Iran-Pakistan gas pipeline: In snub to US, China offers $500m loan

Published: March 13, 2013

Pakistan is in the middle of procuring compressors and pipelines from a Chinese company and Iranian company Tadbir will do the construction, says official. PHOTO: AFP

IRAN / CHAHBAR: 

The United States has made clear its strong stand against the Iran-Pakistan gas pipeline – but the first world power will perhaps be further irritated to hear that China is backing it with a $500 million loan to Pakistan.

“In a major development, China has offered [the] loan,” an official at the Pakistan Embassy in Iran told The Express Tribune. The remaining $500 million would be generated through the Gas Infrastructure Development Cess from gas consumers.

Pakistan had earlier planned to generate the billion dollars through the tax and Iran will be putting in $500 million.

The geopolitical sands appear to be shifting on more than one front as this development comes days after Pakistan handed over to China control of its key Gwadar port in Balochistan.

In one of the boldest snubs of consistent US pressure and warnings, Islamabad and Tehran formally launched the project on Monday in an elaborate groundbreaking ceremony held at the Pakistan-Iran border.

Petroleum ministry officials confirmed that Pakistan is in the middle of procuring compressors and pipelines from a Chinese company and Iranian company Tadbir will do the construction. Pakistani companies such as Sui Northern Pipeline Limited, Sui Southern Gas Company Limited and Frontier Works Organisation would be involved.

The board of directors at the Interstate Gas Systems met March 8 to consider awarding the contract for the pipelines and compressors to Chinese company Panyn Chu King Steel Limited that will provide the pipeline at the rate of $1,650 per tonne, including compressors. The board will be negotiating for discounts with the Chinese firm.

Meanwhile, an Iranian company had quoted the price of $1,980 per tonne. An official said that Iranian contract prices would be turned down because they are higher.

The 1,600-kilometre pipeline, projected to cost a whopping $1.5 billion would enable the export of 21.5 million cubic meters of Iranian natural gas to Pakistan daily. The country hopes to overcome its energy crisis with the 4,000 Megawatts capacity of this project.

 

Published in The Express Tribune, March 13th, 2013.

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Reader Comments (58)

  • Imran Ahsan Mirza
    Mar 13, 2013 - 5:31AM

    Now it is more clear. Pakistan couldn’t sign it on its own without aligning China with its goals. Thanks China for standing by with us.

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  • Raj - USA
    Mar 13, 2013 - 5:42AM

    Time will tell if China is snubbing USA or is preparing Pakistan for US action. Loan to Pakistan does not attract US sanctions but direct dealing with Iran shall.Recommend

  • Mar 13, 2013 - 6:07AM

    The priority for Pakistan should be its national interests – no other nations concern, in fact if Pakistan looked after its interests since its creation we wouldn’t be the mess we are in now!

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  • stevenson
    Mar 13, 2013 - 6:17AM

    Why is this a snub of anyone? Pakistan is doing what it needs to do to meet the needs of its people who are desperate for energy. If the Chinese can help with a loan, all the better. I think the US understands Pakistan’s legitimate needs and why Pakistan has to work for its own future.

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  • Sattu Singh
    Mar 13, 2013 - 7:10AM

    China told this to Pakistan embassy in Iran not Pakistan government in Pakistan ?

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  • jugnoo
    Mar 13, 2013 - 7:14AM

    Historically USA has always economically exploited and enslaved countries by offering them energy (electricity) supplied by their own companies. The result American companies become rich overnight and developing countries becoming beggars. Thats why they are unhappy about Iran-pak pipeline. In ~1989, USA even invaded Panama to get Canal without any provocation by Panama and kidnapped their president (Noreiga). He was accused of violating American law (in his own homeland!!!!!). USA can do any thing to get economic benefit for its companies. Iran & India are lucky they have resisted USA interference.

