GOP SEEKS OIL DEFFERAL FROM IRAN BUT NO PROGRESS ON IPI

UNCLAS ISLAMABAD 003265 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ETRD EAID EFIN ENGY EPET PK IN IR SUBJECT: GOP SEEKS OIL DEFFERAL FROM IRAN BUT NO PROGRESS ON IPI REFS: A) Islamabad 3120 B) Islamabad 1699 C) 2007 Islamabad 4578 ¶1. (SBU) Summary: Local media reported that the Government of Pakistan (GOP) has asked Iran to supply oil on an extended deferred payment plan and that both countries have agreed to exclude India from the Iran-Pakistan-India (IPI) natural gas pipeline project. However, GOP officials confirm that Pakistan and Iran have not made progress on the pipeline discussions but continue to seek additional electricity imports from Iran. End summary. -------------- GOP SEEKS DEFERRED OIL PAYMENTS -------------- ¶2. (SBU) At a joint press conference October 10 with his Iranian counterpart Manoucheher Mottaki, Foreign Minister Shah Mahmood Qureshi, announced that Pakistan has requested an increased deferred payment schedule on oil . The Iranian Foreign Minister promised to take up the matter with his government. Qureshi said, "If implemented, the facility will certainly help stabilize the economic situation in Pakistan and improve our balance of payment position." Under current Iranian law, crude oil can be exported on deferred payment for a maximum of three months. The press reported that Mottaki said the Iranian government would consider extending this period further so that Pakistan could reap maximum benefits. ¶3. (SBU) Ministry of Petroleum and Natural Resources Joint Secretary Tahmoor Azmat Osman told EconOff that out of a 200,000 barrels a day domestic requirement, Pakistan imports a meager 10,000 barrels a day from Iran. He added that "Iranian crude oil is not very compatible with the requirements of domestic refineries, hence chances of increasing imports in short term are nonexistent." -------------- PIPELINE DISCUSSIONS STILL IN LIMBO -------------- ¶4. (SBU) Iran's Mottaki stated that Pakistan and Iran would go ahead with a trans-regional project to pipe Iranian gas to South Asia "even without India's participation." Referencing discussions between the presidents of the two countries in New York in September (REF A),Qureshi said the IPI gas pipeline project was of strategic significance and reiterated that it should be executed on a fast-track basis for the economic benefit of Pakistan and Iran. ¶5. (SBU) Referring to the outstanding issues relating to IPI, Qureshi said that gas pricing issues would be settled soon. The minister said both countries had also agreed to establish a joint financing company to gather resources for executing the gas pipeline project. Joint Secretary Osman told EconOff that "the decision to exclude India from the IPI project is verbal and nothing has been said by either side on this subject in writing." ¶6. (SBU) Qureshi said Pakistan has also expressed interest in buying an additional 1000 MW electricity from Iran. (REF C) Mottaki has reportedly given tacit approval for the transaction to further expand economic and trade relation between the two countries. ¶7. (SBU) Comment: With rapidly depleting foreign exchange reserves, Pakistan's economic and energy worries are multiplying by the day. GOP Ministers are increasingly making optimistic public statements to pacify the masses. While some recent steps, like phasing out energy subsidies are indeed helpful for the economy, the benefits of these steps are not immediately obvious to the general public who are suffering extended periods of blackouts but asked to pay significantly more for what little energy is provided. A public request for deferred oil payments from Iran is new, Pakistan is increasingly desperate and is seeking oil from all friendly oil producing countries. While the rhetoric continues publicly on the IPI, no progress has been made to address the myriad of outstanding issues. End Comment. FEIERSTEIN