Iran-Pakistan pipeline: Foreign Office calls meeting to decide project’s fate

Delegation expected to visit Iran this month to avoid penalty, renegotiate gas price.

ISLAMABAD:

The Foreign Office has stepped in to clear the air about the Iran-Pakistan gas pipeline project and called a high-level meeting among different ministries today in an effort to set policy guidelines.

The move comes in the backdrop of the US refusal to give assurances that the pipeline would be exempt from sanctions and subsequent reluctance of the Ministry of Petroleum and Natural Resources to press ahead with the project.

The meeting, which will draw representatives of the Ministry of Petroleum, Law, Defence and Finance, will decide the fate of the gas pipeline keeping in view the threat of embargo.

It will also consider a way out in an attempt to avoid penalties if the government abandons the project, for which Iran has almost completed its part of the pipeline.



After the deliberations, a Pakistani delegation is expected to visit Iran by the end of current month to discuss an array of issues including the penalty, extending the deadline and renegotiating the agreed gas price.

Both sides will also discuss a strategy to implement the project keeping in view the plan to be finalised at the Foreign Office.

Earlier in July 2013, the Foreign Office had held an inter-ministerial meeting, which suggested that the US should be approached to keep the project out of the sanctions regime. Prime Minister Nawaz Sharif, during his visit to the US, also sought exemption, but Washington refused.

In a follow-up meeting held in Washington in November, which was also attended by Water and Power Minister Khawaja Muhammad Asif and Petroleum Minister Shahid Khaqan Abbasi, the same issue was taken up, but the US authorities dismissed the suggestion.

According to sources, legal experts have suggested the government to convert the project into a bilateral treaty as US sanctions will not apply in this case. This option will also be discussed in Thursday’s deliberations.

Sources point out that Pakistan could face a penalty of $3 million per day if it fails to receive first flow of gas in December 2014. In the meeting, views will also be sought from legal experts to determine how the government could avoid the penalty if the project does not go through.

A senior government official told The Express Tribune that Interstate Gas Systems, a state-run company dealing with gas import projects, could face sanctions if it pushed ahead with the Iran-Pakistan project and even it would not be possible to import compressors.

Germany-based Siemens and US-based General Electric have expertise in manufacturing compressors, but both companies will not export to Pakistan in the face of western sanctions.

Now, the petroleum ministry has approached the Foreign Office, seeking its guidance whether the ministry should pursue the project.

Published in The Express Tribune, January 16^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.