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Iranian Oil Refinery

Brian Hicks

Written By Brian Hicks

Posted February 26, 2013

When I read about Iran’s plan to build of a $4 billion oil refinery in the heart of Gwadar, I knew the U.S. would not be far behind with the usual threat of sanctions.

Under the negotiations, the Iranians would trade the oil for food supplies. Iran will also be issuing a $500,000 loan to Pakistan, and the nation will help in the construction of a $1 billion oil pipeline between the two countries with a 15 month time frame of completion.

Not a bad deal, right?

It seems the gears are all in motion, with Pakistan President Asif Ali Zardari headed to Iran to hammer out the specifics. The project could begin as early as December 2014. Pakistan may also receive help in upgrading its railway system for the purpose of transporting trade products with more efficiency.

The city of Gwadar is a small city in the southwestern part of Pakistan. Having a refinery in Gwadar would allow “400,000 barrels of oil per day” to flow into Pakistan, according to Fars News Agency.

Pakistan would save money in oil imports, and there would be a stable energy presence within the country.

Iran’s oil exports have been heavily restricted due to sanctions. As a result, there have been widespread food shortages. The fact that Iran is willing to trade oil for food reveals how desperate the nation is becoming.

Even though Iran has a right to conduct business where it pleases, this is not to say officials have no ulterior motive in the deal, and perhaps they do. Perhaps they hope to gain influence in Pakistan while irking American leaders at the same time.

It is hard to tell, and no one can jump into the minds of Iranian politicians. However, no one can ignore the fact that Iran has been a major power-broker in the Middle East. It would only make sense for the nation to conduct oil-related business deals since it is an oil-rich nation.

Place yourself in the shoes of Iranian leaders.

Contrary to popular belief, sanctions do work— not on the leadership, but on the general populace. It is everyday people who bear the brunt of a sluggish economy and a shortage of products and food.

If you were one of the leaders of Iran, wouldn’t you do everything possible to feed your people, not only for the purpose of helping them, but in order to foster stability within?

Every government, no matter how despotic, relies on support and compliance from the people. With Arab Spring fever running rampant across the Middle East, the clerics are looking for ways to maintain order. Social and political turmoil could follow if these food shortages continue.

It’s nothing personal; it’s just business.

Isn’t that the old cliché? However, the cliché is an apt description in the case of Pakistan and Iran.

Bottom line, both nations have demands. Pakistan needs the energy, and Iran needs food supplies. There seems to be nothing insidious behind this business alliance—only two nations who are willing to trade in order to produce security and food for their nations.

Where does the U.S. fit into all of this?

Geo-politics stands in the way of business and energy investment in the Middle East. The U.S. is making veiled threats of sanctions on Pakistan if they continue to deal with the Iranians.

From the Business Line:

“Amidst reports of Iran building an oil refinery inside Pakistan and a joint gas pipeline project, the United States today cautioned Islamabad against activities that are ‘sanctionable’ under US laws.”

This threat should come as no surprise given the persistent saber-rattling from the West regarding Iran’s nuclear capabilities.

However, the Iran-Pakistan deal is not a political strategy but a business one. The U.S. claims there are alternative means of bringing more energy to Pakistan, but there have been no concrete ideas, and American-led projects on energy efficiency in Pakistan have not been successful.

If the U.S. hopes to dissuade Pakistan from dealing with Iran, America might be better off competing in earning Pakistan’s business instead of threatening them with sanctions.

So far, Pakistan shows no sign of wavering with the refinery deal, nor should they.

An oil refinery is not the most progressive way of supplying energy to citizens, but the U.S. has no right in dictating how Pakistani leaders choose to supply energy to their people.

There have been alternative proposals by the U.S. government, including a 900-megawatt upgrade to the Pakistani power grid.

The United States gives billions of dollars in aid to Pakistan each year for the purpose of fighting extremists. Most of that aid money goes to the Pakistani military rather than investments or supplying essentials to the populace.

And the last thing a war-weary Congress wants to hear are proposals that will help another nation solve its energy problems when there are more than enough infrastructure issues at home. In other words, Pakistan should not expect help from the Americans anytime soon when it comes to energy needs.

Energy and infrastructure in Pakistan is strictly an internal matter for government leaders to handle. But the U.S. is so blinded by bluster and machismo against Iran that no other nation can peacefully deal with the nation without facing repercussions.

Recently, Pakistan underwent a national blackout for two hours. Given the rising tide of poverty, power outages are a daily part of life in Pakistan and many parts of the Middle East.

Regardless of how the U.S. government may feel about the Iranian government, leaders have a right to foster business relations abroad while doing what is best for their people.

Multiple factors are holding back energy investment throughout the region, including Western fears of Iran attaining nuclear weapons. Trying to sway Pakistan through threats, however, would only exacerbate tensions with the West.

America is trying to squeeze Iran to the point of desperation. A business deal with Pakistan would be seen as rewarding Iran, and U.S. officials are aiming to keep the Iranian leadership as isolated as possible so they would be forced back into the fold of nuclear talks.

Is there a solution for addressing energy needs in the Middle East?

The answer is a most emphatic yes.

It is hard to believe that a region with the most concentration of oil still suffers from regular power outages and lack of infrastructure. However, it is well known that most of the oil in the Middle East is exported to the West, and elites in the form of monarchs, presidents and prime ministers pocket most of the profits while doing little for their countrymen.

The oil refinery deal with Pakistan could be a model for how the rest of the region brings more energy to average people. Such a deal should be viewed as a possible means to solve problems instead of being scorned and frowned upon.

Until then,

Jon Carter

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