IP gas pipeline: Islamabad ponders move to calm US concerns

Iran may be asked for assurance it will not use proceeds for N-proliferation.

ISLAMABAD:

In a bid to soften the US stance on Iran-Pakistan (IP) gas pipeline project, Pakistan is considering seeking an undertaking from Iran that the project proceeds would not be used for nuclear proliferation.

Despite Iran’s nuclear deal with global powers, the US has made it clear that it had not changed its stance on the IP gas pipeline project.

Sources told The Express Tribune that Pakistani authorities, following the opinion of legal expert Ahmer Bilal Soofi, was considering seeking an undertaking from Tehran that it would not use proceeds from the IP gas pipeline project for nuclear proliferation.



According to Soofi, the global sanctions regime against Iran was based on a presumptive association between Iran’s energy revenues and its nuclear programme.

With the US government having already listed the National Iranian Oil Company (NIOC) as a proscribed entity, its involvement with the project might not only invite US sanctions, the action might also trigger similar EU sanctions as the Europeans tend to follow the Americans.

The attorney general of Pakistan has already suggested that a US-based international law firm should be engaged to evaluate the project before it gets rolling in 2015. According to a senior foreign office official, Americans had objected to the ‘intent’ of the pipeline, hence any finer distinction (natural gas, liquefied gas construction for the pipeline of the actual gas supply) would not cut much ice with them.



The foreign office official also said geo-strategic dynamics of the region, including the situation in Afghanistan, turmoil in the Middle East, the wider problem of global terrorism and the pervasive anti-Americanism in the country would be important considerations in the US calculations of the IP gas pipeline project.

Due to the threat of US sanctions, Pakistan faced problems in securing funds for the project and the government had requested Iran to finance the portion of the project at Pakistan’s side too.

During the previous government, Iran had committed to provide $500 million to finance Pakistan’s portion of pipeline but the present government wants Iran to enhance the credit limit.

The total cost of the project has been estimated at $1.8 billion. Against this financing, the government had decided to award the contract of Engineering Procurement and Construction (EPC) to the Iran-designated firm, Tadbir Energy.

According to a petroleum ministry report, if the furnace oil-based power generation is replaced with imported gas, it would have an annual savings of $2.4 billion. It also said that incremental impact of IP gas price will be just 20% in the country’s overall average gas basket price if 750 million cubic feet per day (mmcfd) gas is imported.

Under the project, Pakistan will import 750 mmcfd extendable to one billion cubic feet gas per day.

Published in The Express Tribune, December 3^rd, 2013.