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  • Munshi
    Mar 13, 2013 - 7:28AM

    @Imran Ahsan Mirza:
    Too early to thank them. Those who believe China is standing by Pakistan to snub America, just remember it will one day gobble the entire country. Taking control of the Gawadar Port was just the beginning. Wait and watch how severely this failed state with dismal resources, almost non-existent foreign exchange reserves, and loans right up to the eyeballs will be abused by this all-weather friend.

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  • naeem khan Manhattan,Ks
    Mar 13, 2013 - 7:35AM

    @Raj – USA: Before you mouth off , go and study the sanctions, Iran is still selling oil to China,India and European countries.If US policy makers are dumb enough to penalize Pakistan to meet it’s needed energy needs, then there will be some adjustments made geopoliticaly. World is changing and one country just can’t throw it’s weight around specially when that country is already in dire economic situation, ie: loans from China and Japan and trillions in deficit. Pakistanis remember well when sanctions were imposed by US and her allies after the nuclear testing but Pakistanis did survive and perhaps Pakistanis could stand up on their feet once in their life time if sanctions are imposed, rest assure Pakistanis are resilient people and will survive, after all we are part of the Sub-Continent culture and don’t live too far from your country India.

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  • Billoo Bhaya
    Mar 13, 2013 - 8:06AM

    “The board will be negotiating for discounts with the Chinese firm.” In other words kickbacks. Why not negotiate a discount or a lower price with the Iranian Contractor. That way they will make sure that the pipeline is laid expeditiously and gas starts flowing. They want to make profits too.

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  • O2
    Mar 13, 2013 - 8:31AM

    we’ve had strict sanctions after nuclear tests, so we can cope with soft sanctions with ease. Right now there are no chances of any strict sanctions in sight, or even softer sanctions, & many countries are dealing directly with Iran such as Turkey, Russia & India. So Indian troll’s calm down, none of your wishes will come to be true.

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  • syed baqar ahsan
    Mar 13, 2013 - 8:54AM

    American’s continuous objecting this project denied us of energy and our industry,agriculture suffered badly,un employment at worst levels due to closer of cottage industry was the biggest blow,even school and health centres in rural area closed.Pressure of population on main cities increased manifolds.Americans in all this mess still project itself “friend”.They give money only to remain in/involved to cause choke.

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  • Mar 13, 2013 - 9:06AM

    a whopping $1.5 billion

    Why is this whopping? It is quite a reasonable amount for a project of this size; in comparison, medium to large dams usually cost 10 to 15 billion dollars.

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  • wasim
    Mar 13, 2013 - 9:20AM

    @ Raj – USA. what action can US take… they need pakistan for a respectable escape from afghanishtan.. other wise afghni’s will keep on ** them.

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  • Syed
    Mar 13, 2013 - 9:30AM

    Look at our history, when we were sanctioned by US on nuclear tests, we got together and build Texilla Heavy industry complex and out come was Al Khalid tank. Similarly when US stopped sale of F-16 to us, despite our payment, we have developed our own Fighter jet…

    These sanctions will come either one way or the other… We need to learn to stand on our own feet.

    May Allah bless our country.

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  • yu chumine
    Mar 13, 2013 - 9:35AM

    Chine is playing a very clever fame. Making us rely more on them while getting us furthwr away fromm US. We dont want to rely on any country especially a country who doesnt give us any aid nor does it make us independent.

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  • India
    Mar 13, 2013 - 9:59AM

    As an Indian I will say Pakistan Zindabad, good luck to Pakistan

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  • Ali Zaid
    Mar 13, 2013 - 10:03AM

    Russia China Iran will break the Western hegemony
    Slap USA and carry on with the national interest, we will support the government if takes stand for national cause.

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  • Mar 13, 2013 - 10:14AM

    @Munshi:
    To avoid making fun of your self, please do study even the initial chapters of Pakistan China relations

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  • Asad
    Mar 13, 2013 - 10:15AM

    I believe India should have been a part of this as well, who knows in the future?

