It has two ship based power plants moored in Port Qasim and on April 5 both were banned from sailing out. ‘No talks till the restraining order issued by Supreme Court is removed’ the Turkish company told Islamabad. It has also served notice that if Pakistan fails to act quickly, it will opt for international arbitration.

For the Pakistan leaders, who loved the homilies of Prime Minister Erdogan on good governance and good politics, Karkey notice was a shocker. This is not what they expected from Erdogan, who was invited to give a blunt message for and by the political, government and   army leaders. In fact, with the visit, Islamabad elevated Turkey to the exalted status hitherto enjoyed by America and Saudi Arabia and in the process hoped to shine in the reflex glory of Istanbul which loves to be the bridge between the Muslim world and the West.

So, the message from Karkey notice is clear. In the global village of 21st century, politics and economics don’t mix and when they mix they don’t care for friends – new or old with all the focus on the bottom line.

Facing this reality the hard way, Pakistan’s first priority is to ward off international arbitration. A senior official of Ministry of Water and Power said they had been recently served the notice of international arbitration.

The notice served on May 19 seeks compensation for the losses arising out of – what it says – violation of the Rental Service Contract (RSC).  Its contention is that Pakistan has violated the obligations of investment treaty between Pakistan and Turkey, and that the breach of contracts pertaining to rental power plants is also in violation of international law.

Fear within the government is that the case may go against Pakistan as the contract was cancelled arbitrarily in the wake of allegations of financial irregularities and kickbacks in the deal.  The government has since initiated talks for an out of court settlement plan. The discussions held on May 17, 18 and 19 made no headway.

On the basis of 14% of rental fee, Karkey should get $ 80 million as payment. But it has been paid thus far around $43.20 million as rent. The net value of units supplied by Karkey is $26.96 million. Fuel bill works out to $9.69 million, which also has to be paid.

Karkey is peeved by the notice slapped by the National Accountability Bureau (NAB). The notice sought a deposit of over $180 million pending completion of an inquiry into the RPP scam initiated under the directions of the Supreme Court.  The Turkish company summarily refused to deposit the amount. In retaliation, NAB issued an order freezing Karkey’s bank accounts in Pakistan. Simultaneously, the Port Qasim Authority directed that Karkey vessels should not move from their moored position until completion of the NAB inquiry, or before clearance from NAB.

Pakistan government has refused to lift the Port restraint order to date, which has mudded the case further

Turkey government is fully in the picture, though it has not come upfront per se. “Karkey has been advised to stay away from any negotiations and to only follow the advice of Turkish government,” Karkey representative reportedly told a water and power ministry official. And the advice is that there be no let up in pressure till the restraining order on the two ships is removed.

It means the government in Islamabad has little elbow room to act. It also cannot hope to invoke fraternal ties for bail out.

Yet, die-hard optimists in Islamabad are not giving up hope. They want the political executive to tap its contacts in the Turkish capital and get ‘some comfort level’ in the negotiations for a settlement. It means that the Turkish government be requested to nominate a person to be part of a two-member committee, the other member being the secretary water and power government of Pakistan, to deliberate and reach a solution which could be the basis of a full and final settlement of Karkey deal.