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Pakistan mulls plan to complete Iran gas project sans US sanctions

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11 months ago

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  • “Iranian authorities are also on the board,” say officials.
  • Pakistan seeks to avoid $18 billion penalty sought by Tehran.
  • Pakistan failed to lay down pipeline amid US sanctions.

ISLAMABAD: The authorities have started formulating a plan to restructure the much-delayed Iran-Pakistan (IP) gas pipeline project to avoid US sanctions and the $18 billion penalty sought by Tehran, top officials in Law Division told The News.

“Under the new option, Pakistan may not purchase the gas directly from Iran, but through a third party or a powerful country to escape the US sanctions imposed against Iran for its nuclear ambitions. Iranian authorities are also on the board.”

The interim energy ministry was sent a question as to whether the authorities are working to restructure the project to avert the US curbs and penalty of $18 billion, but he gave no response till the filing of this story.

“Pakistan has so far failed to lay down the pipeline in its territory in the wake of US sanctions against Iran whereas Tehran has laid a pipeline from a gas field to the point bordering Pakistan. Pakistan has been very sensitive and careful in implementing the project as it never wanted to be the victim of US sanctions.”

Iran has been advocating that there are no sanctions on gas trade and more importantly on the construction of pipelines within Pakistan’s territory.

So in the latest scenario, in January 2023, Iran formally asked Pakistan to construct a portion of the gas line project in its territory till February-March 2024, or be ready to pay a penalty of $18 billion. 

“When Pakistan’s delegation visited Tehran in November-December 2022, Iranian authorities had said that the US sanctions on Iran were illegal and Pakistan, and under the revised agreement, Pakistan was bound to erect the pipeline in its territory till February-March 2024. Iran had already completed part of the pipeline in its own territory from the gas field to the Pakistan border.”

The Gas Sales Purchase Agreement (GSPA) was signed in 2009 for 25 years, but the project could not take shape. 

Almost 12 years have passed since the signing of the agreement, and the three-year construction period for the pipeline in Pakistani territory has been wasted. 

Under the agreement, Pakistan was supposed to lay down in its territory a pipeline of 781 kilometers from the Iranian border to Nawabshah under the GSPA.

Under the original agreement, Pakistan was bound to pay Iran $1 million per day from January 1, 2015, under the penalty clause. And in case Iran moves an arbitration court, Pakistan would have to pay billions of dollars as a penalty.

The project was to be implemented under a segmented approach meaning that Iran had to lay down the pipeline on its side and Pakistan had to build the pipeline in its territory. The project was to be completed by December 2014 and become functional from January 1, 2015.

Pakistan has tried a lot to ascertain the status of the US sanctions impact if Pakistan goes for the gas pipeline through the US embassy, but no response was attained. 

“Now the Attorney General’s Office (AGO) has been tasked to make contacts with US relevant departments to know what US sanctions would impact Pakistan if Islamabad decided to complete the project.”

However, top authorities in the Law Division and the Ministry of Energy, according to sources, have started working on the option to restructure the IP gas pipeline project in such a way that the project gets completed and the penalty of $18 billion is also averted.

The authorities are working to include in the project transaction a third party or a powerful country that does not care about the US sanctions.

“Pakistan will purchase the gas from a third party and this is how the project will be completed setting aside the sanctions and gas intake will also be ensured.”

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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