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  • Mar 13, 2013 - 10:21AM

    @Raj – USA: Why is you’re a– on fire? China and Pakistan will not pull the rug from under each other’s feet. Have a nice day.
    Although the developments on the gas pipeline are late; at the end of the PPP term, it remains to be seen how successive governments can tackle the fallout from the American disappointment. Any future PM with a strong rectitude and backbone will see the project completed. Pray to Allah Almighty for the success of the project so Pakistan can get over the slack in its economics and law and order. Salams

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  • Paindoo
    Mar 13, 2013 - 10:37AM

    Pakistani nation is the most resillient nation on the planet. If we are asked to stand up for safeguarding our national interest, there is nothing that we can’t do. I will say to my leadership, “keep steadfast and have faith in ALLAH and your people.”

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  • Raj - USA
    Mar 13, 2013 - 10:50AM

    @naeem khan Manhattan,Ks:
    China is in a different league and has its own clout. India, though much lower than China in influence, is different from Pakistan for the reason India also opposes Iran going nuclear. Also, India has reduced 80% of its oil imports from Iran, So has China and Japan. India and China have been given special waiver by US and this waiver shall also be reviewed periodically. Pakistan has many more problems also. If my reply to @wasim gets published, you can see some of my points. As I said there, stopping this regime of Iran from going nuclear is far more important to US than anything else, including pulling out from Afghanistan. Also note that China is removing its protective shield from its even more closer friend N. Korea.

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  • Rehan
    Mar 13, 2013 - 10:54AM

    In a complex geo-political world and specially in this area of the world, I think this agreement is a test to many relationships.

    Its a test how a retrieve-from-Afghanistan-US policy and world order will look like, who gets more involved in the region to fill the vacuum of power that will be created.

    Its also the test of China’s greater ambitions, what role does Pakistan play in their goals and then Afghanistan and India, how do they see this development.

    I think its also a test of our own character and will to stand for ourselves. For now I would put this as a political stunt by outgoing govt, which has no business striking such deals, but still i give some credit to actually doing it. Unless this is all happening with USA’s underhand blessings (which I will not be surprised), PPP puts it self at some risk infront of USA as a party that can take on US, previously the only actors have been Nawaz Sharif (through nuclear test) and Imran Khan (so far vocal, no action, on drone attacks.).

    What remains to be seen is if the GHQ is backing this or not? How does Army sees this development viz-a-viz the security situation. Does shaking hands with Iran solve any pending internal security threats in Pakistan!!!

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  • Ali
    Mar 13, 2013 - 11:17AM

    Thank you China.

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  • Realist
    Mar 13, 2013 - 11:27AM

    This is all well and good but what will happen in June when we go to IMF for more loans.

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  • Yoghurt lover
    Mar 13, 2013 - 11:28AM

    @Syed:

    “Look at our history, when we were sanctioned by US on nuclear tests, we got together and build Texilla Heavy industry complex and out come was Al Khalid tank. Similarly when US stopped sale of F-16 to us, despite our payment, we have developed our own Fighter jet…”

    Is this true? You developed your own fighter jet? Interesting.

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  • Raj - USA
    Mar 13, 2013 - 11:34AM

    @Ali Zaid: “…………we will support the government if takes stand for national cause.”

    Heard in Pakistan TV today that Punjab Government has asked SC to declare illegal any Cess levy by the federal government to finance the pipeline.

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  • balakrishnan
    Mar 13, 2013 - 11:40AM

    Iam an indian. go ahead with what is the best interest for pakistan. america now a paper tiger. dont worry pakistan. long live pak iran friendshipRecommend

  • neil
    Mar 13, 2013 - 12:00PM

    “The remaining $500 million would be generated through the Gas Infrastructure Development Cess from gas consumers.”…..my pakistani brothers do you guys understand what this means?…you guys just got a new tax. Enjoy.

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  • Aschraful Makhlooq
    Mar 13, 2013 - 12:05PM

    @India:
    Highly obliged for your precious comments……..

