote, will strengthen Pakistan’s hand.