Iran To Fund $500 Million Gas Pipeline In Pakistan

December 4, 2012Pakistanby EW News Desk Team

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Iranian officials have agreed to loan Pakistan $500 million to complete a controversial cross-border pipeline project that can transport over 21.5 million cubic metres of gas daily to their neighbours by 2014, reported Pakistani newspaper Express Tribune on Tuesday, ahead of president Asif Ali Zardari’s visit to Tehran later this week.

The construction of the Iran-Pakistan (IP) pipeline, which will travel from Iran's offshore South Pars gas field to the Pakistani border before possibly branching off into India or China, had initially ran into difficulty after several investors backed out of their commitment in fear of possible U.S. sanctions; and while Iran had completed nearly 90 percent of construction on its side of the border, construction on the Pakistani side had stalled with the lack of financial support.

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Under the terms of the new inter-governmental cooperation agreement however, Tehran will provide $250 million in direct loans to Pakistan, while another $250 million is expected to come from Iran’s commercial banks. According to the Fars News Agency, the Iranian oil ministry will also send a special team to Pakistan to aid the construction of the pipeline.

Discussions between both governments over the pipeline began as far back as 1994. Although India, China and Russia have all at one time or another expressed interest in participating in the project, none have fully committed to its construction over diplomatic issues. The Express Tribune added that the U.S. in 2010 had asked Pakistan to abandon the project, promising assistance in the construction of a LNG terminal instead.

But on May 1st this year, Pakistan's foreign minister, Hina Rabbani Khar told an audience that Islamabad will not give in to US pressures and will finish the huge pipeline project "at any cost.”

"Pakistan has decided to expand its cooperation in all areas, especially energy, with Iran," said Pakistan’s Adviser on Natural Resources Dr. Asim Hussain on Tuesday, as cited by The Nation.

In the meanwhile, the two countries also agreed to strengthen their diplomatic ties, and shared a common view on the reconciliation process in Afghanistan.

“It is imperative that Pakistan and Iran work closely in the wake of the US pullout from Afghanistan by 2014,” said Pakistan’s Defence Production Committee Senator Mushahid Hussain, echoing comments made by his Iranian counterpart.

Pakistan also backed Iran’s stance on its nuclear program, blasting the west for their double-standard policies with Iran.

" Pakistan believes that diplomatic and political ways are the best options for resolving Iran's nuclear issue," Pakistan's Foreign Minister Hina Rabbani Khar said, according to Fars News. “And we continue to believe that a peaceful solution can be found to this issue through mutual confidence-building between the Iranian and the western negotiating parties.”

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