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  • Polpot
    Mar 13, 2013 - 1:21PM

    “In a major development, China has offered [the] loan,” an official at the Pakistan Embassy in Iran told The Express Tribune.
    ++++++++++++++++++++++++++++++++++++++++++++++++++++++
    A story based on a quote from an unnamed official that too in Pakistani embassy in Iran. I will believe the story when China announces that.
    Request ET to verify its sources or flag stories as speculation.

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  • vasan
    Mar 13, 2013 - 3:23PM

    I think this is a good development if it is true. Getting a transcountry pipeline will be a big achievement and it will serve as a gateway to India and china also which will enable Pak to collect transit fee. Obviously this will serve the country’s energy needs well. Those are the good and obvious points about this project. There are many negative points. Sanctions and Iran’s intrasigence may be a short term affair I mean may be 5 years but pipeline’s life is much more. The biggest problem may be the security of the pipelines because it runs thru Balochistan. Pak should get their priorities right and solve Baloch problems simultaneousy for this project to succeed.

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  • G. Din
    Mar 13, 2013 - 3:54PM

    @jugnoo:
    ” In ~1989, USA even invaded Panama to get Canal without any provocation by Panama and kidnapped their president (Noreiga). He was accused of violating American law (in his own homeland!!!!!). “
    Do Pakistanis have any respect at all for historical truths or facts? We know, they don’t. For your information, US built Panama Canal at its own expense and then handed it over to Panama. If they wanted to “get Canal”, why would they hand it over to Panama in the first place? And then, after arresting that scoundrel, did they occupy the Canal? No, they didn’t!
    US arrested Noriega because he was the kingpin of drug smugglers into US. He was put into jail in US where he completed his sentence and now is serving his sentence in France.

    Recommend

  • Nabeel
    Mar 13, 2013 - 4:05PM

    Its a good news, At least we will not rely on US and their invisible hostile behavior. India should be part of this to make this region stable. I hope India will join this project in near future.

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  • G. Din
    Mar 13, 2013 - 4:19PM

    ” “We reckon this ground breaking could potentially go down as another popularity attempt by the outgoing Pakistan Peoples Party-led administration,” the report said.”
    Those Pakistanis above who are delirious about China “standing with Pakistan” against US may do well to read the analysis in this issue of ET.
    http://tribune.com.pk/story/520003/analysis-a-mutually-convenient-political-stunt/
    It is not $500 million cash that China is offering but only to cover the cost of Chinese equipment like compressors etc., that Pakistan will have to buy in the remote possibility of the pipeline ever coming into being. China knows that this pipeline is going nowhere. Why not try for a little free goodwill of Pakistanis?

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  • Hunter Punter
    Mar 13, 2013 - 4:32PM

    THis is a win-win-win for all three, Iran, Pakistan and China. the funds will be disbursed to chinese project developers, and there will be some quid pro qou for China, maybe get cheap or free Gas. Gwadar was handed over, maybe some other bases will be handed over too. In anycase, Iran and Pakistan have rather limited choice. Both arebankrupt economies.

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  • balavir
    Mar 13, 2013 - 4:39PM

    Pakistan should approach it in a businesslike manner and not chest thumping and making a big achievement. Pakistan now spends 5.3 billion for importing gas. The pipeline will supply double the quantity for half the price. The total expense will be around 2.5 billion. Pakistan does not have to charge any surcharge. The price that they pay now would be enough to repay the iranian and chinese loans within a year and then make a saving of 2.5 Billion every year.

    Pakistan politicians should do this pipeline because the money that they will save is 3 times the pakistani remitances from abroad. It makes excellent deal.

    But i am not sure if handing over ports to foreign companies is good. Pakistan should try and run its port because it can employ its people by doing things locally and not by import. That too when a strategic port like gawdar, Pakistan can make billions of dollars every year. Even the US is at pakistan mercy today because of the strategic position of pakistan. Pakistan should not sell strategic ports as they are very important for security.

