Pakistan’s president has taken part in a ceremony in Iran to mark the start of construction of a controversial pipeline to bring natural gas from the Islamic Republic, despite US opposition to the project.
The Iran-Pakistan pipeline is intended to help Islamabad overcome its increasing energy needs at a time when the country is facing increased blackouts and energy shortages.
However, there are serious doubts about how Pakistan can finance the $1.5bn needed to construct the pipeline and whether it can go through with the project without facing US sanctions, which Washington has put in place to pressure Iran over its nuclear programme.
In live television images shown on Pakistani television, President Asif Ali Zardari and his Iranian counterpart Mahmoud Ahmadinejad shook hands with various dignitaries as the ceremony got under way at the border.
Last Monday’s event comes just days before the government’s term is set to expire and could be designed to win votes by making the ruling Pakistan People’s Party (PPP) look like it is addressing the energy crisis.
The pipeline also allows the government to thumb its nose at the US, which is widely unpopular in Pakistan despite billions of dollars in military and civilian aid.
US opposition
The US has opposed the project, instead promoting an alternative pipeline that runs from the gas fields of Turkmenistan to Afghanistan, Pakistan and then to India.
Washington has also championed a number of electricity-generation projects within Pakistan such as helping to renovate hydropower dams.
Iran says it has already finished its side of the pipeline, which travels 1,150km from the gas fields to the Iran-Pakistan border.
The Pakistan segment of the pipeline is expected to be about 780km.
Gas is supposed to start flowing in by the end of 2014, although few see that deadline as realistic considering the delays so far in the project.
“If this deal is finalised for a proposed Iran-Pakistan pipeline, it would raise serious concerns under our Iran Sanctions Act,” said Victoria Nuland, the US state department spokeswoman, during a news briefing in Washington last week.
“We’ve made that absolutely clear to our Pakistani counterparts.”
Sanction triggers
Under US regulations, a wide-ranging list of business-related activities with Iran can trigger US sanctions.
Certain sales of technology or equipment that allow Iran to develop its energy sector are barred, as are most transactions involving gas or other fuels, according to a January report by the Congressional Research Report.
The regulations also bar business dealings with Iranian financial institutions.
Possible penalties include barring the entity violating the sanctions from receiving US military equipment or making it essentially impossible to do business with US banks.
Iran also faces separate EU and UN sanctions over its controversial nuclear programme, which the West believes is geared for building nuclear weapons. Tehran denies the charge, insisting the programme is purely for peaceful purposes.
Rhetoric aside, it remains to be seen whether Pakistan would ever actually face US sanctions.
The PPP government led by Zardari is likely to have only days left leading the country with new elections expected to be called by the end of the week.
“That timing is very important for the People’s Party because they are building their campaign on this,” said Hussain Yasar, a senior energy analyst at KASB Securities in Karachi.
Pakistan shares slumped almost 2.5 percent on Monday on fears of possible US sanctions following the groundbreaking ceremony, traders said
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