Multi-billion-dollar IP project virtually runs aground

Multi-billion-dollar IP project virtually runs aground By Zafar Bhutta Published: November 18, 2014 According to sources, the economic decision-makers believe the project couldn’t be implemented under the present geopolitical situation because of Tehran’s association with the project. PHOTO: AFP ISLAMABAD: The troubled multi-billion-dollar gas pipeline project between Pakistan and Iran is virtually dead. With the sword of possible international sanctions dangling over their head, Pakistan’s economic managers have decided to stall the $7.5 billion Iran-Pakistan (IP) gas pipeline project until the international community lifts sanctions against the Islamic Republic, The Express Tribune has learnt. According to sources, the economic decision-makers believe the project couldn’t be implemented under the present geopolitical situation because of Tehran’s association with the project. They decided the border phase of the project would only be implemented once international sanctions were lifted and Pakistan was in a position to construct and connect its portion of the pipeline with the Iranian pipeline with no concern for sanctions on its companies for receiving gas or making gas payments to Iran. The decision-makers in a meeting of the Economic Coordination Committee (ECC) held on October 2 had noted that since phase-II would comprise construction of an approximately 80-kilometre long pipeline, it would require little time for completion, sources said. The meeting was informed that a gas sales and purchase agreement (GSPA) between the Inter-State Gas Systems Pvt Limited (ISGS) from Pakistan and the National Iranian Oil Company (NIOC) was signed in June 2009. Despite Pakistan’s best efforts, the project repeatedly hit snags due to the international sanctions imposed on the Islamic Republic for its controversial nuclear programme. Iran’s association with the project and possible risk of violating sanctions has scared away potential financiers, reputable international suppliers of crucial equipment and contractors. The economic managers were also informed about Iran’s unilateral withdrawal from the government-to-government cooperation agreement and the $500 million financing for the construction of Pakistan’s portion of the pipeline. This had created a force majeure situation for Islamabad and accordingly the matter was taken up with Tehran as per the provisions of the GSPA. It was also stated that the Gwadar-Nawabshah LNG terminal and pipeline project had been planned keeping in view any future developments in the IP project. The pipeline would meet growing needs of the energy-starved Pakistan and could also be utilised to link up to the Iranian border in future. “As work of pipeline route has already been done for the IP project, it has been envisaged that the same specifications should be utilised for this project,” an official of the Ministry of Petroleum and Natural Resources said, adding that this project would provide capacity of up to 500mmcfd of LNG-based gas supply which could be used to cater for the needs of public and private sectors. It shall also serve as a means to realise the objectives of the IP project for the import of substantial qualities of urgently needed natural gas within three years. After detailed deliberations, the ECC approved in principle the Gwadar-Nawabshah LNG terminal and pipeline. Officials of the Ministry of Petroleum and Natural Resources said that proposals for this purpose had been shared with Iranian authorities who would respond after discussing with their high-ups. Published in The Express Tribune, November 18th, 2014. ==================== Exclusive: Iran uses China bank to transfer funds to Quds-linked companies – report By Louis Charbonneau, Jonathan Saul and James Pomfret NEW YORK/LONDON/SHENZHEN Tue Nov 18, 2014 12:19am EST A general view of the Central Bank of Iran building in Tehran January 23, 2006. REUTERS/Morteza Nikoubazl A general view of the Central Bank of Iran building in Tehran January 23, 2006. Credit: Reuters/Morteza Nikoubazl Related News U.S. 'disappointed' with Iran's IAEA cooperation ahead of nuclear talks China gives Australia investment rights, yuan clearing bank India's Oct Iran oil imports rise 60 pct y/y -trade Analysis & Opinion How to fix the climate change beat China’s stock connection: a guide to the perplexed Related Topics China » (Reuters) - There is no trace of Shenzhen Lanhao Days Electronic Technology Co Ltd at its listed address in the beige and pink-tiled "Fragrant Villa" apartment complex in this southern Chinese city. The building's managers say they’ve never heard of it. But a Western intelligence report reviewed by Reuters says Shenzhen Lanhao is one of several companies in China that receives money from Iran through a Chinese bank. Such transfers help to finance international operations of the Islamic Revolutionary Guards Corps' elite Quds Force, the report said. The Quds provides arms, aid and training for pro-Iranian militant groups in the Middle East, such as Hezbollah, Hamas and Shi'ite Muslim militias in Iraq. They have also armed and trained government forces in Syria's civil war in violation of a U.N. arms embargo, U.S. and European officials say. Washington