US threatens Pakistan with sanctions over Iran gas pipeline deal

The US has asked Pakistan to abandon the multi-billion dollar gas pipeline deal with Iran and instead pursue the TAPI project, warning that Islamabad may face American sanctions if it continues with I-P pipeline.

The US raised the pipeline project during the fourth round of a dialogue on energy with Pakistan that concluded in Islamabad yesterday without any major tangible gains, The Express Tribune newspaper quoted unnamed officials as saying.

The officials said US Special Envoy for International Energy Affairs, Ambassador Carlos Pascual, "advised" Islamabad to abandon its plans to import gas from Iran.

He proposed instead that Pakistan should pursue the TAPI gas pipeline with Turkmenistan, Afghanistan and India.

A US Embassy spokesperson confirmed that the US is concerned with Pakistan's plans regarding the pipeline project from Iran and that the issue was raised in Ambassador Pascual's meetings.

"The proposed Iran-Pakistan (I-P) pipeline, if built, could raise concerns under the Iran Sanctions Act. We are encouraging Pakistan to seek alternatives," said the US Embassy spokesperson.

Asked about reported US opposition to the Iran-Pakistan pipeline project at a weekly news briefing yesterday, Foreign Office spokesperson Tehmina Janjua said the project was in Pakistan's interest as the country is facing an energy crisis.

"Therefore, it is the decision of the government of Pakistan to continue this cooperative project with Iran to ensure that energy is provided to the people as required," she said.

Pakistan has reservations about the TAPI project due to security concerns about Afghanistan and unsettled issues related to gas prices.

On the other hand, Iran's South Pars gas field is the largest in the world and production costs for Iranian gas are significantly cheaper than those for gas from smaller fields in Central Asia.

The renewed opposition from the US to the Iran-Pakistan pipeline came just days after high-level talks between Tehran and Islamabad on the project.

Last week, Pakistan and Iran agreed to speed up the pipeline project. The two sides said they intend to go ahead with the project that would bring its first gas flow by 2014.

The Iran-Pakistan pipeline was originally meant to have India as its terminal location but New Delhi has not been able to make a firm commitment on the project to date.

An unnamed senior Pakistani official said that despite opposition from the US, Islamabad would not abandon the pipeline project as an agreement had already been signed with Tehran.

The two-day Pakistan-US talks on energy ended without any significant developments despite initial high hopes.

The US appeared reluctant to provide significant investment in Pakistan's financially crippled power sector, The Express Tribune reported.

A senior official told the daily that Ambassador Pascual had informed Pakistani authorities that it would be naïve to expect large support from the US in the power sector till there is an institutional overhaul in the way it is regulated and managed.

The official said the US had urged Pakistan to introduce major reforms by scrapping redundant policies and implementing new regulations.

The latest US stance highlighted the urgency to reform the energy sector that has stalled economic growth.