Iran-Pakistan Oil pipeline, its financial dynamics and the Role of RUSSIA - My Article for TheNews

[AsifAmeer]

This was 1 of the threads that was deleted by the great Siasat.pk holocaust. I will resurrect the idea which is more relevant today!


Iran-Pakistan Oil pipeline, its financial dynamics and the Role of RUSSIA
March 2nd, 2012

http://blogs.thenews.com.pk/blogs/2012/03/02/state-crony-capitalism/



Recently Iran agreed to export 80,000 barrels crude per day to Pakistan. Pakistan requested a loan of $500 Million from Iran for the pipeline to be built. Iran refused for $500 million but agreed for half the amount – $250 million. This loan of $250 million doesn’t have the interest rate decided or the loan repayment length. The fun does end here. Russia is “pressuring” Pakistan to award a $1.2 Billion Oil Pipeline ‘no-bid’ contract to Gazprom, a Russian firm that has used its economic clout for political gains in Europe.


Let’s try to understand what’s happening here.

• Iran is going to loan $250 Million for IP pipeline to Pakistan
• Russia wants $1.2 Billion to build the pipeline for Pakistan
• Pakistan will import $292 million of crude from Iran every month.

So what is Pakistan giving in return? The answer is – I don’t know. And here’s why I say this

• Pakistan owes a total of $130 billion, local and foreign
• Pakistan has a trade deficit of about $1.5+ Billion per month i.e. its importing 66+% more than its exporting
• Repayment of $2.3 billion (1.5 billion SDR) to the IMF is due this year. You will witness a 15% drop in the PKR value by or before summer.

So how do we solve the huge debt, the huge trade imbalance and rupee depreciation? Simple! Take on more debt, use that debt to build infrastructure to boost imports and then reduce the price of imports by subsidies financed by money printing! The general public is completely complacent in these decisions. The public protested the rise in oil prices. The public demanded and welcomed the recent subsidies. And I can only assume the response from the public to this Iran Pakistan Oil pipeline is going to be ‘encouraging’. Never mind the consequence of influence of these both countries, Iran and Russia, will play in the internal affairs of Pakistan when the debt bill comes due. There is a saying “When you borrow money from the Russians, you are lending your soul”. For Pakistan, there will be no room left for soul-searching. That too would have been collateralized.


Last year I read a book by Michael Lewis – “Boomerang – Travels in the New Third World”. The author tried to understand the mindset of citizens of different countries. What surprised me was the stark resemblance between Greece and Pakistan (without the law & order situation). I will quote a paragraph from his book.


“What happened in Greece — when the Greek people were left alone in a dark room with a pile of money — what they really wanted to do was bloat the state. Because they had this very perverted relationship to their own government — it was a kind of pinata filled with goodies that everybody got a crack at.”


Fact of the matter is the only reason why there are riots in Greece before Pakistan is because Greece doesn’t control its own local currency. Greece cannot print money and inflate away its debt, unlike Pakistan. If Pakistan hadn’t been bailed out by the IMF in 2008, you would have seen the greek scenes on the streets of Karachi and Lahore.


Pakistan is considered to be the world’s 6th largest population, representing about 3% of the world’s population. Its share of GDP in the World Economy – 0.25%. To put it in simple terms, Pakistan is consuming about 10 times more than it is producing. So who’s providing the rest? The International Economy. Pakistan has truly given a new meaning to the word – “A Welfare State”

 

[gazoomartian]

This was 1 of the threads that was deleted by the great Siasat.pk holocaust. I will resurrect the idea which is more relevant today!


Iran-Pakistan Oil pipeline, its financial dynamics and the Role of RUSSIA
March 2nd, 2012

http://blogs.thenews.com.pk/blogs/2012/03/02/state-crony-capitalism/



Recently Iran agreed to export 80,000 barrels crude per day to Pakistan. Pakistan requested a loan of $500 Million from Iran for the pipeline to be built. Iran refused for $500 million but agreed for half the amount $250 million. This loan of $250 million doesnt have the interest rate decided or the loan repayment length. The fun does end here. Russia is pressuring Pakistan to award a $1.2 Billion Oil Pipeline no-bid contract to Gazprom, a Russian firm that has used its economic clout for political gains in Europe.


Lets try to understand whats happening here.

