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Controversial Pakistan-Iran pipeline project seems to have hit another roadblock.
The state-owned Industrial and Commercial Bank of China (ICBC) on Tuesday appeared to be backing out of an agreement with Pakistan to finance a gas pipeline from Iran, the Associated Press of Pakistan reported.
A government committee issued a statement saying the Chinese side is "showing less interest" in the $1.5 billion project, which was to be jointly financed by ICBC and Pakistan's Habib Bank, according to Pakistan's Dawn news agency.
Although there was no immediate confirmation that ICBC has formally pulled out, observers say the fact that the plan was oppsed by the US could be a contributing factor. One Pakistani finance ministry official told Reuters on the condition of anonymity, "I don't think they are in the mood to brave American pressure and the threat of sanctions from any dealings with Iran."
US Secretary of State Hillary Clinton on Thursday termed the project "inexplicable" and recommended the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project as an alternative, said Dawn.
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Iran and Pakistan signed the pipeline deal last year after years of back-and-forth, reported The Washignton Post. The arrangement would see Iran, which has the world's third-largest oil reserves but very little refining capacity, supplying Pakistan with 760 million cubic feet of gas per day starting in 2014.
The US has warned of sanctions if the project were to move forward. Finance Ministry spokesman Naveed Iqbal today said the oil ministry earlier cited "the geopolitical situation" as a reason, according to the Associated Press (AP).
Iran's economy is struggling due to international sanctions over its controversial nuclear program, which Western powers accuse it of using to pursue a bomb. Iran says the program is strictly for civlian purposes.
But Pakistani officials remain upbeat about the project, with Foreign Minister Hina Rabbani Khar telling AP, "There are always a multiplicity of funding sources which are available for any project."
Islamabad needs $1.2 billion for its side of the pipeline, according to Pakistan's Daily Times.
Ministers discussed alternative funding options such as government-to-government contracts with China, Russia, or Iran, as well as ways to finance the project domestically, reported the Associated Press of Pakistan.
Pakistan produces oil and natural gas but does not produce enough to meet demand.