Delay in IP pipeline: PM Nawaz to try and win concessions in Tehran talks

Published: April 22, 2014
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The US has already refused to exempt the IP pipeline from sanctions, triggering uncertainty about the future of the project. PHOTO: FILE

The US has already refused to exempt the IP pipeline from sanctions, triggering uncertainty about the future of the project. PHOTO: FILE

ISLAMABAD: 

After failing to get Iran-Pakistan (IP) gas pipeline exempted from US sanctions, Prime Minister Nawaz Sharif is set to ask Tehran during an upcoming visit to waive penalty following delay in work and revise the agreed deal.

In case of disagreement, the two countries may land in the international court of arbitration to settle the matter, sources say.

In addition to this, Pakistan and Iran will sign a 3,000-megawatt power supply deal during the premier’s trip slated for May 11-12.

Pakistan is already importing 73MW from Iran to meet the needs of Gwadar, but has not been able to clear outstanding payments, a process impeded by US sanctions against Iran for its alleged nuclear programme, which Tehran vehemently denies, that blocks transactions through banks.

The US has already refused to exempt the IP pipeline from sanctions, triggering uncertainty about the future of the project.

Though Tehran has signed a preliminary nuclear deal with the US and other western powers, Washington insists that it has not changed its stance on the IP pipeline.

Pakistani authorities had taken up the project with US officials in a meeting on the sidelines of the bilateral strategic dialogue in Washington in November 2013. However, the US did not give assurances that the project would not invite any sanctions.

The US has been pushing Pakistan to shelve the IP project and opt for Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and Central Asia-South Asia (CASA) 1,000MW power import project to meet its energy needs. It has also offered assistance in liquefied natural gas (LNG) import, but is not willing to commit its own LNG supplies.

A month later, Petroleum and Natural Resources Minister Shahid Khaqan Abbasi visited Iran on December 9 and told officials there that Pakistan could not begin work on the IP pipeline until US sanctions were lifted.

Be soft

According to officials, the prime minister will again try to convince the top leadership of Iran’s new government that US restrictions are a major stumbling block in the way of the pipeline. Therefore, Tehran should be soft and waive penalty as well as extend the project completion deadline from the current December 2014.

Officials point out that Pakistan would have to face a penalty of $3 million per day if it dithers and fails to put the required project infrastructure in place on time. They suggest that the dispute may also take the two sides to the international court of arbitration if the penalty is not waived.

Officials argue that the standoff between the US and Iran has stalled the project and Pakistan could not be blamed for the delay, which is very much likely in such circumstances.

Tehran would also be informed that Islamabad had also tried to secure financing for building its part of the pipeline, but even China, a close friend of Islamabad, backed out in the face of the sanctions threat.

Even the new government of Iran also withdrew a $500-million financing offer given by the previous government, which led to termination of the contract awarded to Iran’s Tadbir Energy for pipeline construction.

According to a report prepared by the petroleum ministry, if furnace oil is replaced with imported gas, it will result in annual savings of $2.4 billion.

Published in The Express Tribune, April 22nd, 2014.

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Reader Comments (16)

  • Apr 22, 2014 - 2:21AM

    or else iranians will face same from pakistan as syrians are facing from iranians and their proxies, and believe you me, we can do it!

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  • Mirza
    Apr 22, 2014 - 9:08AM

    We want everything for free and at our terms. Looks like we already have major problems with yet another neighbor!

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  • analyser
    Apr 22, 2014 - 10:11AM

    Simply convert you electricity generation plants on Gass on place them on Iranian border/ Iranian side and get electricity from them and ask Iranian Govt to Shop the Goods from Pakistan govt of Pakistan will pay bills.

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  • Islooboy
    Apr 22, 2014 - 3:05PM

    No way!!! Iran should not waste an oppertunity of earning free $s. It clearly told the Pakistan government that there is a clause of punishment, but still they signed.

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  • Sonya
    Apr 22, 2014 - 3:34PM

    What i don’t understand that if India can do business Iran why can’t Pakistan?

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  • Butt
    Apr 22, 2014 - 5:53PM

    Another begging mission.

