ISLAMABAD: Despite strong opposition from the US and warnings of economic sanctions, Pakistani President Asif Ali Zardari and Iranian President Mahmoud Ahmedinijad on Monday officially inaugurated construction work of a delayed $7.5 billion gas pipeline from Iran to Pakistan.

The ceremony, which the president’s office described as a ‘big event’, was held in the Iranian border city of Chabahar. Both presidents were accompanied at the ground-breaking by delegations comprising ministers, top officials as well as representatives of several Arab states.

Iranian state television showed footage of Ahmadinejad and Zardari shaking hands and offering prayers after unveiling a plaque to mark Pakistan’s involvement.

“The completion of the pipeline is in the interests of peace, security and progress of the two countries ... it will also consolidate the economic, political and security ties of the two nations,” the two presidents said in a joint statement.

President Zardari, in his address at the ceremony, regarded the pipeline project as “very important” for Pakistan.

Zardari said world peace was correlated with peace in Pakistan, which, he stressed, was not opposed to or against any other state.

He said the prosperity of Pakistan and Iran was inter-linked and that the former was striving to become self-reliant. He added that the international community was unaware of the problems of the regional countries.

Ahmadinejad hailed the fact that work on the new section of the pipeline was going ahead despite US sanctions against Iran’s oil and gas sector imposed over its controversial nuclear programme.

“This gas pipeline is a sign of show of resistance against domination,” Ahmadinejad said.

“This pipeline has nothing to do with the nuclear issue, you can not build a nuclear bomb with natural gas,” he said, speaking alongside President Zardari in comments broadcast live on Iranian state television.

Possible sanctions

The Iran-Pakistan pipeline is intended to help Pakistan overcome its mushrooming energy needs at a time when the country is facing increased blackouts and energy shortages.

Dubbed the “peace pipeline”, the project has faced repeated delays since it was conceived in the 1990s to connect Iran’s giant South Pars gas field to India via Pakistan.

It has also prompted several warnings from the United States of the possible imposition of economic sanctions on Pakistan.

US State Department spokesperson Victoria Nuland has warned if the deal is finalised, it “would raise serious concerns under our Iran Sanctions Act.”

“We’ve made that absolutely clear to our Pakistani counterparts. And just to say again that Iran has proven again and again that it is not a reliable partner,” she said.

But, brushing aside US concerns and pressures, president’s spokesman Farhatullah Babar told Dawn on Sunday that the project was being commissioned purely to meet economic needs of the country and was being executed by two sovereign states.

“The government is going to initiate this important project in view of the energy requirements. The project will bring economic prosperity, provide better opportunities to the people and help defeat militancy,” he said.

Fears of possible US sanctions over the deal took their toll on the Karachi Stock Exchange, Pakistan's main stock market, as it plummeted almost 2.5 per cent, or 441 points, on Monday. Analysts said a statement from the US State Department was expected later Monday, which could determine the future course of the stock market.

The Pakistani foreign office said earlier last week that the country is “not in a fix” on account of US pressure on Pakistan because of Iran being sanctioned.

“Pakistan, being an energy deficient country, is hugely suffering both economically and socially,” a foreign office spokesman told a press conference on Thursday. “We are very clear about this project. It is in our national interest to go ahead with this project.”

India, which was initially also slated to be part of the project, quit in 2009, citing costs and security issues, a year after it signed a nuclear deal with Washington.

Completion by end-2014

Iran has completed 900 km of pipeline on its side of the border and Iranian contractors will also construct the pipeline in Pakistan, Iran’s national broadcasting network IRIB reported.

According to Pakistani state-owned news agency APP, Tehran-based Tadbir Energy Development Group will undertake all engineering procurement and construction work for the first segment of the project, which starts from the Iran-Pakistan border.

The Iranian firm will also carry out the second segment of the project, while the remaining amount is expected to be generated by Pakistan through Gas Infrastructure Development Cess (GIDC).

Tehran has agreed to lend Islamabad $500 million, or a third of the estimated $1.5 billion cost of the 750 km Pakistani section of the pipeline, Fars news agency reported.

The two sides hope the pipeline will be complete in time to start delivery of 21.5 million cubic metres of gas per day to Pakistan by December 2014.

Monday’s ceremony comes just days before the five-year term of the ruling Pakistan People’s party government is set to expire, with elections scheduled to be held in mid-may.