Economic support for Pakistan-Iran pipeline is uncertain

According to a Pakistani finance ministry official, the Industrial and Commercial Bank of China (ICBC), one of the world's most valuable lenders, had submitted a bid to act as financial adviser for the planned Iran to Pakistan gas pipeline project, estimated at US$ 1.25 billion. However, the bank is "showing less interest," the Economic Coordination Committee of the Cabinet said in a recent statement.

A Pakistani finance ministry official said it seems likely that the fear of US sanctions on companies dealing with Iran appeared to be weighing on the Chinese bank. "I don't think they are in the mood to brave American pressure and the threat of sanctions from any dealings with Iran," the official told reporters, requesting anonymity because he is not authorised to speak to the media.

In the past, the US has warned Pakistan that committing to the proposed gas pipeline could mean sanctions affect Pakistani companies.

Chronic electricity shortages have sparked demonstrations and battered Pakistan’s weak civilian government.

If the ICBC formally pulled out of the project, the ECC said there were four options: funding through a new tax, finding more financing banks, government-to-government agreements with Russia or China to fund the entire project or a government-to-government agreement with Iran.

However, Irfan Ashraf Qazid, a spokesman for the Pakistani Ministry of Petroleum, stated that “ICBC is still engaged in IP (Iran-Pakistan) project and the negotiations are still going on."

"There were several options presented by the ministry regarding funding of this IP project but somehow the press took it as if these options were being presented because ICBC was trying to back out, which was not the case."

No statement has been released from ICBC.

Pakistan's Foreign Minister Hina Rabbani Khar underlined that ICBC's reluctance would not impact the project. "There can be, always are multiplicities of funding sources which are available for any project," she said.

"This is a fairly viable project and we hope and we do not see any problem in trying to find ways and means of ensuring its funding."

Shortly after US sanctions were imposed, Islamabad and Tehran agreed on a gas pricing mechanism for the 800 km long project but the terms were never made public. And like the pricing mechanism, much of the pipeline's details are unclear. 

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