Iran-Pakistan agreement: IP gas pipeline deal can’t be reworked, says FO

Wants to avoid the threat of US sanctions.

ISLAMABAD:

The Foreign Office is opposed to the conversion of the Iran-Pakistan gas pipeline agreement into a ‘bilateral treaty’ as a means to sidestep any possible sanctions by the United States.

International law expert Ahmer Bilal Soofi had earlier raised the prospect of converting the gas pipeline agreement into a ‘bilateral treaty’— since sovereign acts are beyond the purview of US sanctions, as opposed to commercial transactions.

But when Islamabad sought a waiver from Washington regarding sanctions, the Obama administration refused to provide assurances on the matter. “The Foreign Office feels that Pakistan does not want to invite US sanctions at all and wants Iran to take up the matter with the global powers with which it inked its nuclear deal,” sources said.

They added that there have been hiccups in the implementation of the pipeline agreement due to the tension between Iran and the US.

Energy experts are of the view that Pakistan should urge the US to provide a waiver on the pipeline project. The US has previously opposed a deal between Turkmenistan-Afghanistan-Pakistan and India (Tapi) in 1997; US firm Unicol backed out of the project following pressure from the US State Department. According to officials, the implementation of this project is of importance as it is linked with the security situation in Afghanistan and will remain in limbo following the withdrawal of Nato troops from the country.

Pakistan has previously conveyed to Iran that the issue of possible sanctions should be resolved as soon as possible in order to tackle the project’s implementation and the generation of funds. However, Iran says that Pakistan should fulfill its obligations to implement the pipeline project as Islamabad was fully aware of the possibility of sanctions before the deal was signed. Islamabad is of the view that as Washington has already listed the National Iranian Oil Company (NIOC) as a proscribed entity, involvement with the project might invite US and EU sanctions. “The Pakistani company, Interstate Gas Systems (ISGS), working on the pipeline project may also face US sanctions if it moves ahead with the project,” officials said.

According to officials, Pakistan is also seeking an extension in the deadline to complete the project, pushing it from December 2014 in order to avoid the $3 million per day penalty.

“Under the present circumstances, the project may not be completed in time as Pakistan would not be able to import compressors and generators being manufactured by US and European companies,” an official said. “Pakistan may even face arbitration by Iran if it does not implement the project,” he said, adding that the Pakistani government had given sovereign guarantee and is therefore bound to implement the project.

According to a report by the petroleum ministry, if furnace oil is replaced with imported gas, it will result in annual savings of $ 2.4 billion. The report adds that the incremental impact of price of IP gas will be just 20 per cent in the overall country’s average gas basket.

Published in The Express Tribune, March 4^th, 2014.