ISLAMABAD: In a major development, Iran has offered to provide 80,000 barrels of crude oil per day (BPD) to cash-starved Pakistan on three months deferred payment. This is despite the fact that Iran is financially beleaguered by the US and its allied countries in the wake of its nuclear ambitions.
This was revealed by Special Assistant to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain while speaking to The News Tuesday. He also added that Iran has agreed to extend a $250 million credit line for completing the IP (Iran-Pakistan pipeline) project on the Pakistani side. Pakistan had initially asked for $500 million, but Iran, which is currently facing economic sanctions from the US and the EU, responded by committing a $250 million credit supply to help Pakistan complete the IP project.
The IP gas line project is scheduled to be completed by December 31 2014, and Pakistan has completed the survey of the pipeline route and is now in the process of arranging the financing for the laying of the pipeline from the Iranian border to Nawabshah.
When asked about the interest Iran would charge on its credit, Dr Asim said it was yet to be decided. However, both the offers by Iran should be taken as an opportunity for oil-import for the teetering economy of Pakistan.
The special assistant also said that his ministry has sought Pakistan’s central bank’s opinion over Iran’s generous offer of to provide 80,000 barrels of crude oil on three month deferred payment as the government wants the foreign exchange forwards covered by the State Bank of Pakistan against the import of oil from Iran. Since Iran is a neighbour to Pakistan, the freight cost is also expected to dwindle manifold, ensuring fiscal breathing space to the economic managers of the incumbent government.
Meanwhile, Iraq has also offered Pakistan crude oil supply on deferred payment and in this context the special assistant revealed that he may visit Iraq in mid-March to negotiate the import of oil.
“This is possible only when the State Bank of Pakistan (SBP) provides foreign exchange forward cover and if it does not provide the cover, then there will be no benefit to import oil from Iraq,” he said, before adding, “The circular debt will prove a stumbling block in exploiting the deals with Iraq and Iran as our refineries are currently running 60-65 percent of their operational capacity as the government needs to make the refineries 100 percent operational after ceasing the deals with Iraq and Iran and to this effect concerted efforts are needed to waive off the circular debt.”