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Iran’s ambassador says US sanction delaying IP project

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News Analysis |

On February 22, 2018 Iran’s ambassador to Pakistan Mehdi Honardoost, while speaking at a seminar on “Contemporary Relations between Pakistan, Iran and Saudi Arabia: Present Challenges” organized by Strategic Vision Institute Islamabad, lamented that Iran-Pakistan bilateral banking ties were being delayed because of Islamabad’s conservativeness. The Iran-Pakistan gas pipeline project has not progressed since initially initiated.

He added that Iran has faced unjust sanctions by the US and faced conservativeness of its brotherly state which has delayed the opening of banking channels whereas many other countries maintain banking ties with Iran. Iran’s leasing out of its Chabahar Port to India and Pakistan Army’s decision to send its troops to Saudi Arabia may increase the likelihood of mistrust between Iran and Pakistan.  

Both countries are responsible for the completion of this project in respective territories. Around 750 mmcfd gas flow in the pipeline is projected to help generate around 4,000 MW electricity also, along with creating job opportunities in backward areas of Baluchistan and Sindh.

Banking relations are crucial to enhance bilateral trade between Iran and Pakistan which currently stands at $1.2 billion. To achieve an expected target of $5 billion per year over the next few years, there is a need to regulate banking channels between the two countries. In 2017, the State Bank of Pakistan (SBP) and Iran’s central bank “Bank Markazi Jomhouri Islami Iran (BMJII)” signed the Banking and Payment Agreement (BPA) aimed at providing a trade settlement mechanism to promote bilateral trade.

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They were supposed to invite other commercial banks to carry out transactions under this agreement. He asserted that there was no progress in this initiative because Pakistani banks have shown little interest.  He surmised there was no progress in the Iran-Pakistan pipeline project because of Pakistan as it is facing many internal and external challenges. He believed that this project would benefit both countries in addressing their common problems.

Moreover, he rejected the perception that India would use Chabahar Port against Pakistan. He explained that constant sanctions on Iran despite Iran’s nuclear deal were one of the factors for leasing out the port to India. Responding to these comments, Pakistan’s Defence Minister Khurram Dastgir Khan said that Iran should have a better understanding of Pakistan’s relations with Saudi Arabia and other Gulf countries.

Sharing the details of this project, officials said that a 56-inch diameter pipeline will originate from South Pars gas field Iran and end at Nawabshah, covering a distance of around 1,931 kilometer with 1,150 km portion in Iran and 781 km in Pakistan.

He added, “Our interests in stability in GCC countries stem from the fact that around 1.9 million Pakistanis live in Saudi Arabia alone, who are contributing a great deal to our foreign exchange reserves”. Pakistan’s foreign policy towards Middle East is sustained on the basis of its longstanding cordial relations with Saudi Arabia and on limiting the outcomes of sectarian conflicts originating from the Saudi-Iran rivalry.

He explained, “Pakistan had an ideological affinity and deep military, economic, and leadership” ties with the Saudi kingdom, whereas it was building “economic cooperation and counterterrorism links” with Iran. An opening has been achieved with Iran. Iran-Pakistan relations are expanding including economic and industrial cooperation. He reminded that Pakistan had deployed its troops in Saudi Arabia since last four decades under their bilateral defence agreement on “training and advisory mission”, not against any third party.

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Ministry of Petroleum and Natural Resources of Pakistan claimed in 2017 that government had allocated Rs. 25 billion in the current fiscal year for the development of gas infrastructure across the country including the IP project. Sharing the details of this project, officials said that a 56-inch diameter pipeline will originate from South Pars gas field Iran and end at Nawabshah, covering a distance of around 1,931 kilometer with 1,150 km portion in Iran and 781 km in Pakistan.

Both countries are responsible for the completion of this project in respective territories. Around 750 mmcfd gas flow in the pipeline is projected to help generate around 4,000 MW electricity also, along with creating job opportunities in backward areas of Baluchistan and Sindh. There are more prospects for the progress of this project after removal of the US sanctions. With the changing geostrategic environment of South Asia, Pakistan is moving ahead to improvise relations with its neighbors.


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