• Iran is going to loan $250 Million for IP pipeline to Pakistan
• Russia wants $1.2 Billion to build the pipeline for Pakistan
• Pakistan will import $292 million of crude from Iran every month.

So what is Pakistan giving in return? The answer is I dont know. And heres why I say this

• Pakistan owes a total of $130 billion, local and foreign
• Pakistan has a trade deficit of about $1.5+ Billion per month i.e. its importing 66+% more than its exporting
• Repayment of $2.3 billion (1.5 billion SDR) to the IMF is due this year. You will witness a 15% drop in the PKR value by or before summer.

So how do we solve the huge debt, the huge trade imbalance and rupee depreciation? Simple! Take on more debt, use that debt to build infrastructure to boost imports and then reduce the price of imports by subsidies financed by money printing! The general public is completely complacent in these decisions. The public protested the rise in oil prices. The public demanded and welcomed the recent subsidies. And I can only assume the response from the public to this Iran Pakistan Oil pipeline is going to be encouraging. Never mind the consequence of influence of these both countries, Iran and Russia, will play in the internal affairs of Pakistan when the debt bill comes due. There is a saying When you borrow money from the Russians, you are lending your soul. For Pakistan, there will be no room left for soul-searching. That too would have been collateralized.


Last year I read a book by Michael Lewis Boomerang Travels in the New Third World. The author tried to understand the mindset of citizens of different countries. What surprised me was the stark resemblance between Greece and Pakistan (without the law & order situation). I will quote a paragraph from his book.


What happened in Greece when the Greek people were left alone in a dark room with a pile of money what they really wanted to do was bloat the state. Because they had this very perverted relationship to their own government it was a kind of pinata filled with goodies that everybody got a crack at.


Fact of the matter is the only reason why there are riots in Greece before Pakistan is because Greece doesnt control its own local currency. Greece cannot print money and inflate away its debt, unlike Pakistan. If Pakistan hadnt been bailed out by the IMF in 2008, you would have seen the greek scenes on the streets of Karachi and Lahore.


Pakistan is considered to be the worlds 6th largest population, representing about 3% of the worlds population. Its share of GDP in the World Economy 0.25%. To put it in simple terms, Pakistan is consuming about 10 times more than it is producing. So whos providing the rest? The International Economy. Pakistan has truly given a new meaning to the word A Welfare State

very good. This time, it did not go over mah head lol

Your thoughts, analysis, writings, and true comments about our country gives me a notion that you would be a good Economic Adviser. Hang around, I MIGHT make you that for my govt unless some one else's resume is even more impressive.

Gazoo

 

[cefspan]

very good. This time, it did not go over mah head lol

Your thoughts, analysis, writings, and true comments about our country gives me a notion that you would be a good Economic Adviser. Hang around, I MIGHT make you that for my govt unless some one else's resume is even more impressive.

Gazoo

Gazoo Chaha ! He's The Best Financial Analyst I Ever SAW On A Forum .

" This was 1 of the threads that was deleted by the great Siasat.pk holocaust. I will resurrect the idea which is more relevant today! "


:lol::lol::lol::lol: I Guess Siasat.pk Admin Needs To Elevate Its Standards .

 

[cefspan]

• Pakistan has a trade deficit of about $1.5+ Billion per month i.e. its importing 66+% more than its exporting
• Repayment of $2.3 billion (1.5 billion SDR) to the IMF is due this year. You will witness a 15% drop in the PKR value by or before summer.

Pakistan is considered to be the world’s 6th largest population, representing about 3% of the world’s population. Its share of GDP in the World Economy – 0.25%. To put it in simple terms, Pakistan is consuming about 10 times more than it is producing. So who’s providing the rest? The International Economy. Pakistan has truly given a new meaning to the word – “A Welfare State”

OOOOO MYYYYY GAAAAAAAAAAAAAAAAAAAAAAAAAAAAATTTTTTTTTTTTTT !


What The Heck ?


President = Mr 110 %
PM = A Drug Dealer

[ HOPE LESS ]

 

[Unicorn]

@AsifAmeer , Oil flowing through pipes will drastically cut down the cost of transporting the oil. A 500 Million loan to link oil to major consumer centers is well worth the cost. I think its the Saudis and Americans who are against it.

I don't understand the Russian connection in this. What kind of clout Russia has on Pakistan?, obviously it has no clout on Iran.

