Pakistan may ink a deal with Iran for the purchase of Liquefied Petroleum Gas (LPG) in Pak Rupees as Tehran is already considering Pakistan’s proposal, the media reported while quoting sources in the Commerce Ministry.
According to the details, both sides have emphasized their commitment to the early solution of the Iran-Pakistan gas pipeline project under the Gas Sales and Purchase Agreement and agreed to take necessary measures.
The matter will come under discussion in the 21st Session of the Pak-Iran Joint Economic Commission (JEC) which is scheduled to be held from August 16-19 in Islamabad.
The issues of the Pak-Iran Gas Pipeline, joint projects between OGDCL, National Oil Refinery (NIOC), and pending issues between NTDC, CPPA-G, and Iranian company Tavanir will also come under discussion, in addition to the promotion of barter trade and payment mechanism.
Important to note that these agreements were already under consideration, however, no cooperation could materialize so far due to US sanctions.
US sanctions – major hurdle
US sanctions against Iran are a major hindrance for most gas pipeline projects in the region. Former President Donald Trump’s administration had warned countries around the world to stop buying Iranian oil or face sanctions of their own.
Another concern for Pakistan is the Financial Action Task Force’s blacklisting of Iran. While the FATF does not prohibit trade relations with blacklisted states, such engagements may bring global scrutiny to Islamabad.
However, under former Prime Minister Imran Khan’s government, Pakistan aimed to complete the Iran-Pakistan gas pipeline project soon despite reservations of the United States. Moreover, recently, Foreign Minister Bilawal Bhutto also proposed the resumption of the Iran-Pakistan gas pipeline project.
[New Perspective Paper] If Iran offers discounts on its energy resources like Russia is currently doing, this would not only help out cashstrapped Pakistan but would lead to considerable oil export for Iran, write @TauseefJaved16 & Zulfiqar Ali. https://t.co/xsziqe0xM9 pic.twitter.com/pbo84kH7eQ
— Centre for Strategic & Contemporary Research (@CSCR_pk) July 18, 2022
Important to note that the pipeline today itself is not subject to UN sanctions, and the US has granted exemptions to countries such as Turkey, India, and Iraq in petrochemical trade with Tehran. Therefore, Pakistan and Iran are considering conducting their trade by way of barter to ensure that US sanctions are not triggered.
Interestingly, Afghanistan, which is facing one of the worst economic crises after the Taliban takeover has already signed a contract with Iran for the purchase of 350,000 tons of oil.