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Gas accord will be honoured, Iran assured

February 07, 2012

Minister of Finance Dr. Abdul Hafeez Sheikh shaking hand with the Vice President of Iran Saeedlou. - APP Photo

ISLAMABAD: Notwithstanding international pressures, Pakistan gave on Monday an unequivocal assurance to Iran that it would implement, on a fast track basis, multi-billion-dollar gas and electricity import projects. “Pakistan is fully committed to importing electricity and gas from Iran and we are working on a fast track basis to finalise these deals at the earliest,” Dr Abdul Hafeez Sheikh, the prime minister’s adviser on finance, told visiting Iranian Deputy President Ali Saeedlou.

The assurance was given at a time when Washington is putting pressure on Islamabad to back off from the Iran-Pakistan gas pipeline project, under which the country is to receive up to one billion cubic feet of natural gas from Iran by 2014.

The US, which has intensified its efforts for increased economic sanctions against Iran, offered to Pakistan alternative sources of energy in the form of LNG imports and natural gas transmission from Turkmenistan.

Dr Hafeez and Ali Saeedlou also discussed opportunities to boost trade and increase investment in horticulture, livestock, energy, transport, telecommunications and engineering sectors.

Dr Hafeez said the establishment of proper rail and road network for goods transport would facilitate trading communities of the two countries to access markets in the region. “The present visit will further strengthen our friendship and bilateral trade, economic and political relations,” he said.

A joint news conference by Dr Hafeez and the Iranian deputy president was cancelled in the evening following a Supreme Court order suspending 28 members of the Senate and national and provincial assemblies elected during by-polls conducted by an incomplete Election Commission. Dr Hafeez is also among them.

Pakistan called for early implementation of the projects already committed to by the two sides. It also stressed the need for increasing bilateral trade from $1.5 billion to $5 billion.

“Pakistan and Iran must actively implement the preferential trade agreement and work towards realising the goal of free trade area,” Dr Hafeez was quoted by sources as saying. He said the two sides should curb cross-border smuggling, review tariff and non-tariff barriers, promote business-to-business interaction and simplify visa procedures.

Pakistan also urged Iran to ratify the international road transport agreement to facilitate traders to have an access to regional markets and take steps for early construction of the Kirman-Zahedan rail link and improvement of the Quetta-Taftan section.

Besides the gas pipeline project, Pakistan is in advanced stages of finalising a deal with Iran for importing 100MW of electricity for Gwadar. Islamabad has urged Tehran to consider other options, including bartering commodity exports with electricity trade, because the Export Development Bank of Iran and M/S Sunir have been told that banks are reluctant to open letters of credit in favour of Iranian banks owing to sanctions by the West.

The two countries have already signed agreements for import of 100MW of electricity for Gwadar at a rate of about Rs7 per unit and hope to deliver about 35MW to Makran in a couple of months.

They are also negotiating another project for import of 1,000MW Iranian electricity in about two years. According to the sources, the two sides have yet to finalise a contract for laying transmission line and interconnection for the project. Under a Rs3.7 billion project, about 75km of line will be laid to transmit 100MW of Iranian electricity to Gwadar and adjacent areas of Balochistan.

Under a Rs74 million contract signed in 2009, Pakistan’s Nespak and Iran’s Mushanir Power will determine technical and economical viability of the proposed electrical interconnection between Pakistan’s NTDC and Iran’s TAVANIR.

The joint venture has completed reconnaissance survey of the line route in Pakistan. The final route survey and investigation report were submitted by Nespak last week. In order to finalise the design and feasibility study, final comments from TAVANIR are still awaited.

Initial estimates suggest that the Iranian portion of the transmission line (Zahedan-Mirjaveh on Iranian border) and switching stations in Zahedan will cost $254 million. The transmission line and other facilities in Pakistan from Taftan to Quetta section will cost another $440 million, taking the total project cost to $694 million.

Once the comments are available from Iran, the two sides will activate functions of a joint steering committee to take the project to implementation phase, which will involve engagement of project consultants, arrangements for financing and tariff negotiations.