 

[TruPakistani]

[MENTION=24375]AsifAmeer[/MENTION]

A friend sent me this article about the Pak-Iran pipeline.
It's a bit lengthy, but do have a look.

You can download it from here.

http://www.mediafire.com/?06pzj9rc14b7fqm

 

[Temojin]

This doesn't only end here, right asif?

 

[AsifAmeer]

This has some very detailed insights. Plus this is talking about a "GAS" pipeline and then later adding an overhead capacity to move oil as well. I thought that the whole deal was a $1.2 billion but thats just the "Add-on" cost! But the total cost of this GAS + OIL line is over $9 billion! The more I read about it, the more I feel I would throw up. Still going thru the article. I wish ordinary Pakistanis read and understood this stuff.. Zardari and Co wouldnt have survived 1 month in power..

Thanks for sharing!

@AsifAmeer

A friend sent me this article about the Pak-Iran pipeline.
It's a bit lengthy, but do have a look.

You can download it from here.

http://www.mediafire.com/?06pzj9rc14b7fqm

 

[AsifAmeer]

Unicorn, you didnt have your breakfast today. I can feel it. So... I will come and eat your lunch for ya.. Apologies in advance

>>Oil flowing through pipes will drastically cut down the cost of transporting the oil
Since Pakistan is broke, it cant fill its car tank. To fix this problem, Pakistan will get a loan to buy a new Benz. You're suggesting that if we buy the manual transmission, we will save money.

What I am suggesting is for Pakistan to wake up!
Power generation via OIL will bankrupt Pakistan. Oil will wipe out Pakistan's national balance sheet. Get off from oil.

What then?
Here!

These are called marine turbines built by Siemens. Ireland has already started deploying them. They are much more efficient than windmills and has a higher power density. Underwater moving currents move these giant turbines. Let the INDIAN oceans' tidal waves power Karachi. Imagine if Karachi and coastal cities of Balochistan can be put on tidal power. Sure its not going to be cheap.. lekin Pakistan is already wasting BILLIONS on a construction of gas lines via IRAN.

@AsifAmeer , Oil flowing through pipes will drastically cut down the cost of transporting the oil. A 500 Million loan to link oil to major consumer centers is well worth the cost. I think its the Saudis and Americans who are against it.

I don't understand the Russian connection in this. What kind of clout Russia has on Pakistan?, obviously it has no clout on Iran.

 

[AsifAmeer]

Gazprom is like the EAST-INDIA Company under the Russian flag. They sell tea-bags (yeah..sure)

@AsifAmeer , Oil flowing through pipes will drastically cut down the cost of transporting the oil. A 500 Million loan to link oil to major consumer centers is well worth the cost. I think its the Saudis and Americans who are against it.

I don't understand the Russian connection in this. What kind of clout Russia has on Pakistan?, obviously it has no clout on Iran.

 

[AsifAmeer]

Gazoo... all this stuff is for free my friend. Commitments scare me! ;) lol.. therefore single.. But you are more than welcome to ask for my input on anything. The honor will be mine..

very good. This time, it did not go over mah head lol

Your thoughts, analysis, writings, and true comments about our country gives me a notion that you would be a good Economic Adviser. Hang around, I MIGHT make you that for my govt unless some one else's resume is even more impressive.

Gazoo

 

[AsifAmeer]

Calling me the best financial analyst would be unfair. You see almost all the best financial analyst were completely wrong about the 2007 bull market.. I was partially wrong .. So that makes me a bit better than the best! lol..

On a serious note, I appreciate your confidence in me. I try to keep things simple. Personally I dont like the uselessly complicated jargon. Hope you find my posts knowledgeable and worth the time.

Gazoo Chaha ! He's The Best Financial Analyst I Ever SAW On A Forum .

" This was 1 of the threads that was deleted by the great Siasat.pk holocaust. I will resurrect the idea which is more relevant today! "


:lol::lol::lol::lol: I Guess Siasat.pk Admin Needs To Elevate Its Standards .

 

[AsifAmeer]

Germany is being given $250million (which WILL be borrowed from Iran) to do a "survey" on the line's construction and its cost. Its like taking your car to a petrol pump and getting an estimate for Rs 3000 how much money would it take to fill up your tank..

As far I am concerned, this ended before it even started. But its Pakistan, it wont end even after it has ended. Look at Kalabagh. That project has been talked about since the times of the Mughals!

