Iran-Pakistan Gas Pipe Launched, Could Trigger U.S. Sanctions

By Ben Priddy, March 18, 2013

Pakistan's Ministry of Petroleum is set to consider the offer in a subsequent cabinet meeting. Meanwhile, China has quietly acquired a strategic deepwater port at Gwadar, near the Iran-Pakistan border and Strait of Hormuz, that could serve as a secure outlet for storage and transshipment for oil and gas supplies passing through Pakistan.

The Gwadar port is of key strategic importance, as it could become the only regional oil and gas supply facility outside of the control of the U.S. navy, which has a large presence in the Persian Gulf. China took over operational control of Gwadar from a Singaporean operator in October 2012 and was just handed over full management of operations at the end of February 2013. Beijing paid for most of the port's original construction costs as part of a strategy to create an energy and trade corridor from the Persian Gulf through Pakistan and into western China, where it is currently building a third west-east natural gas pipeline to feed it's gas-hungry eastern provinces.

"China must find as many sources of oil and gas for itself as possible…and Iran is one of the most important suppliers of fossil fuels for China," Stanislav Mitrakhovich, Leading Expert at Russia's National Energy Security Fund in Moscow told OGE. "China has already taken on the role of 'big brother' for Pakistan, actively selling arms to Pakistan, and participating in many other joint projects,"  Mitrakhovich continued. "On the one hand, China could do without the IP pipeline project. If Iran were to build an LNG terminal with Chinese help and send tankers to China, Beijing would be satisfied. But on the other hand, China is willing to help both Pakistan and Iran in the IP pipeline," according to Mitrakhovich.

China's Gwadar port is located near the Strait of Hormuz, through which flows almost 20 percent of oil traded worldwide, according to the U.S. EIA. As China continues to develop rail and road links from Pakistan and Central Asia to it's western Xinjiang Province, the Gwadar port could help Beijing monitor supply routes for it's energy shipments and bolster it's position in the Persian Gulf. Hinting at intentions to bolster energy ties with China, UPI reported March 13 that Iran has announced plans to build a 4,000-barrel per day oil refinery at Gwadar that could undermine U.S. sanctions.

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