Jun 052008

Pakistan is occupying a valley between mountains of supply in the west, and peaks of demand in the east. Although virtually every country in Asia routinely claims to be “where East meets West”, Pakistan has a solid claim to the title

The current age of globalisation, which I date roughly from the early to mid-1980s, is characterised by the prominence of financial flows in the flow of wealth between countries. Indeed, the image of modern globalisation is one of stock rooms and imposing high-rises, of obscure financial terms and mystical vacillations in the economy.

It is worth remembering that there is in fact a real international economy, based on the trade of actual goods and services. Although it may seem anachronistic to do so, I would like to draw attention to the material flows of two commodities. In particular, I want to point out how flows of energy in the foreseeable future interact with the geo-spatiality of the Pakistani state.

I have in front of me two maps, which display the global flows of two commodities in the Eurasia-North Africa region. Arrowheads point in the net direction and the thickness of the arrow is proportional to the volume of flow. There are striking similarities between the two, despite the vastly divergent commodities they map.

The first map is from the United Nations Office on Drugs and Crime’s (UNODC) latest World Drug Report, and depicts the international flows of cannabis resin (better known as hashish). The second is a map prepared by a French energy consultancy, depicting natural gas supply and demand. Both maps show thick arrows emanating from North Africa and Asia and plunging helplessly into West Europe.

The gas map has, in addition, several monstrous snakes stretching from east Russia into West Europe, and a smaller, innocuous caterpillar linking Norway. That both maps show similar patters in this respect is not surprising — the raw consumption power of West European has a magnetic pull that the commodities of the hemisphere simply cannot resist.

If the map depicting natural gas showed projected flows for the next 10-15 years, there would be another striking similarity. Pakistan occupies the same position, in geo-spatial terms, for the global production network of both hashish and natural gas: a transit space.

As there is probably very little political support for the legalisation of hashish, both inside and outside Pakistan, it is pointless to discuss how national strategy could be aligned to take advantage of the crucial role our space plays in the global supply chain of this commodity. As an aside, however, the significance of hashish should not be lightly dismissed. The UNODC reports that 94 tons of hashish were seized (a fraction of the total volume) in Pakistan in 2005. That is worth roughly 55 billion rupees when sold in Western markets (in 2005, assuming a ton draws US$10 million) — or more than the combined value of Pakistan’s leather, woollen carpets and rugs, and sports good exports for that year.

The concept of a nation’s space as a natural resource is a tricky one. So far, the Pakistani military has been the only party actively engaged in selling Pakistan’s space — mainly to Americans, and as part of strategic alliances in global conflicts. The method of geopolitics has traditionally been associated with military or security studies. These studies, valuable as they doubtless are, tend to overshadow the non-military value of our geo-strategic space. For both hashish, groping for an ocean, and natural gas, struggling to migrate to high-demand areas, Pakistani space is key.

A combination of events in the global economic geography has conspired to deliver Pakistan a “windfall benefit”, to use the jargon of the oil and gas industry. These factors are the manifest energy crisis the world is facing, our own conspicuous lack of middle-class consumption power, and most importantly, the perpetually morphing economic terrain of the region. Pakistan is occupying a valley between mountains of supply in the west, and peaks of demand in the east. Also, the fact that natural gas can best be transported by pipeline is of no small import. Although virtually every country in Asia routinely claims to be “where East meets West”, Pakistan has a solid claim to the title, if evolving developments in the regional gas market are any indication.

The Iran-Pakistan-India pipeline is an obvious example of using this space to advantage. Although much has been said about the transit tariff, I want to focus instead on the strategic import pipelines have for Pakistan. Suffice it to say that the price India is asking us to settle for ($0.15/MMBTU) is not bad compared to other international examples I could dig up (Georgia receives about $0.03/MMBTU in transit fees from the Baku-Supsa oil pipeline). What is imperative is that the IPI pipeline actually gets built, and starts operating as soon as possible.

Pakistan should love pipelines. As natural gas technology advances, and liquefaction and gasification gets cheaper and cheaper, gas will become a fluid commodity, in the form of liquefied natural gas (LNG). For Pakistan, which is essentially just selling its space, keeping gas anchored to pipelines is clearly advantageous. Producers who gain leverage by controlling the flow of gas (Russia, for example) should also, geopolitically speaking, prefer the pipeline. Producers of natural gas and transit countries like Pakistan, Turkey, the Ukraine, and Georgia therefore have shared strategic imperatives about the evolving commodification of natural gas.

Of course, LNG will advance according to how attractive it is relative to pipeline. “Pipeline countries” should focus on improving pipeline technology, establishing consumer’s trust, and coming up with other incentives to keep pipelines attractive. In Pakistan’s case, this means coming to terms with the Balochistan problem, and urgently addressing the issue of how to establish a fair and functional federation.

Other concrete measures can be taken to ensure that we maximise our geo-spatial “manna”. First, we should stick to payment in-kind for transit fees. Given our corrupt bureaucracy and greedy politicians, the reason for this should be obvious. And second, we need to focus on regional alliances. This means we need to halt our bad neighbour policy; we need to stop meddling in Afghanistan, and flush our mindless antagonism with India down the toilet. On this last score, I am optimistic that as young people assume positions of influence in the country, foreign policy will be dictated less by chauvinism and more by smart statesmanship.

Statesmanship, while we are on the topic, is impossible without geographic knowledge of how we materially relate to our neighbours. We are but small fish in a sea full of sharks, and the art of statesmanship, not dangerous gambits like nuclear “deterrence”, will strengthen our nation in the future. To this end, geographic research aimed at understanding our place in the global economy, whether it informs about hash or gas, should be a top priority for Pakistan.

Majed Akhter is an economist based in Karachi. He can be reached at majed.akhter@gmail.com

Source: Daily Times, 5/6/2008

 Posted by at 8:04 am

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