This doesn't only end here, right asif?

 

[Unicorn]

Unicorn, you didnt have your breakfast today. I can feel it. So... I will come and eat your lunch for ya.. Apologies in advance

>>Oil flowing through pipes will drastically cut down the cost of transporting the oil
Since Pakistan is broke, it cant fill its car tank. To fix this problem, Pakistan will get a loan to buy a new Benz. You're suggesting that if we buy the manual transmission, we will save money.

What I am suggesting is for Pakistan to wake up!
Power generation via OIL will bankrupt Pakistan. Oil will wipe out Pakistan's national balance sheet. Get off from oil.

What then?
Here!

These are called marine turbines built by Siemens. Ireland has already started deploying them. They are much more efficient than windmills and has a higher power density. Underwater moving currents move these giant turbines. Let the INDIAN oceans' tidal waves power Karachi. Imagine if Karachi and coastal cities of Balochistan can be put on tidal power. Sure its not going to be cheap.. lekin Pakistan is already wasting BILLIONS on a construction of gas lines via IRAN.

I agree with you Pakistan can reduce the dependency on oil, as a matter of fact US and many others could do the same, by doing what you have suggested but some oil still have to be imported. I thing an internal combustion engine is going to be around for a while.

 

[Temojin]

Germany is being given $250million (which WILL be borrowed from Iran) to do a "survey" on the line's construction and its cost. Its like taking your car to a petrol pump and getting an estimate for Rs 3000 how much money would it take to fill up your tank..

As far I am concerned, this ended before it even started. But its Pakistan, it wont end even after it has ended. Look at Kalabagh. That project has been talked about since the times of the Mughals!

Its all about kickbacks and both the countries, iran and Pakistan are sufficient in this field. The only difference here is that iran's government is playing it in a way that it gets benefited while its people get kickbacks too and we are at the same platform as we have always been.

Now the thing here is that if you know about these issues, doesn't the emerging party a.k.a PTI know it? Why wouldn't it speak a word about it and drag the government in the court of law? Why has everything to be associated with obtaining power only. Whenever I see this and many other contradictions, I want to ask my mates to see the actual picture. The rule will again be of those who have been ruling us since 6 decades, only this time, more bread will be thrown on the floor so we get less hurt while picking it up.

Want to write more but what is the benefit?

 

[Keepinformed]

There are a few more hurdles to action in the given scenario such as

1. Nearly all Arab countries are against Iran. Like Pakistan, Iran also specializes in making enemies of every one around it.

2. The new bank wire transfer restrictions. The funds have to be routed through London not Newyork and with these new limitations one is not sure how the money would be transferred over unless they work out a currency swap agreement of some sort or perhaps use SDRs (if the jurisdiction of american trade restrictions does not apply to it).

3. The news item which remains to be seen is what US is finally going to do in order to really step up the game and assert its influence considering the ground reality of massive trade activity already being done by China and India with Iran.

The land of Pakistan is an underdog when it comes to Iran and the global politics of power declaration.

 

[AsifAmeer]

BLASPHEMY!! You speak against our Gods! Damn you! There'll b heck to pay.. I tell you.. HECK to pay!

Its amazing how EMOTIONAL Pakistanis are. I know 1 thing about emotions. As a trader, I noticed I am more emotional when I am less informed. Less the emotion when more the information.

PTI is an organization with different heads or different professions and aims and motives. All these objectives take a very interesting form in a collective way. I was talking to a friend of mine about Exxon Mobil and it was an interesting conversation. Exxon is a huge company. It has Engineers, MBAs, Finance guys, Oil traders, Lobbyists, politicians and Accountants running this huge firm. Every profession will have a unique approach to the business. Accountants wouldnt wanna spend any more than needed to run status quo. Engineer want every penny spent on RnD. Trader would want production & RnD reduced to maximize profit from existing inventory. MBAs wud b looking at the same firm as an Energy firm rather than an Oil Company.. See the point? Every profession will have its own approach to the same business. Now imagine politics. Even if IK has a vision, it almost impossible steer the party single-handedly.

Its all about kickbacks and both the countries, iran and Pakistan are sufficient in this field. The only difference here is that iran's government is playing it in a way that it gets benefited while its people get kickbacks too and we are at the same platform as we have always been.

