VZCZCXRO5204
RR RUEHLH RUEHPW
DE RUEHIL #3265 2881239
ZNR UUUUU ZZH
R 141239Z OCT 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 9275
INFO RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC 4270
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/SECDEF WASHINGTON DC
RUEHKP/AMCONSUL KARACHI 0453
RUEHLH/AMCONSUL LAHORE 6193
RUEHPW/AMCONSUL PESHAWAR 5027
RUEHNE/AMEMBASSY NEW DELHI 3886
RUEHBUL/AMEMBASSY KABUL 9250

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