Courtesy of The Diplomat, a report on Pakistan’s energy ties with Iran:

Pakistan’s President Asif Ali Zardari arrives in Iran today to sign a series of economic agreements, including one that finalizes the Iran-Pakistan natural gas pipeline.

At the end of January, the two sides agreed to set up a joint construction company to build the portion of the pipeline that will be on Pakistani soil. Iran is providing $500 million to finance a third of the project with Pakistan covering the remaining $1 billion. 781 km of the 1,881 km pipeline will be on Pakistani soil.

The two sides initially said construction of the Pakistani pipeline would be finished in 15 months. More recent reports from Iran’s state media have said it may take up to 22 months. Construction began on February 20th.

Iran has said it has nearly completed the pipeline on its side of the border.

Once finished, the pipeline will carry 21.5 million cubic meters of Iranian gas to Pakistan daily. On the Iranian side the pipeline will stretch from the South Pars gas fields in southwestern Iran to the Pakistani border in southeastern Iran. In Pakistan, the pipeline would travel through Baluchistan on its way to Islamabad’s energy grid in the southern part of Sindh province. The pipeline could conceivably be extended in the future to India or China.

Pakistan has faced an acute and worsening energy crisis for years.The country currently has an electricity shortfall of approximately 5,000 megawatts (MW) per day despite the fact that nearly a third of the population does not have access to grid electricity according to a June 2012 report by the U.S. Institute of Peace. Even where electricity is available blackouts are a daily occurrence.

Natural gas is particularly crucial as Islamabad is highly dependent on it for its manufacturing and both commercial and personal transportation.

The worsening energy crisis has also become a salient political issue ahead of elections this year. These political implications are partly behind the sudden progress in the Iran-Pakistan pipeline project, which has its origins in the 1990s.

The U.S. has registered strong objections against the proposed pipeline, however, and even raised the prospect that Pakistani companies purchasing Iranian natural gas could fall under U.S. sanctions.

“If built, [it] could raise serious concerns under the Iran Sanctions Act. We have made that absolutely clear [to Pakistan],” former Secretary of State Hillary Clinton told Congress in February of 2012. She added: “We believe that actually beginning the construction of such a pipeline, either as an Iranian project or as a joint project, would violate our Iran sanctions law.”

Similarly, when asked about the pipeline last Thursday, State Department spokesperson Victoria Nuland stated: “We understand that Pakistan has significant energy needs and requirements, but there are other long-term solutions to Pakistan’s energy needs that we would believe would have better potential for success and would better meet Pakistan’s needs than spending scarce resources on projects like this.”

One long-term solution the U.S. has pushed for is the “trans-Afghanistan pipeline” that would bring Turkmenistan gas to Pakistan and India via Afghanistan. For decades Washington has advocated running pipelines through Afghanistan as a way to circumvent Iran. Although the current reiteration of the trans-Afghanistan pipeline— which is sometimes referred to as the TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline— has the backing of the Asian Development Bank, such projects have typically faltered in the past because of a lack of security inside Afghanistan. Still the parties continue to explore the feasibility of building the “trans-Afghanistan pipeline,” which would come on line in 2017 at the very earliest.

Discussions of an Iran-Pakistan pipeline also date back to the 1990s. Initially the pipeline was envisioned to extend to India but Delhi pulled out of the project in 2008-2009 because of concerns over security and the high transit costs Pakistan was proposing. Many believed the U.S. had pressured India to quit the project. The Industrial and Commercial Bank of China also backed out of financing the Iran-Pakistan pipeline last year over concerns it would be subject to U.S. sanctions placed against third-parties doing business with Iran.