Pakistan and Iran signed a natural gas deal in June 2009, but the Pakistanis have done nothing about the pipeline on their territory until now.
Iran has almost completed the pipeline from the Persian Gulf to the Pakistani border. But that is not contingent on Pakistan; the Iranian pipeline is supplying cities all across the south of Iran as it moves farther east.
The United States is not happy with the pipeline project and has tried to lure Pakistan away from the pipeline for years.
Pakistani Oil Secretary Ejaz Chaudhry said Saturday that a contract has been issued to a German company, ILF Engineering, to begin work on the pipeline project.
ILF Consulting Engineers, actually an Austrian firm, told the Iran Times it does no pipeline construction. It said it has only a consulting contract for the Pakistani section of the project. So, actual construction remains far away.
Chaudhry said the pipeline inside Pakistan would cost $1.2 billion. He said Iran was putting up $250 million and Pakistan $200 million to start work. He didn’t say where the rest of the money would come from, though Pakistan has asked Iran for $500 million altogether.
Iran had not been interested in putting any money into the project until now. Iran’s shift suggests a growing concern that it will be losing other markets and must take new initiatives to nail down markets wherever it can.
US Secretary of State Hillary Clinton said Pakistan could face sanctions if the pipeline is constructed either as an Iranian project or a joint project. It wasn’t clear what that meant. Under the 1996 Iran Sanctions Act, sanctions can be imposed on firms that invest in oil or gas projects inside Iran. But that is not the case here, where Iran is to invest in the project inside Pakistan—something not envisioned in the 1996 law.
Turkey avoided sanctions for its gas pipe link with Iran because Turkey paid for the pipeline inside Turkey while Iran paid for it inside Iran. That was the original plan for the Pakistan-Iran pipeline.
The Obama budget now before Congress includes roughly $1 billion for the fiscal year starting October 1 to help Pakistan meet its energy challenges. The likelihood that Congress will approve any of that dimmed with this week’s announcement.
News reports published in Pakistan have for years spoken of the United States threatening and throttling Pakistan to stop the pipeline project. But Pakistani and American officials have said that was not true. What the United States has actually tried to do is “bribe” the Pakistani government into halting the project by offering financial help with alternatives. But many in Pakistan say the alternatives remain more costly and fraught with more difficulties.
One US alternative has been a pipeline to bring natural gas from Turkmenistan to Pakistan. But that pipeline is much longer and more costly—and it must pass through war torn areas of Afghanistan.
Still, the pipeline from Iran faces similar problems as it must pass through Pakistani Baluch-estan, where rebels repeatedly blow up some gas pipeline every few months.
Qatar has recently offered to sell liquefied natural gas (LNG) to Pakistan, in what appears to some to be an effort to wean Pakistan away from Iran. There was some suspicion the preliminary contract with the German firm may be an effort to get Qatar to knock down its price.
Whether from Iran or Qatar, the natural gas would come from the shared gasfield in the Persian Gulf that Iran calls South Pars and that Qatar calls the North Field.
