TEHRAN: Iran says it has canceled a planned $500 million loan to Pakistan to build part of a pipeline to bring natural gas from Iran.

Deputy Oil Minister Ali Majedi says Iran has no obligation to finance the Pakistani side of the project and also doesn't have the money. Majedi’s comments were posted on the oil ministry's website, shana.ir, Saturday.

"Pakistani officials were told in recent talks that, given the sanctions, Iran is not able to finance construction of the pipeline (in Pakistan) and has no obligation to do so," he said.

He said Tehran will demand compensation if Islamabad fails to take Iranian gas by end of next year.

Under a valid contract, Pakistan is required to finish construction of the pipeline on its territory by the end of 2014.

"If a contractor is chosen today and pipeline construction begins today, it will take four years to complete it. Should Pakistan fail to take gas by the end of next year, Iran will demand compensation under the terms of the contract," he said.

Pakistan has welcomed an Iranian offer to approach third parties, including European companies, to finance the project.

The Iran-Pakistan pipeline is designed to help Pakistan overcome its mushrooming energy needs. Pakistanis experience frequent blackouts.

Iran has already invested over $2 billion to construct the Iranian side of the pipeline. But there are serious doubts about how Pakistan could finance the $2 billion needed to construct the pipeline, which also faces US opposition.

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Comments are closed.

Comments (39)

Khurram Awan
December 14, 2013 8:01 pm

Anyone who is planting such news that Pak-Iran gas pipeline will took more than 4 years to build is just lying and working on someone's else agenda. Iranian Side pipeline is already complete and Pakistan just need to add an extra 700 Kilometer pipeline and it is not a rocket science at all to do that. This project could complete in less than a year if government is serious but Some Powers are implanting various fake news in Pakistani news outlets now a days. First they planted a 7 Billion Dollar fake pipeline value and we know it is costing less than 4 billion USD now the same group is stating 4 years timeline to steer the government away from this project but infact that is utterly false as well.

December 14, 2013 8:27 pm

The project was dead as soon as India stopped showing interest to the project. If Pakistan cannot afford the pipeline, how it is going afford the oil? There was not much due diligence on this project from day one. Unfortunately Iran becomes the losers in this case.

December 14, 2013 8:29 pm

As per this article, (Quote) "If a contractor is chosen today and pipeline construction begins today, it will take four years to complete it. Should Pakistan fail to take gas by the end of next year, Iran will demand compensation under the terms of the contract," he said. (unquote) Any penalties on this contract should be recovered from Zardari and cronies. How did they sign an agreement when the infrastructure could not be ready to receive gas within 4 years! Zardari knew that some body else will be in next Govt to deal with this situation and become more unpopular among the nation. So cunning of him. He should be tried in the court for signing an impractical agreement. All the people connected to finalizing this agreement should be tried in court for absence of "due diligence" and should be barred to hold a govt position!

December 14, 2013 8:40 pm

"He said Tehran will demand compensation if Islamabad fails to take Iranian gas by end of next year." Iran has every right to demand compensation. Zardari just before he made exit from the presidency went to Iran to sign the agreement,he left the project in the lap of incoming Nawaz Sharif's government. Who will provide $500 millions ? Saudi, US - of course not ,both were opposed to this project to begin with..

zahid s ali
December 14, 2013 8:54 pm



December 14, 2013 8:59 pm

Why would Pakistan even consider entering into any contract when a) it doesn't have the means to finance it and b) the other party (Iran) is facing severe sanctions from the West and it is very possible, Pakistan can face serious repercussion from the U.S., if it carried through? It amazes me how our politicians think - on one hand, they are begging for hand-outs and on the other, they pretend that they are a sovereign state, able to make decisions on their own - knowing fully well that they cannot carry on with their commitments. Agreed, Pakistan is facing energy shortage, but by entering into an agreement that they cannot keep, not only they will not be able to provide relief, but they will end up spending millions more, without seeing any return. Our country is filled with incompetent leaders and it appears we are digging ourselves deeper into the hole. I used to say may God bless Pakistan - maybe, it is more appropriate to say may God Save Pakistan.

December 14, 2013 9:05 pm

I think Iran has wasted 2 billion dollar on building the pipeline

December 14, 2013 9:09 pm

There is no need to worry, all this is negotiating ploy on the part of Iran. Pakistan does not have to construct the pipeline at 2 billion dollars expense if it does not get the loans from Iran or EU. Instead, Pakistan can simply build a filling station right t the border, compress the gas and transport in the high pressure liquid form using trucking transport infrastructure that is currently helping the NATO supplies. After 2014, NATO related transportation in Pakistan is needed and the trucks can be used haul the liquified gas. So, Pakistan should call Iran's bluff and give a fitting reply.

December 14, 2013 9:21 pm

Pakistan Needs Money and USA and KSA will not Finance the Pipeline because both are Against Pipeline.

December 14, 2013 9:54 pm

Iran knows that after 2 years Pakistan will then ask to wave off the loan.

Asad Khan
December 14, 2013 9:56 pm

The inaction on the part of Pakistan leadership continues on this vital project. How will Pakistan pay any compensation if they aren't able to fund any part of the construction through internal or external means. What about demanding from America and Saudi Arabia to get out of the way so that Pakistan can meet its energy needs and this is perhaps the cheapest way of doing it. National interest should be tantamount, and this should be brought up at every forum possible.

December 14, 2013 9:57 pm

Thank you Mr. Zardari.