    As of now i am skeptical as to why china is going too friendly with pakistan. Pakistan should not end up a slave of china in trying to escape from US control. Maybe that the chinese would have paid the pak politicians??Recommend

  • Muhammad Rizwan Ali
    Mar 13, 2013 - 4:56PM

    Great China,I am Pakistani Living in Shenzhen -China, I can not explain, how much Chinese people love Pakistani people,I feel very comfortable here, although can notspeak their langguage, but the people of my area love me so much, respect me so much, just because I am from Pakistan
    Thanks China

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  • Dr.X
    Mar 13, 2013 - 5:35PM

    Unless we get that Iranian Gas, I am not sure that any of this makes any difference. Elections are around the corner. So, Dont get your hopes high right now !!!

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  • joy
    Mar 13, 2013 - 5:35PM

    @Nabeel: “India should be part of this to make this region stable. I hope India will join this project in near future”
    Thanks for the thought dear neighbour, but let’s look our separate ways, you look west and we look east so that we can live peacefully. All the best to Pakistan and I hope and pray that this pipeline project brings prosperity to your country.

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  • Fizza Khattak
    Mar 13, 2013 - 6:05PM

    Usually this sorta tax is levied once the project is completed, here we see that its not even yet started and the talks are on for new kinda tax lol .. Anyways i see this deal as a new stunt by this government, where was the signing of this deal when they actually came into power, WHY NOW??!! .. I’ll never appreciate this government after what they did to its public.
    Other than that China has always helped us in our think and thin, Kudos to them.

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  • Jutt
    Mar 13, 2013 - 6:15PM

    China offered this loan bcz we have given them our blue waters for free.Otherwise they they could have never offered this to Pakistan..Any way good move by china.

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  • Stranger
    Mar 13, 2013 - 6:29PM

    Pak and Iran are sovereign powers. They can do what they feel like among themselves. They are mature enough to decide whats good for their people.

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  • g antanu
    Mar 13, 2013 - 8:53PM

    @Raj – USA:
    why are u so negative? if Pakistan succumbs to US pressure u ridicule it… if it stands firm… u ridicule it…. do u have some integrity in ur senses or not?

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  • f
    Mar 13, 2013 - 8:54PM

    Its a loan not aid…

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  • Raj - USA
    Mar 13, 2013 - 10:36PM

    @g antanu:
    How will you ever understand that what I am talking about is not succumbing up to pressure but standing up and owning some principles? You and some others will not even understand that giving up Gwadar is nothing to be proud of, yet Pakistanis are very happy and proud. You can say it is like Rob Peter to Pay Paul or Bandhar Bhat. India could also have handed over Mumbai or Andaman & Nicobar Islands to China. Iran offered gas at $6 just 5 years ago when it was IPI. Now it is $13. Watch Nijam Sethi in Apas Ki Baat – March 12. Here is the link:
    http://www.awaztoday.com/News-Talk-Shows/34580/Aapas-Ki-Baat-12th-March-2013.aspx

    BTW, Nawaz Sherif’s Punjab government has already asked SC to declare illegal the levy of cess to finance the pipeline. Also, read a report about one year ago that US itself offered liquified gas to Pakistan at around $6.50 for the same unit. Not sure if it included the transportation costs. Did not read the report thoroughly and do not recall the full details. Could be that Mrs. Clinton’s offer was for future supplies and not immediate supplies. Even IP is not going to give immediate supplies to Pakistan. Pakistan did not pursue US offer and I think it did not want to be more dependent on US.

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  • faraz
    Mar 13, 2013 - 11:08PM

    Pakistanis are still living in cold war political-consciousness

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  • Raj - USA
    Mar 13, 2013 - 11:14PM

    @g antanu:
    To continue on what I have said, I have never ridiculed Pakistan for succumbing to US pressure, just because it heeded to US advice. If they do something good for themselves and also others, even if it is under US pressure, I have appreciated it.

