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) ============================

IP gas pipeline project: Iran firm wins contract to build Pak portion of pipeline

Khamen­ei tells Zardar­i the projec­t must go ahead despit­e US pressu­re. By Zafar BhuttaPublished: February 28, 2013 Presidents Mahmoud Ahmadinejad, Asif Ali Zardari and Iran’s Supreme Leader Ayatollah Ali Khamenei at a meeting in Tehran. PHOTO: AFP ISLAMABAD: In an apparent snub to mounting US pressure, Pakistan has awarded the contract of building its portion of the multibillion-dollar Iran-Pakistan gas pipeline to an Iranian firm. This comes as President Asif Ali Zardari met with his Iranian counterpart Mahmoud Ahmadinejad and supreme leader Ayatollah Ali Khamenei in Tehran on Wednesday. Iranian firm Tadbir Energy has been awarded the contract to construct Pakistan’s portion of the gas pipeline, sources told The Express Tribune. The initialisation of the contract took place during a recent visit of a Pakistani delegation to Tehran. The pipeline construction will be formally launched on March 4 on the Pak-Iran border. The Pakistan cabinet has already approved a waiver of the Public Procurement Regulatory Authority rules in order to award the contract directly to Tadbir Energy. “After Russia and China backed out due to US pressure, Pakistan decided to avail Iran’s offer for financing and constructing Pakistan’s portion of the pipeline,” a senior government official said. Sources added Pakistani public sector firm Interstate Gas Systems (ISGS) and Tadbir Energy initially signed the contract in Tehran, and now the ISGS board will endorse it. Iran designated Tadbir Energy to work on the project for which Tehran is also extending a $500 million loan. The firm faces no sanctions from any foreign government. It is controlled by the Imam Khomeini Relief Foundation, one of Iran’s largest charitable groups. The neighbours had already signed an inter-governmental cooperation agreement and the firm has now formally been awarded the contract. Sources added that Tadbir Energy would undertake all engineering, procurement and construction for the first instalment starting from the border at a cost of around $250 million. Tadbir Energy will also undertake the second phase of the project, and will increase the financing by allocating a further $250 million to the pipeline project, subject to discussions regarding its involvement in the distribution of gas in Pakistan later on. It has also agreed to provide and assist in arranging $250 million as supplier credit and any additional financing for the second phase. The firm will act as the lead contractor along with the nominated local subcontractor(s). The total cost of the project is expected to be around $1.5 billion. Tehran will cough up $500 million, while the remaining $1 billion will be generated through the Gas Infrastructure Development Cess (GIDC). With Washington slapping Tehran with a raft of sanctions that have hurt Iranian companies’ ability to do business and creating hurdles in making payments to them, Islamabad and Tehran have drawn up a plan to finance the pipeline on Pakistan’s side without the former transferring funds to the latter. “Pakistan will not pay any money to the company; instead, the Iranian government will pay $500 million directly to the firm for the construction of the pipeline,” a source said. The project envisages gas inflows of 750 million cubic feet per day by the end of December 2014, which will be consumed by power plants to generate around 4,000 megawatts of electricity. The project’s engineering and management consultant, who was appointed in April 2011, has completed work on a bankable feasibility study, an interim front-end engineering design, and a route reconnaissance survey. Project must go ahead: Khamenei In Tehran, supreme leader Ayatollah Ali Khamenei told President Zardari that the gas pipeline project must go ahead despite US opposition. “The Iran-Pakistan gas pipeline is an important example of Tehran-Islamabad cooperation, and despite hostilities towards the expansion of ties we must overcome this opposition decisively,” Khamenei told Zardari, his office reported. “Accessing safe energy source is the first priority for any country including Pakistan. In this region, the Islamic republic is the only nation that has safe energy resources and we are ready to provide Pakistan its energy needs,” Khamenei said. President Ahmadinejad told Zardari that, “building the gas pipeline between Iran and Pakistan is a great and important event, and it serves the two nations’ interests,” the president’s office reported. “I believe that building this project is very beneficial for both sides and we support all the work carried out so far,” Zardari said in talks his Iranian counterpart. “The international and regional players have tried in vain to prevent an expansion of Iran-Pakistan ties but the people have learnt how to act against enemies of Islam,” he was quoted as saying. Islamabad has said it will pursue the project regardless of US pressure, saying the gas is needed to help Pakistan overcome its energy crisis that has led to debilitating blackouts and suffocated industry. Iran has almost completed the work on 780-kilometre pipeline in its territory. “There are impediments in view of the US opposition to the project but we are determined to complete it to meet our fast-growing energy requirements,” said one government official on condition of anonymity. (With additional input from AFP) Published in The Express Tribune, February 28th, 2013. ================== Iran pipeline work to begin March 11: officials The pipeli­ne on the Irania­n side has almost been comple­ted. By AFP Published: March 1, 2013 Islamabad has said it will pursue the gas pipeline project regardless, calling it vital towards overcoming debilitating blackouts. PHOTO: FILE ISLAMABAD: An Iranian-Pakistani consortium will start work next week on a much delayed $7.5 billion gas pipeline from Pakistan to Iran that has aroused strong US opposition, Pakistani officials said Friday. The date was announced after Pakistani President Asif Ali Zardari held talks in Tehran with Iranian counterpart Mahmoud Ahmadinejad and supreme leader Ayatollah Ali Khamenei, who urged Islamabad to press ahead with the project. “The groundbreaking is going to be performed on March 11 on the Pakistani side of border and we hope that the presidents of the two countries will be present on the occasion,” a senior Pakistani official told AFP, requesting anonymity. He said the ceremony would mark the start of work by an Iranian-Pakistani consortium on the 780-kilometre (485-mile) pipeline earmarked on the Pakistani side of the border, which is said to cost some $1.5 billion. A second Pakistani official also confirmed March 11 as the start date. The pipeline on the Iranian side has almost been completed. But Pakistan has run into repeated difficulties over the project, in finding the money and over US opposition and the threat of possible sanctions due to Iran’s controversial nuclear activities. The United States says it is providing Pakistan with alternative means to help overcome its crushing energy crisis and to avoid sanctions. “It’s in their best interests to avoid any sanctionable activity, and we think that we provide and are providing… a better way to meet their energy needs,” State Department deputy acting spokesman Patrick Ventrell said Wednesday. Islamabad has said it will pursue the gas pipeline project regardless, calling it vital towards overcoming debilitating blackouts and suffocated industry. ===========================