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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