designated the Quds a supporter of terrorism in 2007. The European Union sanctioned them in 2011. The report said that the Central Bank of Iran (CBI) holds accounts with the Bank of Kunlun Co Ltd, a China National Petroleum Corp unit. Quds-controlled Iranian companies, including one called Bamdad Capital Development Co, initiate transfers from these accounts to either Chinese entities directly controlled by the Quds or to Chinese entities owed money by the Quds, such as Shenzhen Lanhao. "The money transfers from accounts held by the CBI with Bank Kunlun are initiated by the Quds Force and transferred to Chinese companies connected to the Quds Force in order to meet its financial needs," the seven-page report said. Reuters could not independently verify the claims in the report. The suspected movement of Iranian funds linked to the Quds Force through a Chinese bank and Chinese companies is a reminder of the difficulty of enforcing sanctions on Iran at a time when the United States and other world powers hope to clinch a nuclear deal with Tehran by Nov. 24. The U.S. Treasury sanctioned Kunlun in 2012 for conducting business with Iran and transferring money to an entity linked to Iran's Revolutionary Guards, but there was no mention then of any link to the Quds. Once the money is transferred from Kunlun to other entities, the intelligence report said, the Quds can use it for acquisitions in China and to finance all sorts of covert activity in other countries. The report does not say how specific funds moving out of the CBI's accounts at Kunlun would be used by the Quds. The report does not suggest that either the Chinese government or Bank of Kunlun were aware of the possibility that there could be a Quds Force connection to Kunlun's transactions. But the report's assertions underline Tehran's complex and economically close relationship with Beijing: Iran is China's third-largest crude oil supplier, making China the Islamic Republic's biggest oil client. BEIJING PICKED KUNLUN The exact amount of money the Quds could have received from the Kunlun channel is unclear. But the sums flowing from the Iranian central bank to Kunlun over the past year have been in the hundreds of millions of dollars, the report said. As Western sanctions tightened on Iran in 2012, Beijing picked Kunlun as its main bank to process billions of dollars in oil payments to Iran, shielding other banks from penalties. Kunlun had assets of 246.5 billion yuan ($40 billion) at the end of 2013, according to its annual report. The U.S. Treasury's 2012 sanctions targeted money Iran was being paid for oil exports, including $22 billion held at Kunlun. However, there was an easing in the restrictions on Iran’s access to the money in November 2013 under a bilateral agreement with China, and as an interim nuclear deal was reached with six world powers in the same month. The deal between Iran and the United States, Britain, France, Germany, Russia and China gave Tehran access to several billion dollars in assets frozen at banks worldwide in exchange for assurances it would curtail a nuclear program that Western powers suspect will give it the ability to build nuclear weapons. Negotiators gather in Vienna this week to try to reach a comprehensive deal that would prevent Iran from building a nuclear bomb while eventually lifting sanctions that have badly hurt its economy. Hopes of a breakthrough are slim. METALS PURCHASE Officials at Kunlun did not respond to Reuters requests for comment, nor did CNPC, China's biggest oil and gas company. The Chinese government said China's trade relations with Iran and other countries do not violate international laws. "China maintains normal trade relations with relevant countries, including Iran," Foreign Ministry spokesman Hong Lei said in a statement in response to queries from Reuters. "This does not violate any international law or (U.N.) Security Council resolution, and does not harm the interests of other countries or the international community." Iran’s U.N. mission declined to comment. Reuters viewed a payment transfer order from 2014 showing Bamdad requesting Iran's central bank transfer 1.45 million euros ($1.81 million) from an account at Kunlun to Shenzhen Lanhao for a payment "related to purchasing metals." While it was unclear how and whether the Quds Force received any funds through the transaction, it appeared to show the movement of funds as described in the report. The report says other companies also initiate and receive transfers from the central bank's Kunlun accounts in this way. Bamdad's website said it is engaged in pharmaceutical and base metals trading. Its Iranian telephone number was out of service. It lists an address in a non-existent Iranian province. A person listed as a general manager in a directory for Shenzhen Lanhao said he does not work for the company when contacted by telephone. The apartment complex listed as the business address for Shenzhen Lanhao in Shenzhen's western suburbs is occupied by a family. They told a Reuters reporter they hadn't heard of the company, nor of its general manager. (Additional reporting by Michael Martina, Fayen Wong and Chen Aizhu in Beijing, and Parisa Hafezi in Ankara. Editing by Jason Szep and Martin Howell) ============================