Pakistan, India, and Iran came one step closer this week to realizing a $7 billion natural-gas pipeline, a project that is likely to irk US policymakers trying to contain Tehran's nuclear ambitions.
Billed as a "peace pipeline" by the three countries, which are currently negotiating terms in Tehran, the project is designed to slake Pakistan's and India's soaring thirst for energy and strengthen regional cooperation. Pakistan, for one, says it can't afford to let the project fail.
But Washington says it can't afford to let the pipeline succeed, as the revenues would further Iran's alleged nuclear- weapons program. Analysts say this stance could backfire if it undermines Pakistan's key strategic function: fighting terrorism.
Key to that fight is sustained economic growth underpinned by ample supplies of natural gas, a resource that Iran has in abundance. "The only option we have is Iran," says Mukthar Ahmed, an energy adviser to Pakistan's prime minister. "We're talking about a serious crisis" if the pipeline project falls through.
As of this month, the project seemed a step closer to reality: feasibility studies were completed in early May, and the three countries hope to sign a construction agreement by the end of June. Iran has the world's second-largest natural gas reserves after Russia.
Washington has, accordingly, stepped up its diplomatic offensive in recent weeks, from private conversations with leaders in Pakistan and India to robust public statements.
In April, the US Embassy's charge d'affaires in Pakistan, Peter Bodde, told reporters that "we will continue our opposition [to the pipeline]. At the same time, Pakistan should put more focus on finding means for alternate energy resources, such as from coal or wind or solar energy."
Members of Congress have also bared their teeth. In March, Ileana Ros-Lehtinen, the ranking Republican member of the House Foreign Affairs Committee, suggested that foreign governments investing in Iran's energy sector should be targeted with sanctions.
Few analysts say that the US would yank aid from Pakistan at a time when President Pervez Musharraf – seen by the Bush administration as a bulwark against extremism – is facing the worst crisis of his political tenure.
"It's more likely that Washington would make a lot of noise about scrapping this aid but, if or when the pipeline project goes ahead, would really find some other way of retaliating, perhaps imposing new restrictions on the export of certain types of US technology or weaponry to Islamabad," Roger Howard, author of 'Iran Oil: The New Middle East Challenge to America', writes in an e-mail.
Islamabad insists that it will go ahead. "Our public opinion, our governments, our people want us to pursue our national interests, and we will pursue that," Prime Minister Shaukat Aziz told reporters when asked about US resistance. The pipeline means more to Islamabad than gas; it's building relations with frosty neighbors.
"This is the one point at which things [between India and Pakistan] are being discussed in a businesslike manner, and that's good," says Najmuddin Shaikh, a former foreign secretary of Pakistan.