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Delay in Zardari's visit raises questions over Iran gas project

12 December, 2012

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ISLAMABAD: President Asif Ali Zardari has delayed a visit to Iran to discuss a huge gas deal despite Tehran's offer of a loan to help finance a project which the US opposes, officials said Tuesday.

The $7.5 billion pipeline project has run into repeated difficulties – over US opposition because of Iran's nuclear activities and Pakistan's difficulty in finding funds. It was originally reported that President Zardari would visit Iran last Friday and that the final agreement would be likely signed during the visit. Pakistani officials denied that the visit had been cancelled, claiming it had never been officially scheduled due to Zardari's engagements in London and Paris.

"The visit may materialise on his way back from the ongoing foreign tour or he may visit Tehran after coming back home," a Petroleum Ministry official told AFP. Iranian officials said that the visit had been postponed at Pakistan's request and would happen "soon". "It has been agreed that the visit would take place with a bit of change. Iranian assistance to build the peace pipeline in Pakistan will be one of the issues on the visit's agenda," said Foreign Ministry spokesman Ramin Mahmanparast.

Negotiations are reaching a critical point, the Financial Times said, because it will take two years to build Pakistan's sections of the pipeline and Islamabad would have to start paying Tehran for the gas two years from now. The newspaper said an increasingly desperate Pakistan is struggling to overcome strong opposition to the project from the United States, which has clamped economic sanctions on Iran because of its nuclear programme.

In 2010 Iran and Pakistan agreed that Iran would supply between 750 million cubic feet (21 million cubic metres) and one billion cubic feet per day of natural gas by mid-2015. Islamabad has said that it will pursue the project regardless of US pressure, calling it vital to overcome the country's energy crisis that has led to debilitating blackouts and suffocated industry.

But in March, it was forced to review sources of funding after newspapers said a Chinese bank pulled out over fears that firms involved will face sanctions. Pakistani officials said on Tuesday that Iran had promised a $500 million loan and that Islamabad would meet the rest of its $1.6 billion share. "There are impediments in view of the US opposition to the project but we are determined to complete it to meet our fast-growing energy requirements," said one government official on condition of anonymity.

But the Iranian Foreign Ministry spokesman said Iran has confirmed it can finance at least $250 million, despite Pakistan asking for $500 million. "This is a technical issue," Mahmanparast said. Analyst Imtiaz Gul said the deal would probably be signed only if the United States backs down over its opposition to the deal, possibly in exchange for Pakistani cooperation on Afghan peace efforts.

Meanwhile, the All Pakistan CNG Association (APCNGA) has expressed optimism about the outcome of talks with OGRA officials, saying issues pertaining to the CNG sector would be resolved soon. A meeting was held on Tuesday between the OGRA officials and an APCNGA delegation led by its Supreme Council chairman, Ghiyas Abdullah Paracha. Ghiyas Paracha, in a statement, claimed that OGRA officials had accepted discrepancy in gas bills of the CNG filling stations and assured its resolution by December 13.

He said the CNG operators told the meeting, which took place on the directives of the Supreme Court of Pakistan, that the gas distribution companies were getting inflated price of gas for the last three years in violation of rules and regulations. Paracha said the OGRA officials were told that petrol pump business were entirely different as far as the expenses and other technicalities were concerned. Major investment in petrol pumps is made by the oil marketing companies, while the operators get commission and on the other hand, the CNG station owners have invested entire amount themselves, he said. Paracha also demanded uniform gas rates and similar taxation on all the sectors.


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