Pakistan to buy oil from Iran–mulls ways to escape sanctions

Pakistan is planning to buy oil and gas from Iran through a circuitous manner to avoid sanctions from the US and other western nations.

There is a general consensus in the Pakistan government that if oil and gas could be traded from Russia, another heavily sanctioned nation by the US, it would not cause a greater flutter to trade with Iran.

Iran has also offered the sweetener in terms of a barter system for the gasoline required by Pakistan.

In May this year, the CEO of the National Iranian Gas Company, Majid Chegeni, had made public that Iran would start negotiations for selling its gas to Pakistan. The discussions received an impetus on May 26 this year when newly appointed Foreign Minister Bilawal Bhutto met with his Iranian counterpart Hossein Amir Abdollahian on the sidelines of the World Economic Forum in Davos. The offer was reiterated in October this year by Iranian Ambassador Mohammad Ali Hosseini.

The Pakistan oil industry calculates that oil and gas from Iran are cheaper and easily accessible and a circuitous route can be used to avoid sanctions.

Pakistan faces acute oil and financial crises in the coming months and is desperate to keep the wheels running.

When Iran recently offered oil and gas worth Euro 2 million as part of humanitarian assistance for flood victims, Pakistan was keen on accepting the offer. The only issue is how to avoid being sanctioned.

The Pakistan Foreign Ministry has recommended to the Prime Minister’s office that Pakistan can accept Iran’s offer with necessary safeguards to avoid being punished for trading with a country heavily sanctioned by the US. Pakistan is keen on not upsetting the US at this stage due to financial and political reasons. The US has been pushing the IMF and other international financial institutions to bail out Pakistan.

The foreign ministry has cautioned against media publicity.

The modalities of the trade, shipment and payment would be worked out by the Petroleum Division under the Pakistan Ministry of Energy. The coordinating agency in Tehran would be the Pakistan Mission.

The foreign ministry has also emphasised that state-owned oil companies and any other state entity should not be involved in financial transactions or barter with Iranian entities sanctioned by the US and UN Security Council for this transaction.

The logistical arrangements for the transport of oil and gas products should be strictly done through Pakistan State Oil only. The National Iranian Tanker Company should not be utilised for these transactions.

Iran has even offered wheat, meat and rice as payment for the export.

Although the US had sanctioned Iran in 2013, there has been a steadily increasing blackmarket for cheaper Iranian oil and gas in Pakistan’s Balochistan province. Balochistan shares a long and porous border with Iran. The oil smuggling works under the patronage of the Frontier Constabulary and is not a secret.