A multi-billion dollar gas pipeline project between Iran and Pakistan has run into difficulty over reluctance by a Chinese bank to sign up as an investor, officials said yesterday.

Foreign Minister Hina Rabbani Khar said the government was reviewing sources of funding for Pakistan’s $1.5bn share of the project that the US has called on Islamabad to drop because of sanctions against Iran.

“A committee has been set up to look at all available resources for funding the Iran-Pakistan project,” she told reporters at a news conference.

Local newspapers yesterday reported that the Industrial and Commercial Bank of China (ICBC) has declined to be part of a consortium to finance the project following reports that firms involved will face sanctions.

Pakistan has said repeatedly that it will pursue the project regardless of US pressure exerted over Iran’s controversial nuclear programme, calling it vital in helping to overcome the country’s debilitating energy crisis.

The petroleum ministry on Tuesday recommended that the government pursue “other options” because “existing parties of ICBC and Pakistan’s Habib Bank Ltd (HBL) are showing less interest in the Iran-Pakistan Gas pipeline”.

It suggested finding a second consortium with other companies, or government to government arrangements with China, or Russia, or an arrangement with the Iranian government to complete the project, an official statement said.

However, yesterday the ministry suggested the matter was not final. It said Inter State Gas Services (ISGS), set up in 1996 to implement the project and which selected a consortium which included ICBC and HBL, was still “in the process of soliciting requisite internal and regulatory approvals”.

Pakistan considers China its closest foreign ally and the ministry said it “views Chinese co-operation with great respect and would pursue the economic co-operation with the ICBC which has shown keen interest in the project”.

Pakistan and Iran signed a deal in 2010 in which Iran is to supply natural gas to its eastern neighbour from 2014, with sales to reach 750mn cubic feet (21mn cubic metres) to 1bn cubic feet per day by mid-2015.

Pakistan, which produces just 80% of its electricity needs, has presented the $7.5bn gas project as a partial answer to a crippling energy crisis which has led to debilitating blackouts and suffocated industry. Washington slapping new sanctions on Iran’s central bank in an effort to force it to reverse course on its nuclear programme, has voiced strong objections to the pipeline project.

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Finance Minister AMA Muhith Wednesday sought Chinese investment in six mega infrastructure projects in the country including the Padma Multi-Purpose Bridge.

Muhith said the government is yet to know the source of fund for the Padma Bridge as the deals with the WB, the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) for pledged fund have not been concluded.

"We have sought Chinese investment for six projects including Padma," Muhith told reporters after a meeting with the Chinese ambassador in Dhaka Li Jun at the finance ministry.

The Chinese ambassador has advised me to resolve the issues with the WB first, Muhith added.

The minister, however, said it was unclear with whose money the Padma Bridge would be built. But he vowed to start the construction of the longest bridge by November next.

The infrastructure projects against which Chinese investment has been sought are -- Padma Bridge, a tunnel from Jahangir Gate to Rokeya Sharani in the capital, Second Meghna Bridge, National ICT Park and construction of Teputia Bridge in Tetulia district, meeting sources said.

The World Bank was supposed to lend $ 1.2 billion of the $ 2.9 billion for constructing the Padma Bridge but it, later, suspended its funding for allegations of corruption in the bidding process.

The government was supposed to sign a memorandum of understanding with Malaysia in February last for financing the Padma Bridge Project. Later, the government slowed the process as the deal with the WB was not scrapped.

Asked whether the disputes over the WB funding in the project will be resolved soon, the finance minister said the World Bank is a large donor organisation and Bangladesh has been in good relation with it.

"Generally, the WB does not cancel any project. If cancelled, it will be very rare case," Muhith said.

"We are continuing dialogue with the WB and simultaneously trying for alternative sources to construct Padma," he added.

The finance minister said China is a good friend of Bangladesh. It has invested about $600 million in Palash Fertiliser Factory, which will be inaugurated soon.

He said should the WB finally backtrack from financing the project; the government will enter into a new agreement with other available financiers.

"Under a different scenario, we are planning to source funds from different alternative sources including Malaysia, China, ADB, JICA and IDB (Islamic Development Bank)," Muhith told reporters.

Web link: http://www.thefinancialexpress-bd.com/more.php?news_id=123503&date=2012-03-15