Export of Iranian crude to Pakistan will resume after three years, pursuant to the agreement between the two countries’ ministers, Mehr news agency reported Wednesday.
Iranian Minister for Economic Affairs and Finance Ali Tayyebnia, reached an agreement with Pakistani Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi at the 19th session of the Pakistan-Iran Joint Economic Commission (JEC) in Islamabad on Monday, for Iran to resume crude exports to Pakistan which was halted for three years.
The National Iranian Oil Company (NIOC) and Pakistan Refinery signed an agreement about three years ago, according to which Iran was to export 12,000 barrels of oil per day. However, banking sanctions imposed on Iran caused difficulties for the refinery to open a letter of credit (LC); and hence the plan was suspended in November 2011.
Some Pakistani officials referred to technical problems in the refinery, noting that it was the only one in Pakistan which could process Iranian crude.
Since 2011 payments could not be made as no bank was ready to offer services for clearing Pakistan’s outstanding dept worth millions of dollars. The government has even failed to pay dues from barter trade because of the reluctance of banks and shipping companies.
Pakistan has informed Iran that it could not press for energy trade unless economic curbs are lifted by the US and the European Union. Thus, it is not clear how the two countries are going to resolve banking arrangements for crude exports.
Pakistan is reportedly studying Turkish and Indian models to clear its debts. Turkey is making payment against supply of gas by offering precious metals like gold to Iran. India, on the other hand, is paying for the import of petroleum products through a local bank which does not have branches worldwide.
The US imposed tough sanctions on Iran to curb the country’s nuclear program which it claims is geared to military use. Iran insists its program is peaceful. Since late 2011, the US has led a campaign to accelerate the pace of sanctions, focusing on Iran’s energy and financial sectors. Sanctions have sharply cut back oil exports and isolated Iran from international banking systems.
In November Iran and the P5+1 group (five permanent members of the UN Security Council, namely the US, Russia, China, United Kingdom, and France, plus Germany) failed for a second time to resolve the 12-year dispute over Tehran’s nuclear program, and gave themselves seven more months to resolve the deadlock that has prevented an historic deal. Banking problems caused by the sanctions will be discussed in the next Pakistan-Iran Joint Economic Commission (JEC).
