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Pak-Iran gas pipeline not possible due to US curbs

26 February, 2014

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ISLAMABAD: Pakistan on Tuesday said that work on a pipeline to import gas from Iran cannot proceed because of sanctions imposed by the United States and the European Union on Tehran.

The Iranian side of the $7.5-billion project is almost complete, but Pakistan has run into repeated problems paying for the 780-kilometre section to be built on its side of the border.

Last year, Pakistan had asked Iran for $2 billion in financing to build its side of the controversial gas pipeline.

Iran has the second largest gas reserves in the world but has been strangled by a Western embargo that has seen its crude exports halved in the past year.

US officials had earlier warned that the Iran-Pakistan pipeline project would risk triggering sanctions aimed at Iran.

Petroleum minister Shahid Khaqan Abbasi told AFP on Tuesday that the work on the pipeline was not possible because it falls under the sanctions imposed by the US and EU.

"The work on the Pakistan-Iran gas pipeline project is not possible because of the sanctions imposed by the US and EU," Abbasi said.

"This project is affected by the sanctions imposed," he told AFP without elaborating on how the sanctions could derail the project.

Iranian Oil Minister Bijan Zanganeh said that his country was ready to go ahead with the pipeline agreement.

"Iran is committed to this gas agreement but until Pakistan has not officially relayed its stance, we cannot react and make a decision," he was quoted as saying Tuesday by the Mehr news agency:

In late October Zanganeh had said he had 'no hope' for the project, citing financial problems.

The long-delayed pipeline that would link the two neighbours was planned to ease Pakistan's chronic gas shortages.

Iran currently produces around 600 million cubic metres of gas per day, almost all of which is consumed domestically due to lack of exports. Its only foreign client is Turkey, which buys about 30 million cubic metres of gas per day.

The Karachi stock exchange took fright when the countries' then-presidents Mahmoud Ahmadinejad and Asif Ali Zardari inaugurated the much-delayed section of pipeline in March last year.

Spooked by fears of US sanctions, the main index slumped almost 2.5 percent.

Pakistan has severe gas crisis as natural gas supply to homes and factories almost hit the dead end in winters and the consumers have to rely on the Liquid Petrobium Gas (LPG) cylinders.

The compressed natural gas (CNG), used as fuel in cars to improve environment and reduce cost also shuts down for three days a weak during the tight supply months in the most-populated Punjab province.

Many Pakistanis have converted their cars to run on CNG, depending on it as a cheaper alternative to petrol and diesel.

End.

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