Iran has asked Pakistan to return $216 million that it had deposited in KASB Bank, which is currently under State Bank of Pakistan’s supervision, creating a diplomatic issue for the federal government.
The request was made by Iranian Ambassador to Pakistan Ali Reza Haghighian during a meeting with Federal Minister for Finance Ishaq Dar on Wednesday, according to officials of the Ministry of Finance.
Iran took up the issue days before a scheduled Joint Ministerial Commission (JMC) meeting with Pakistan.
It had deposited the money in KASB Bank few years ago, which it could not withdraw after the United States imposed sanctions on the Gulf state.
Officials said the issue would be settled only in a legal manner as Pakistan could not afford to violate the sanctions regime. Owing to the restrictions, the government is also not actively pushing ahead with the Iran-Pakistan gas pipeline project.
On November 14, the State Bank of Pakistan placed KASB Bank Limited under moratorium for a period of six months. The central bank has suspended certain debt and other obligations. It has allowed bank depositors to withdraw up to Rs300,000 and placed curbs on withdrawals above that level.
The $216 million or Rs22.2 billion constituted 35% of the total deposits of Rs63.1 billion of KASB Bank in December last year.
Officials of the finance ministry argued that the issue of deposits was between the Iranian government and the private bank and there was no binding obligation on the federal government to sort it out.
However, they added, the options of seeking exemption from the US sanctions and settling the money in barter trade could be considered.
They did not rule out the possibility of clearing the dues during the moratorium if both the sides found a solution pertaining to the sanctions.
Final decision would be taken by the finance minister during the inter-ministerial meeting ahead of the JMC sitting, they said.
According to the officials, Tehran will also have to establish its case and the government will take a decision only when the State Bank of Pakistan confirmed the deposits.
Owing to the US curbs, Pakistan has also not been able to pay roughly $200 million to Tehran for electricity purchases. This delay in payment came under discussion in the meeting and it was suggested that Iran could buy rice, sugar and wheat from Pakistan instead of seeking cash payment.
Dar and the Iranian ambassador also reviewed the proposed agenda of the upcoming meetings, according to a handout issued by the finance ministry.
The minister was of the view that the upcoming visit of Iranian finance minister would help in enhancing economic cooperation between the two countries. Islamabad was looking forward to any suggestion from the Iranian side to deepen bilateral trade and economic relations, he said.
Dar was also very optimistic about the success of the JMC meeting as the leadership of the two countries was serious about addressing the issues and taking steps for better cooperation.
Published in The Express Tribune, December 4th, 2014.
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COMMENTS (27)
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@Sonya: The mansha gossip was a cover up. KASB had been failing to meet MCR for years now and getting short term fixes with SBP looking the other way. But with Iran, US has placed financial sanctions whereby the bank making any transaction with Iranian residents or companies will be prohibited to transact in US Dollar or any other currency. KASB's transactions with Iran and inability to now explain a very large deposit (Now unearthed) led to the moratorium.US pushed the screws and SBP acted. KASB can now safely say bye bye to its trade business.
@Sonya: "The comment by @Truth above is a complete nonsense – it wasn’t a gift money to Pakistan and asking to return isn’t immoral either. " I never said that it was gift money or that asking for its return is immoral. Unfortunately, you have inferred what I did not imply. All I was trying to say is that like Saudi Arabia, Iran should also consider helping out with some money, even loan. For, given Iran's oil exports and less than half the population of Pakistan, and despite sanctions, Iran is in a better financial and economic position than Pakistan. So it can help ease Pakistan’s current financial difficulties; just as we helped Iran during its 1980-1988 war with Iraq by sending wagon after wagon of the much needed wheat to Iran, which sustained Iran during very difficult times. Iran needed Pak wheat supplies very badly as other sources were scant since the Gulf was insecure, neither Turkey could supply from the West, nor could grains starved Soviet Union help from the North. So we proved to Iran as a true friend and Iran should reciprocate.
@Sonya: You sound like a paid Iran lobbyist.
@Sonya: Very real comments. I agree.
@Truth: Economic Hardship - try living under sanctions for the last 30 years. in any event why should any country show Pakistan Largess. But since we are on the topic, how about supply of Cheap Gas, which is now being cancelled at the BEHEST of Saudi Arabia. Our great Saudi Friends would rather our industry withered and died, we freeze to death, but they want to play their petty proxy games in Pakistan. Zardari had flaws, but the Iran Pakistan Gas Pipeline was a good thing for Pakistan.
@Azmat: Iran will any how gets its money dont live in illusion.pakistan cant keep it as it not pakistans money.
And Pakistan wants to befriend Russia. What will Pakistan do when sanctions come against Russia?
Irananian took a risk on a very weak Pakistani bank with no adequate capital and are responsible for the consequenses. This is a big money as compared to the total deposit of the illfated bank and they should be prepared to pay the price for bypassing sanctions. Its a very high risk game and the price will be huge.
You are saying as if pakistan is a vibrant state.Iran still in better condition and their economy of $402 billion is bigger than pakistan's $236 billion almost twice.
Iran should not worry.....its safely invested in Dubai and London properties.
Iran Is Failed State.Failed policies. At current Crude price It will Defualt in Two years time. So No trade wid Iran is better.
While SBP's applying moratorium on KASB itself is a controversial issue being highlighted in the media (ref: Mian Mansha link) - this has triggered a bad economic signal to not trusting Pakistani banks anymore. The comment by @Truth above is a complete nonsense - it wasn't a gift money to Pakistan and asking to return isn't immoral either. What would you think if the same happens to Pakistan in other countries.
saudi conspiracy...
@Irked: And u r only intelligent out here. Get a life
Most of the comments above are so stupid. This nation has my pity.
Pakistan only know how to take not give. Unless you're a shady organization, you don't ask Pakistan for money.
@anon: India is not relevant in Gulf, take a hike.
@anon: 216M thats it? Pakistan cannot return 216 Million? Why is the govt hiding behind the sanctions? we can pay in PKR?.
Iran is a one greedy country. Surely that's not a big money for it. A lesson for pakistan too, come out of its so called islamic block and make better ties with foreign country than our greedy neighbour iran.
Between Iran has been continuously hurting us in balochistan. Wonder which people call this country a friend.
The money was deposited in the troubled KASB Bank, not sure they will get it back!
@anon: Nonsense.
can we ask iran to stop funding subversive activities in pakistan also
Looks harsh on Iran! If I sold stuff and the customer deposited the money in a bank which can't pay me, - then, it's the customer's duty to ensure payment isn't it? - through other banks or cash - if necessary. If the customer then delays the payment and ask that I "barter" and buy his stuff which i may not necessarily need or may not be satisfied with quality/price. I am disadvantaged both ways.....
This is a conspiracy, à birather mulk will never do this to another birather mulk... Surely india is behind this.
Would the forthcoming meeting also discuss the 3 Mn USD daily Penalty .. ++++++++++++++++++++++++++++++++++++++++++++++++++++ due to be paid by Pakistan for non completion of the I[P Pipeline.
In times of economic hardships, whereas Saudi Arabia has gifted Pakistan over one billion US dollars, Iran wants to get back a petty sum, instead of matching Saudi largess. So is Iran really a friend of Pakistan? As the saying goes a friend in need is a friend indeed.
In times of economic hardships, whereas Saudi Arabia has gifted Pakistan over one billion US dollars, Iran wants to get back a petty sum, instead of matching Saudi largess.