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  • NO BS
    Apr 22, 2014 - 6:36PM

    We can purchase electricity from Iran but can buy gas? What are they smoking?Recommend

  • unbelievable
    Apr 22, 2014 - 7:20PM

    USA informed Pakistan that sanctions would be imposed BEFORE you signed the IP agreement – Iran completed their side of the bargain and there is no logical reason they should not expect you to complete your side.
    .
    Pakistan didn’t have the financial or technical resources to complete this project yet chose to sign this agreement. The IP was a popular decision even though nobody knew how much it would cost or whether there were better/cheaper alternatives – it was an emotional decision based in part on defiance of America combined with an incorrect perception that the IP would cure Pakistan’s energy issue. An emotional decision which never took the time to view the issues from a logic/business perspective. Classic example of Pakistan chest thumping at it’s worst.

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  • Singh
    Apr 22, 2014 - 7:24PM

    Officials point out that Pakistan would have to face a penalty of $3 million per day if it dithers and fails to put the required project infrastructure in place on time.
    To Iran: Please don’t wave any penalty so Pakistan politician & bureaucrat can learn their lesson that they can not commit promise if they can’t deliver.
    ET do you censor this one too?

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  • Raj - USA
    Apr 22, 2014 - 7:42PM

    @Sonya:
    “What i don’t understand that if India can do business Iran why can’t Pakistan?”

    Because Pakistan does not want to do any business with Iran and vice versa. In the last 65 years, there has not been even one long-term trade agreement between the two countries. Zardari signed a currency swap agreement (I think it was for 100 billion Rupees) with Iran. But, Iran did not buy wheat, rice or mangoes from Pakistan and Pakistan did not buy iron ore from Iran under this agreement. Not a penny of trade has materialized between Iran and Pakistan under the currency swap deal that was signed over 5 or 7 years ago. If Pakistan can finance and build the pipeline on its own and can pay for the gas on its own in cash or barter deals, I do not think US sanctions would be a major issue. More than US sanctions, it is the pressure from the Saudis and Arabs that Pakistan is really concerned. Pakistan never tried to use its advantage on the NATO supply routes to get waiver from US. Nor did it bring it up at any time with the US when it was negotiating Kerry-Lugar bill.

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  • M. Bakhtiar
    Apr 22, 2014 - 8:17PM

    It is simple: The Indian government conduct its trade with Iran, based on international norms; without asking for unrealistic concessions or bringing along the customary begging-bowl to the negotiations table.Recommend

  • Ali Tanoli
    Apr 22, 2014 - 9:00PM

    Iqbal soul must be in pain ……… Azaadi e jaan to mil gaye par azaadi Rooh na mil saqey.

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  • unbelievable
    Apr 23, 2014 - 6:48PM

    @Raj – USA:

    Pakistan never tried to use its
    advantage on the NATO supply routes to
    get waiver from US. Nor did it bring
    it up at any time with the US when it
    was negotiating Kerry-Lugar bill

    Pakistan couldn’t leverage NATO supply line to extract an apology from the USA – what makes you think that it could use it to leverage something of higher value? Further – Kerry-Lugar bill is charity where recipient is suppose to say “thank you” – it’s not a lever.
    .

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  • Raj - USA
    Apr 23, 2014 - 11:12PM

    @unbelievable:
    Agree. Not that Pakistan would have got it but the point I am making is that Pakistan was itself not interested in IP pipeline and never asked for it. Pakistan asked for nuclear technology on par with India and also for drone technology but never asked US to allow IP pipeline when India was allowed to buy oil from Iran. Pakistan did not even make a sincere effort at any time.

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  • Polpot
    Apr 30, 2014 - 1:50PM

    The Iranians have proved themselves to be infinitely smarter and farsighted negotiators than Pakistan
    ++++++++++++++++++++++++++++++++++++
    Now utlise the 1.5 Bn freebies from Saudi for paying the 3 Mn per day penalty to Tehran.

    Recommend

  • Polpot
    Apr 30, 2014 - 2:20PM

    Since India is diverting Pakistrans Water maybe the IP can be used for
    +++++++++++++++++++++++++++++++++++
    carrying water from Iran to Pakistan.!!!!

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