US says new sanctions on Iran could impact Pakistan

Pakistan should be wary of committing to an Iran-Pakistan natural gas pipeline because anticipated US sanctions on Iran could hit Pakistani companies, the US special representative to the region said on Sunday.

While sympathetic to Pakistan's energy needs, the US special representative to the region, Richard Holbrooke, told reporters that new legislation, which targets Iran's energy sector, is being drafted in the US Congress and that Pakistan should "wait and see".

"Pakistan has an obvious, major energy problem and we are sympathetic to that, but in regards to a specific project, legislation is being prepared that may apply to the project," he said, referring to the pipeline. "We caution the Pakistanis not to over-commit themselves until we know the legislation." Pakistan is plagued by chronic electricity shortages that have led to mass demonstrations and battered the politically shaky government of President Asif Ali Zardari.

US senator Joseph Lieberman said last week he expects Congress to finish shortly legislation tightening US sanctions on Iran that will include provisions affecting the supply of refined petroleum products to Tehran, and add to sanctions on its financial sector.

Lieberman, an independent, is a member of a House-Senate committee of negotiators working on final details of the bill and said it could pass by July 4.

The $7.6 billion natural gas pipeline deal, signed in March, doesn't directly deal with refined petroleum products and was hailed in both Iran and Pakistan as highly beneficial.

The US has so far been muted in its criticism of the deal, balancing its need to support Pakistan, a vital but unstable ally in the global war against al-Qaeda, with its desire to isolate Iran.

But the legislation could be comprehensive enough to have major implications for Pakistani companies, Holbrooke said.

"We caution Pakistan to wait and see what the legislation is." 

This was Holbrooke's tenth trip to Pakistan since president Barack Obama appointed him special representative to the region. His visit followed a series of working groups this week that are part of the US-Pakistan strategic dialogue, which both countries say will lay the groundwork for a new relationship.

Afghanistan was on the agenda in meetings with the Pakistani leadership, Holbrooke said, including talks on a Pakistani role in talks between the Afghan Taliban and the Kabul government. 

But the United States would not support Pakistan pushing the Haqqani network, one of the strongest factions of the Afghan insurgency and mostly based in Pakistan's North Waziristan, into talks with Kabul as Washington sees the group as intransigent, brutal and too tightly allied with al-Qaeda.

The United States has said any groups wishing to lay down their weapons must renounced al-Qaeda and agree to participate peacefully in the Afghan political process.

"It's just hard to see that happening," Holbrooke said of the Haqqani network.

Regardless of what happens in Afghanistan, he said, the United States would remain engaged with Pakistan.

"Pakistan matters in and of itself. Whatever happens in Afghanistan, the US cannot turn away from Pakistan again," he said. "We are not going to repeat the mistakes that occurred - at least not on our watch -- of the last 20 years."