December 14, 2013 11:00 pm

It does not surprise me at all. What else you can expect from Iran? Historically Iran is never been sincere or even fair with Pakistan.

December 14, 2013 11:44 pm

I say, this is happening from a brotherly nation....not to different from KSA some time back. So the bottom line is stop looking for easy loans, grants, freebies. Work hard. There is no easy way to success.

December 14, 2013 11:46 pm

Pakistan should borrow money from India and get it done. Later, this line can be extended to India.

December 14, 2013 11:53 pm

India was the main factor/attraction for Iranians in this project. So, after India withdrew from this project in 2009, it was destined to doom.

December 15, 2013 3:13 am

Pakistan should ask all weather friend China to finance the deal. China has large trade surpluses every year. Why Pakistan does not ask for more aid and technology from China instead of US or EU.

December 15, 2013 4:03 am

So much so for Muslim Ummah!

December 15, 2013 4:19 am

As expected. Is anyone really surprised?

December 15, 2013 6:51 am

If a contractor is chosen today and pipeline construction begins today, it will take four years to complete it. Should Pakistan fail to take gas by the end of next year, Iran will demand compensation under the terms of the contract

I guess mutual animosity towards the USA only goes so far. Looks like Iran is going to make you honor your commitment - maybe next time you will do some due dillegence before you enter into a contract.

December 15, 2013 5:42 pm

This is an interesting example of a state whihich is not sure of its finances but still goes out for an expensive shopping hoping the seller will give it either on loan or for free. It is quite surprising why Iran in first place agreed to start constructing the pipe line at a heavy cost on its side without assessing the capacity of its neighbour of its ability to finish the project on its side. It is humiliating situation for both the parties.

December 15, 2013 9:18 pm

If its in Pakistan's interest to have the pipeline built, it needs to come up with 2bn and stand up to US and its sanctions that hurt Pakistan's interest.

December 16, 2013 12:31 am

What can u say?Pakistan will never change,I wish Quaid e Azam knew that the future leaders would be so corrupt.

December 16, 2013 12:48 am

Dear Pakistani brothers , I have one solution for financing the project. Guess who . . . Yes its non other than Mr. Imran Khan ask him to appeal Pakistanis to donate generously. Believe me i'm CA this will work. BDW this was Mr. Imran idea/way of ruling Pakistan. Thanks I won't charge for my service.

December 16, 2013 11:31 am

@Pakistan#1: Can you share a few examples? Mr. Historian

December 16, 2013 3:06 pm

Lessons to learn....There is nothing like muslim brotherhood. All the countries are separate states and would care only for the benefits of their own countrymen. There was a time when Pakistan stood by the US to ignore Iran....Iran has just returned the favour.

December 16, 2013 3:20 pm

For those who think only an indian consumer at the end of this pipeline would make it economically feasible, I should remind you the Chinese are also interested in this pipeline being extended through the Karakoram to the Chinese border.

The Chinese have much more money to finance projects than any indians. There is also talk of an oil pipeline, but we shall see what comes of it. I am optimistic, these type of project take years and are never plain sailing, but eventually once built are literally a life line.

dr vimal raina
December 16, 2013 6:35 pm

hollow pipeline.

December 16, 2013 8:57 pm

Another neighbour who is not happy. Is that the best Pakistani government of Nawaz Sharif & his family members can do?. Is this how they conduct their own business deals?. What a shame.

December 16, 2013 9:11 pm

4 years to complete the pipe line, now thats cleverly done by Zardari, he signed the contract before his term came to an end, next gov. will go through the struggling of completing the project and in that time Zardari will back in power to do the inauguration.

December 16, 2013 11:18 pm

@Pakistan#1: Is it fair to Iran that they wasted $2 billion building their part of the pipeline while Pakistan sat around and did nothing ? Iran is cutting its losses.

December 17, 2013 1:55 am

I am surprised that no one called it a Conspiracy against Pakistan as yet!

Just Someone
December 17, 2013 3:59 am

@dr vimal raina: Aren't pipelines supposed to be hollow to allow them to transport oil and gas.

December 17, 2013 6:35 am

@Akram: Decision by india is already done!! Only time will tell, if china will take a pipeline through Karakoram and Tibet... I sincerely hope that it happens. Poor people of Pakistan will suffer and not politicians. In mean time be ready with messed up project to pay off Iran from hard earned tax from common people or donation from countries you do not love.

December 17, 2013 8:27 am

Now we know why no country trusts Iran.

December 17, 2013 10:58 am

@kk: India is still very very far away with anything like that. This is something else that has delayed the project.

December 17, 2013 4:04 pm

Raising two billion dollars should not be a problem for a country like pakistan.. Somehow I feel that the real issue of not building the pipeline is not the money.

December 17, 2013 6:07 pm

One of the major reasons Pakistan went ahead with the project was to annoy the Americans.

India and China, 2nd and 3rd biggest economies in the world in PPP terms, stopped taking Oil from Iran, under the fear of Sanctions. Yet, Pakistan went ahead with it.

Not so smart. Not smart at all!

December 17, 2013 6:54 pm

It's a welcome development. Iran’s import price for gas from Turkmenistan undercuts the price at which it will offer gas to Pakistan by 250 percent and is subject to revision based on prevailing global market conditions -- a ridiculous pricing formula. Pakistanis who negotiated this deal should have been tried and sent to jail (a good lead for any investigative Pakistani journalist). The pipeline should only be completed after renegotiating the pricing formula. Otherwise Pakistan is better off without this expensive gas.

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