Iran has suspended a USD 250 million loan to Pakistan to build part of a pipeline project for importing natural gas from the Islamic Republic.
"Pakistani officials were told in recent talks that, given the sanctions, Iran is not in a position to finance the construction of a pipeline in another country and has no obligation to do so," Iran’s Deputy Oil Minister Ali Majedi said on Saturday.
Majedi said Iran has proposed Islamabad seek assistance from European firms to complete the Pakistani part of the pipeline project between the two neighbors.
“Iran’s Oil Minister Bijan Zanganeh has proposed Islamabad gets help from third-party companies to aid and accelerate the completion of the project on Pakistani soil,” he added.
The Iranian official complained that Pakistan has done little to construct its own section of the project.
"If a contractor is chosen today and pipeline construction begins today, it will take four years to complete it (the pipeline),” said Majedi, adding that if Pakistan fails to take gas by the end of next year Iran will demand compensation under the terms of the contract.
According to the original agreement sealed between Iran and Pakistan, if Pakistan does not fulfill its obligation to complete the pipeline on its side by the end of 2014, it will have to pay a daily penalty of USD 1 million to Iran until completion.
The pipeline will see 21.5 million cubic meters (mcm) per day of Iranian natural gas be exported to Pakistan.
The multi-billion-dollar pipeline is designed to help Pakistan overcome its growing energy needs at a time when the country of over 180 million people is grappling with serious energy shortages.
On January 29, Iranian Deputy Oil Minister Javad Owji said Tehran would finance and help build the 700-kilometer tranche of Iran-Pakistan gas pipeline on the Pakistani side, with a 250-million-dollar loan.
Iran has already built more than 900 kilometers of the pipeline on its soil.