Saudi-Qatar rift will aggravate Pakistan’s energy woes

Amid diplomatic reshuffles in the Middle East, Pakistan anxiously awaits the latest script that it would have to act out in the Arab world

Saudi-Qatar rift will aggravate Pakistan’s energy woes
While Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi was busy refuting claims in the Senate earlier this week that Pakistan is under “foreign” pressure to opt for purchasing energy from another country in lieu of going for a certain pipeline project, a Saudi-Qatar rift was brimming over in the Middle East, making Abbasi’s assertion more or less redundant. The Saudi Crown Prince  Salman Bin Abdulaziz Al Saud’s visit to Pakistan last month all but sanctioned Pakistan detaching itself from the Iran-Pakistan Pipeline, ostensibly leaving Liquefied Natural Gas (LNG) import from Qatar as the only possible alternative for Islamabad’s ever escalating gas needs. Along comes an epoch-making divide in the Middle East, which has resulted in Saudi Arabia threatening to blockade Qatar by air, land and sea if it continues to support Muslim Brotherhood, and the Islamabad-Doha deal now seems to be in doldrums.

Whither Muslim brotherhood?

Saudi Arabia, United Arab Emirates and Bahrain have withdrawn their ambassadors from Doha after collectively accusing Qatar of “meddling in internal affairs.” Egypt following suit aggravated Qatar’s position owing to its ties with the Muslim Brotherhood and similar Islamist groups who continue to divide the Middle East and the Muslim world along ideological and diplomatic fault lines.

Pakistan Today’s Middle East Correspondent Shahab Jafry believes Saudi Arabia dictating foreign policy in Gulf Cooperation Countries (GCC) means that it’s inevitable that Riyadh would ask Pakistan to maintain its distance from Doha.

“The deal with Qatar already calls into question the wisdom of siding so strongly with the Saudis at this point in time. If friction within the GCC is strong enough for Riyadh and Abu Dhabi to recall ambassadors from Doha, then Saudis will definitely pressure other friends to distance themselves too. And for Pakistan that could mean problems with the LNG program.

Again, these differences have arisen out of differences with regard to developments in Arabia, especially Egypt and Syria. Qatari backing of the Islamic brotherhood and Saudi liking for Al Qaeda proxies is at the centre of this split. And it does not behoove Pakistan to take a side that harms its security and financial interests,” Jafry said.

[quote]Any agreement with Qatar without annual price review will be financially suicidal[/quote]

With Saudi Arabia declaring Muslim Brotherhood a terrorist organization and “banning” expressions of sympathy with it, which could result in imprisonments, clearly Riyadh is vying to nip Egypt’s new “democratic Islamism” in the bud, trying to ensure the hegemony of Salafism in the region.

Qatar, Muslim Brotherhood’s most vocal sympathiser in the region, is now bearing the brunt of supporting Saudi foes; the ramifications of which are going to be felt in Pakistan’s ministry of petroleum and natural resources.

Cat among the pigeons

Abbasi and Qatar Energy and Industry Minister Dr Muhammad bin Saleh Al-Sada discussed LNG deal in Doha on February 18. The LNG agreement on the surface seems to suit all parties concerned with the deal between Elengy Terminal Pakistan Limited (ETPL) and Port Qasim Authority (PQA) over the construction of the LNG terminal also seemingly pointing to that direction. However, as the February 18 meeting in Doha revealed, the lack of consensus over gas price continues to be an issue.

With the current price being quoted believed to be $18 per million British Thermal Units (mBtu), $7 per mBtu more than Iranian gas, the question mark over both affordability and the order of priority becomes obvious. Saudi petrodollars were supposed to provide conclusive answers to both those questions, but the new found animosity between Riyadh and Doha has once again thrown the cat among the pigeons.

For, since the Saudi riyal-politics is forcing Pakistan into abandoning any ties with Iran – and in turn the pipedream of the Iran-Pakistan gasline – and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline being a fragment of South Asian delusion owing to volatility in Afghanistan, LNG import seems to be the final roll of the dice for Pakistan.

Enter New Delhi

While Islamabad has been busy negotiating gas price with Doha, New Delhi has been busy importing LNG from Qatar for around $10-12 per mBtu. This when juxtaposed with the $18 per mBtu that Doha is demanding from Islamabad, in addition to a 15-year supply contract sans price reopener with a $200 million penalty for termination, suggests that Qatar might be exploiting Pakistan’s desperation. A fact vindicated by their demand for the gas price to be fixed for the aforementioned decade and a half as a percentage of Brent. This is a deal that would be impossible for the government to agree upon, considering Qatar’s agreement on the other side of the Eastern border and the fact that Islamabad’s signature would make Pakistan’s economy hostage to Qatar’s demands – and escalating oil prices – for the next 15 years.

Any agreement with Qatar without incorporating annual price review would border on being financially suicidal.

Cold war in the desert

The latest divide among the GCC, seems to be heralding the dawn of a cold war in the region, one that has ideological, geostrategic and diplomatic prongs. Qatar’s bond with the Muslim Brotherhood and antagonism towards authoritarian dictators in the region has brought a new bone of contention to the region that has been accustomed to dealing with the Shia-Wahabi division. Qatar seems to be using Muslim Brotherhood ties to back populism in countries like Egypt, Tunisia and Libya, which pinches Saudi Arabia. The Saudis can bear with secular authoritarianism in the region, but they are inherently antagonistic towards any form of populism. And after spending decades countering Khomeinist Shiism, Saudi’s having to counter a hitherto unknown species: democracy.

As this Middle Eastern cold war orchestrates diplomatic reshuffles in the region, Pakistan anxiously awaits the latest script that it would have to act out in the Arab world. However, what seems unlikely is that the script would have any answers to Pakistan’s energy woes, unless Islamabad can carve out a diplomatic opening towards Doha.

Abbasi’s ambitions

Shahid Khaqan Abbasi has been doing his best to suggest that Pakistan will solve its gas crisis in line with its self-interests.

“No contract has been signed with anybody for the purchase of energy. Similarly, no issue of price fixation for energy has been discussed with anybody. We are going to procure LNG on the lowest price. Therefore, speculations for any other agreement or energy purchase are baseless,” he informed the House in response to points raised by the members,” Abbasi said.

The minister for petroleum and natural resources is also adamant that Pakistan would not be paying a dollar above the market price for LNG as Islamabad vies to bridge two billion cubic feet worth of gas deficit. “We are going to procure LNG on the lowest price. Therefore, speculations for any other agreement or energy purchase are baseless,” the minister said.

How exactly he’s planning on doing that remains unclear.

With Pakistan producing half of its power through gas, further gas shortage would lead to even more power outages. And now with the Saudi-Qatar rift making LNG import difficult if not improbable, the government seems to have no alternative plans. Even if the government manages to strike a deal with Doha, paying over the odds and agreeing to Qatar’s demands seem to be the likely scenario.

So it’s either staring at a blank white board of gas alternatives, or gift wrapping Pakistan’s economic sovereignty to Doha and global crude prices. The devil, the deep sea and all that.