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  • Mar 14, 2013 - 11:50AM

    @Raj – USA:
    It does not matter that Iran-India Gas pipeline is halted or not, we needed it and we are doing it that is it, its none of you business. Whether you like it or not India failed to handle US pressure.

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  • Singh
    Mar 14, 2013 - 6:11PM

    I think Gas pipe line is in best interest of Pakistan.
    If GOP is truly sincere in this project. it can generate $1.5 Billion from its public as everyone is suffering from energy crisis. You don’t need China $500 million assistance if you have honest people working on this project.
    Anyway on lighter note: Way thing going on in Pakistan, in near future Pakistan name will be Chinastan.

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  • g antanu
    Mar 14, 2013 - 7:35PM

    @Raj – USA:
    the situation in Pakistan is very different from india. Pakistan is fighting for its survival and desperate .so if china helps develop a port which can generate revenue and jobs… what is wrong with this? don’t u remember we had to mortgage our gold to survive status very difficult time during Chandrasekhar government. it was a bitter pill to swallow but it helped curing the sickness. today Pakistan is sick and has to swallow the bitter pills. apart from that the days of sentimental relationship are over. its all business and profit since the world has become a village and the nations are interdependent. so such deals should be taken as as a business venture instead of making them a matter of misplaced egos.

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  • g antanu
    Mar 14, 2013 - 7:43PM

    @Raj – USA:
    the situation in Pakistan is very different from india. Pakistan is fighting for its survival and desperate .so if china helps develop a port which can generate revenue and jobs… what is wrong with this? don’t u remember we had to mortgage our gold to survive status very difficult time during Chandrasekhar government. it was a bitter pill to swallow but it helped curing the sickness. today Pakistan is sick and has to swallow the bitter pills. apart from that the days of sentimental relationship are over. its all business and profit since the world has become a village and the nations are interdependent. so such deals should be taken as as a business venture instead of making them a matter of misplaced egos.
    another thing even if US offered gas at low price… it was never feasible. US is a nation with double standards and only fools can take it seriously when it comes to HELP. it takes back the investment in many folds… and Pakistan is a small nation no where in the leagues China or India. don’t forget…. it supplied wheat of animal feed quality to us when we were starving .

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  • cautious
    Mar 14, 2013 - 7:44PM

    Why in the World would China try and snub the USA over a loan to Pakistan? I suggest that the ET readers take the time to read a Chinese newspaper some day – you won’t see anything about this mythical loan, same goes for any other newspaper outside of Pakistan. Long and short – another “made in Pakistan” article.

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  • hasan
    Mar 15, 2013 - 3:14AM

    Loans from the US and Europe will be required to service the Chinese loan.

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  • hasan
    Mar 15, 2013 - 3:19AM

    The Chinese loan will no doubt be in the form of Chinese workers being utilised on the establishment of the pipeline project. I can’t see the Chinese actually parting with the cash!

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  • Apr 10, 2013 - 12:34AM

    Despite her adamant and firm attitude of Margret Thatcher towards Germany (east & west also)they can come up with european union, GCC can be formed amongst grieviances. Saudi,Jordan & Egypt can have agreements with Israel, why not China,Iran,India & Pakistan atleast can establish ONE economic forum which includes same currency, barter, lesser visa restrictions & duties on import/export……………..we have everything including consumer base!!

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  • Usman
    Apr 11, 2013 - 1:27PM

    @stevenson: If that were truly the case, why has the US been lobbying so hard to prevent Pakistan from going through with this deal? Hillary made a statement only a few months ago that implied that Pakistan could be sanctioned if it proceeds with the pipeline. The US understands only one thing…”might is right” and everyone else can jump off a bridge.

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  • Usman
    Apr 11, 2013 - 1:35PM

    @neil: It’s a small price to pay to gain more independence from the Westerners.

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