Now the thing here is that if you know about these issues, doesn't the emerging party a.k.a PTI know it? Why wouldn't it speak a word about it and drag the government in the court of law? Why has everything to be associated with obtaining power only. Whenever I see this and many other contradictions, I want to ask my mates to see the actual picture. The rule will again be of those who have been ruling us since 6 decades, only this time, more bread will be thrown on the floor so we get less hurt while picking it up.

Want to write more but what is the benefit?

 

[AsifAmeer]

Dude where u been? I dont see u on twitter.. Whats happening on ur side?

I wanted to share this with u. I dont quite understand these figures. It possibly cant be that bad... If reality is the way these docs show, why havent the shorts pilled on against the SBP? What are we missing here?

and

There are a few more hurdles to action in the given scenario such as

1. Nearly all Arab countries are against Iran. Like Pakistan, Iran also specializes in making enemies of every one around it.

2. The new bank wire transfer restrictions. The funds have to be routed through London not Newyork and with these new limitations one is not sure how the money would be transferred over unless they work out a currency swap agreement of some sort or perhaps use SDRs (if the jurisdiction of american trade restrictions does not apply to it).

3. The news item which remains to be seen is what US is finally going to do in order to really step up the game and assert its influence considering the ground reality of massive trade activity already being done by China and India with Iran.

The land of Pakistan is an underdog when it comes to Iran and the global politics of power declaration.

 

[Temojin]

Its amazing how EMOTIONAL Pakistanis are. I know 1 thing about emotions. As a trader, I noticed I am more emotional when I am less informed. Less the emotion when more the information.

Splendid! Summed it all up. As a child, I had the good fortune to be with big names and really knowledgeable people all the times and our sitting room was a place for hot discussions going on each minute where only facts were spilled and when I got to be 10, I too started to participate fully yet I got emotional easily. When my old man and his mates smilingly said, beta koi baat nahi samajhtay jaoge jab pata chalta jayega phir gussa kam hota jayega, I couldn't understand at that point in time but at this moment, I know what your sentence exactly means here. But the issue with all amongst us is that generally blokes don't know much so they would go on with their emotional rant that too, non-stop so eventually it some times gets us worked up too as we are all humans and to err is human. I then sit down and condemn myself for getting indulged in a superfluous dialogue.

 

[Keepinformed]

Dude where u been? I dont see u on twitter.. Whats happening on ur side?


I wanted to share this with u. I dont quite understand these figures. It possibly cant be that bad... If reality is the way these docs show, why havent the shorts pilled on against the SBP? What are we missing here?

Asif


Hi. Been visiting the website once a while, mostly for the political shows. Cannot say, I am big fan now but for entertainment, look for shows that have Shiekho, Hasan Nisar in it. For informational items, watch Najam Sethi from time to time.


No idea why I have stopped using twitter. Perhaps because A. I do not have enough followers or B. The headache involved with keeping up with what everyone else is doing is quite cumbersome, considering the same time can be used else where, perhaps in coming up with new money making ideas or thinking about naked women.


The last question regarding shorts, my closest guess is that shorting rupee has been in full swing since the recent downfall from 80 to 90 per dollar. In the past, the case has been the same. The opposite force is 1. Remittances 2. Exports of Cotton 3. Exports in general 4. The massive population and its continuous demands for products and services. An interesting example below can explain it in perspective ...


In karachi alone there are 20 million customers and now assuming every one needs 6 naans per day and each naan costs 8 rupees that is Rs 960,000,000 ($10 Million Dollars) worth of naan transactions per day. Now being a smart person, guess out the food transactions on daily basis just in Karachi and the demand of rupee that results from it.


The internal demand of rupee is one of the reasons preventing the wild slide.


High population countries can never be long term shorts simply because of the overall demand. The money for the repayment of loans can be obtained from within the economy and if not we are just a phone call away from assured assistance.


.......above were just my opinions. If you ask me if I personally would invest in Pakistan, the answer would be NO. For me the reasons are 1. Personal and business security 2. Problems with finding the right people for the right job at one place (dispersed talent) 3. Religious suppression 4. Trust issues because of high intensity of Pakistanis in general to cheat.


For me Pakistani rupee is a short but for Pakistan itself its a long term buy as when things come out of the wild wild west mode, all current investments in Pakistan would reap solid rewards for the men of dare.