ISLAMABAD: Pakistan could face a financial penalty of $18 billion, said a senior government functionary while briefing the Public Accounts Committee (PAC) of the National Assembly on Wednesday, if it failed to implement a pipeline project involving Iran on time.
The two countries reached a preliminary agreement to build a pipeline in 1995 to help Pakistan import natural gas from Iran.
The project originally planned to involve India as well, though the administration in New Delhi pulled out in 2009 due to pricing and security issues.
Briefing the committee over the issue, petroleum division secretary Muhammad Mahmood said the government had discussed the issue with the United States, which has imposed sanctions on Iran, while seeking relief.
“The members of the committee asked how much penalty could be imposed on Pakistan for not completing the Iran gas pipeline on time,” reported the Express Tribune newspaper. “The secretary petroleum responded that as per the agreement, the penalty could be $18 billion. He also remarked that they have asked the US ambassador to either give them permission to go ahead with the project or give them money to pay the fine.”
The committee instructed the foreign ministry to discuss the situation with the US envoy to the country.
Pakistan has been trying to explore different options to import energy products at discounted rates from the international markets to reduce its import bill amid mounting financial challenges.
According to official figures, the country has already imported energy products worth $10.6 billion during the first seven months of the current fiscal year.
Last year, its petroleum import bill stood at $23.3 billion, which was 105 percent higher than the year before that.
Iran may fine Pakistan $18 billion for delaying joint pipeline project — official
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Iran may fine Pakistan $18 billion for delaying joint pipeline project — official
- The two countries signed a preliminary agreement to carry out the project in 1995 to help Pakistan import gas from Iran
- The government has taken up the issue with US authorities, who have imposed sanctions on Tehran, while seeking relief
Rating firm S&P says it won’t rush Iran war downgrades, sees risks for countries like Pakistan
- Agency says it is monitoring indebted energy importers as higher oil prices strain finances
- Gulf economies seen better placed to weather shock, though Bahrain flagged as vulnerable
LONDON: S&P Global said it would not make any knee-jerk sovereign rating cuts following the outbreak of war in the Middle East, but warned on Thursday that soaring oil and gas prices were putting a number of already cash-strapped countries at risk.
The firm’s top analysts said in a webinar that the conflict, which has involved US and Israeli strikes against Iran and Iranian strikes against Israel, US bases and Gulf states, was now moving from a low- to moderate-risk scenario.
Most Gulf countries had enough fiscal buffers, however, to weather the crisis for a while, with more lowly rated Bahrain the only clear exception.
Qatar’s banking sector could also struggle if there were significant deposit outflows in reaction to the conflict, although there was no evidence of such strains at the moment, they said.
“We don’t want to jump the gun and just say things are bad,” S&P’s head global sovereign analyst, Roberto Sifon-Arevalo, said.
The longer the crisis was prolonged, though, “the more difficult it is going to be,” he added.
Sifon-Arevalo said Asia was the second-most exposed region, due to many of its countries being significant Gulf oil and gas importers.
India, Thailand and Indonesia have relatively lower reserves of oil, while the region also had already heavily indebted countries such as Pakistan, Bangladesh and Sri Lanka whose finances would be further hurt by rising energy prices.
“We are closely monitoring these (countries) to see how the credit stories evolve,” Sifon-Arevalo said.
