Iran, Pakistan Push Ahead With Gas Pipeline Deal

By Patrick Goodenough | June 14, 2010 | 5:03 AM EDT

( – Four days after the U.N. Security Council approved fresh sanctions against Iran, the Iranian and Pakistani governments on Sunday finalized a multi-billion dollar deal under which Iran will supply natural gas by pipeline to its eastern neighbor for 25 years.
To win Chinese support, the watered-down U.N. sanctions resolution does not target Iran’s pivotal energy sector.
Nonetheless, Washington has long been opposed to the pipeline plan, urging both Pakistan and India – which may join the project at a later stage – not to cooperate with Iran while the international dispute over its nuclear activities remains unresolved.
The warning was reiterated in April by U.S. Assistant Secretary of State for South and Central Asia Robert Blake, who said after visiting the region that with negotiations over Iran’s nuclear activities at a sensitive stage, “we would prefer that all countries not conduct such transactions with Iran at this time.”
Despite their close relationships with the U.S., both Pakistan and India have brushed off American concerns about the pipeline project over the years, citing their pressing need for energy supplies. Iran is home to the world’s second-largest gas reserves, surpassed only by Russia.
Pakistani Foreign Ministry spokesman Abdul Basit stressed last week that the sanctions resolution passed by the Security Council were not applicable in any way to what he called “purely a commercial agreement.”
First planned in the 1990s, the project worth some $ 7.5 billion has seen many delays, but at Sunday’s signing ceremony in Tehran representatives of the Iranian and Pakistani governments voiced optimism that the gas would begin traversing the pipeline by 2014, at a rate of some 21.5 million cubic meters a day.
Iran plans to extend a pipeline from its giant South Pars gas field, through the city of Iranshahr in the southeast and on to its Chabahar port on the Persian Gulf, near the border with Pakistan, a total distance of around 750 miles. From there a 440-mile Pakistani portion of the pipeline aims to link the border with Nawabshah in Sindh province, north of Karachi.
Originally it was envisaged that the pipeline would continue eastward into India.
Although India has left the option open to join at a later stage, it is not currently party to the agreement – a situation attributed in part to U.S. unhappiness but also to India’s distrust of its traditional rival, pricing issues, concerns about security of the pipeline, and a dispute over the transit fees Pakistan would levy on India-bound gas crossing its territory. Iran and Pakistan agreed last year to push ahead with the plans without India, for now.
Sunday’s signing ceremony provided the Iranian government with a new opportunity to dismiss – in public at least – Western efforts to punish it as ineffective.
Far from being isolated, Masood Mir-Kazemi, Iran’s oil minister, told reporters that Iran and its huge gas reserves “will play a key role in guaranteeing global energy security in the future.”
President Mahmoud Ahmadinejad called the sanctions resolution futile and predicted it would backfire, Fars news agency reported Sunday.
An editorial in Keyhan, a newspaper whose editor is appointed by supreme leader Ayatollah Ali Khamenei, said the new measures, once again, would be counterproductive.
“The Capitol Hill warmongers and their blind European allies have been powerless to edge Iran’s rising influence throughout the Middle East,” it said, predicting that by the end of President Obama’s administration, Iran would be playing a more prominent regional and global role than it was before he took office.
Administration officials have described the resolution as “tough” and “comprehensive” and U.S. ambassador to the U.N. Susan Rice called it “a major blow” to Iran.
Although Iran’s oil and gas sector was not targeted by the resolution, legislation currently before Congress aimed at imposing unilateral U.S. sanctions against Tehran seeks to punish companies that help Iran’s energy industry, including building or maintaining oil or gas pipelines, or sell petroleum products to Iran.
Congressional leaders are working to resolve differences in separate bills passed earlier by the House and Senate.
Existing legislation, the 1996 Iran Sanctions Act (ISA), provides for sanctions against companies or individuals investing $20 million or more in Iran’s energy sector (a measure contained again in the new legislation.)
The ISA definition of “investment,” according to an April 2010 Congressional Research Service report, “is interpreted by the State Department to include pipelines to or through Iran, as well as upgrades or expansions of such energy related projects as refineries.”
Although U.S. officials in both the Bush and Obama administrations, have not said directly whether the planned Iran-Pakistan pipeline would be sanctioned under the ISA, State Department spokesman Philip Crowley in April warned of “ramifications” for those doing business with Iran.
Responding to a question about the pipeline plans, he said that part of  U.S. dialogue with India and Pakistan was “to understand and help with the respective and legitimate energy needs that countries in the region have.”
“But we are also sending a very strong signal … to those countries that have economic relations with Iran or to those sectors of the global economy that do business with Iran,” Crowley said.
“Understand where this process is going, and understand that ultimately, the reputation of a company or the reputation of a country will – there will be ramifications here in terms of how this proceeds.”
Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow