Why The UAE Gave Pakistan An Oil Concession For The First Time Ever
The Abu Dhabi National Oil Co (ADNOC) is the key corporate proxy at the centre of the U.S.’s Middle East pushback against increasing Chinese and Russian influence across the region via their activities in Iran (and Iraq).
The awarding of exploration, development, and ancillary contracts for its onshore and offshore oil and gas fields is a principal mechanism by which ADNOC is used to promote engagement with countries regarded as ‘in play’ by Washington. A longstanding prime example of this is Pakistan and the awarding last week of the first ever oil concession to it by the UAE can be regarded as a signal that despite its history of double dealings with the U.S. over Islamic terrorism, Washington has not yet lost all hope that Islamabad can remain at least partly under U.S. influence.
The last major concession award, in the meantime, went in February to the U.S.’s long-term principal ally in the Asia-Pacific region, Japan, with Cosmo Energy Holdings Co. being granted a 100 per cent stake in the exploration phase of Offshore Block 4 in exchange for a US$145 million investment in the site. Last week’s award is also for a 100 per cent stake in the exploration phase – for Offshore Block 5 – and has been given to a consortium of Pakistan companies led by Pakistan Petroleum Ltd. (PPL) that accounts for around 20 per cent of the country’s total natural gas supplies and produces crude oil, liquefied petroleum gas and other natural gas liquids as well.
One such strategic aim that the U.S. has long been looking at pushing back to the front of its dealings with Pakistan is the seemingly unstoppable drift even further into Iran’s (and thus China’s and Russia’s) sphere of influence. Even before Al Qaeda leader, Osama bin Laden, was discovered by the U.S. living in Abbottabad in Pakistan, Washington had known for years that Pakistan was playing a double game with it. On the one hand, it was taking huge aid payments from the U.S. aimed at keeping terrorism at bay in the region but on the other offering sanctuary and support to many of the world’s most dangerous terrorist groups. However, Washington believed that this was a price worth paying to retain at least some say in Pakistan’s foreign policies. This was the opposite view to that taken when the U.S. unilaterally withdrew from the Joint Comprehensive Plan of Action (JCPOA) – ‘nuclear deal’ – with Iran in May 2018, after which not only did Iran become further out of control as far as the West was concerned but so did many other countries in the Shia Crescent, including Pakistan.
Later, in his inaugural speech as Pakistan’s new prime minister, Imran Khan called for improving ties with the country’s immediate neighbours, including Iran, from whose President, Hassan Rouhani, he also accepted an invitation for an early state visit to Tehran. Khan has stated since then that he is personally in favour of the game-changing Iran-Pakistan Pipeline (IPP) and has made it a priority project. It is this pipeline, and the current plans for it that do not involve it going through key U.S. ally, India, as had been part of the original discussions surrounding it, that is one of many key concerns for Washington in the context of Pakistan’s further drift towards the Iranian (and Chinese and Russian) sphere of influence. China has well-developed plans to integrate the IPP into the US$50 billion-plus China Pakistan Economic Corridor (CPEC) project, with Gwadar earmarked to be a key logistical node in China’s ‘One Belt, One Road Initiative’. Russia, meanwhile, sees the IPP as offering surrounding countries a viable alternative to the long-awaited and U.S.-backed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, the prospects for which have been further damaged by the recent U.S.’s withdrawal from Afghanistan. A pipeline for Iranian gas, and later oil, running through Central Asia remains a core strategy for Russia to exert its influence in the Middle East, and to consolidate its presence in central and Eastern Europe to the one side and in Asia to the other.