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Pakistan ready to face US sanctions over IP gas project

04 March, 2013

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ISLAMABAD: While setting aside mounting American pressure to abandon its $7.5 billion gas pipeline project with Iran, Pakistan has made it clear to the United States that it would complete the venture come what may, even at the cost of US sanctions because the project was really important for Pakistan to meet its energy requirements.

The Obama administration has repeatedly warned Islamabad in recent weeks that the project is tantamount to violating American restrictions on major financial deals with Iran that were imposed as part of American efforts to make Tehran abandon its nuclear program.

According to well-informed Foreign Office circles in the federal capital, Pakistan has at last responded to the repeated warnings from the Obama administration about imposition of harsh sanctions if it goes ahead with the project.

Pakistan has made it clear to Washington through the highest diplomatic channels that it was least bothered about the US sanctions and would complete the project at all costs mainly because it was in its larger national interest "We are ready to face economic sanctions for the sake of the people of Pakistan, even though we still believe that the IP project is beyond the scope of relevant UN resolutions which we are obliged to comply with like all other member states," said a senior Foreign Office official, pleading anonymity.

Currently, Iran is under at least three layers of sanctions that include four rounds of United Nations sanctions, the European Union sanctions and bilateral sanctions by the US, Canada, Australia, Switzerland and Japan. The US State Department warned last week that the pipeline could attract sanctions.

"It's in Pakistan's best interests to avoid any sanctionable activity, and we think that we provide and are providing a better way to meet their energy needs," said the State Department spokesman Patrick Ventrell. But dismissing the American opposition, President Asif Zardari made it clear on March 2 during an interaction with the media persons in Lahore that no power in the world could halt the project.

Asked about the US opposition to the project, the president said Pakistan was a sovereign and independent state and that it would go ahead with the project which was originally conceived by Benazir Bhutto in 1993.

While Pakistani officials have defended the gas project with Iran on several occasions, it was the first time that President Zardari announced his explicit support to the project.

During his meeting with President Zardari in Tehran last week, the Iranian President Ahmadinejad too brushed off the American pressure on the pipeline project, saying the United States cannot affect the project and the gas will reach Pakistan as per the plan."

Pakistan and Iran have held a series of talks on the project for nearly two decades but it was finalized only last week during Asif Zardari's visit to Tehran. If everything goes well, the pipeline will be completed within 15 months.

Significantly, Iran has already completed the pipeline in its territory while the laying of 785-km Pakistani section will start shortly. Pakistan plans to import 21.5 million cubic meters of gas daily from Iran through the pipeline.

Advising Pakistan in January 2010 to stay away from the pipeline venture, the Obama administration had offered assistance to Islamabad for a liquefied natural gas terminal besides aiding the import of electricity from Tajikistan through Afghanistan's Wakhan Corridor. But the PPP government turned down the US offer and decided to go ahead with the IP, which is also known as "the peace pipeline".

According to Foreign Office circles in Islamabad, while leaving behind the mounting US pressure, Pakistan appears to have calculated that its short-term energy needs are too great and the threat of American sanctions not strong enough for it to give up the deal. Thus, Pakistan has told the officials concerned in the Obama administration in plain words that Islamabad would not abandon the project come what may as it was vital to help the country overcome its rising energy crisis which has literally shut the industry down.

The Americans were further told that Pakistan could produce just 80 per cent of its own electricity needs and the gas project with Iran would bring the much-needed relief to the energy-starved country. Iran, which has the world's second-largest gas reserves, is fast developing its production but it can only export a small portion of it due to lack of pipelines and international sanctions.

Even otherwise, the sources say, the Americans have been reminded that Pakistan is not the only country trading energy with Iran, as China and India also import substantial amounts of oil from Tehran. Iran is India's second major oil supplier after Saudi Arabia.

Resisting the American pressure to further scale down oil imports from the sanction-hit Iran, India has already made it clear that it has to look at the issue involved beyond the energy trade, as it has crucial security stakes in the Gulf region keeping in view the six million Indians who live there. Similarly, Beijing has also refused to bow to the American pressure as far its relations with Iran are concerned which is China's third-largest supplier of crude after Saudi Arabia and Angola.

While citing the examples of India and China, Pakistan has maintained if these two can trade energy with Iran, why should it sit on the sidelines? The Pak-Iran pipeline project has run into problems time and again, mainly because of Pakistan's inability to arrange funds and Washington's huge opposition to the project.

It was actually in 2010 that Iran and Pakistan agreed that Tehran would supply between 750 million cubic feet (21 million cubic meters) and one billion cubic feet per day of gas by mid-2015. Iran has already completed a 900-km portion of 56-inch diameter pipeline in its territory and the remaining 200 km up to the Pakistani border is expected to be completed in next two years. But Pakistan could not start construction of 780 kilometers of the pipeline on its side, which is to cost $1.5 billion.

As the sanctions-hit Iran has already agreed to finance one third of the costs of laying the pipeline through Pakistani territory, the pipeline project is scheduled to be officially launched on March 11.

The pipeline construction work will be carried out by an Iranian company - Tadbir Energy Costar Iranian Company - which has not been sanctioned by any foreign government. The first gas flow will be available to Pakistan by the end of December 2014.

Courtesy: The News

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