Iranian and Pakistani leaders have inaugurated the construction of a much-delayed section of a $7.5bn gas pipeline linking the two neighbours, defying the threat of US sanctions.

President Mahmoud Ahmadinejad launched the project with his Pakistani counterpart Asif Ali Zardari at a ceremony on the border on Monday, hailing the agreement as a blow to US-led sanctions targeting his country's oil and gas sector.

The two leaders unveiled a plaque before shaking hands and offering prayers for the successful conclusion of the project, which involves the laying of a 780km section of the pipeline on the Pakistani side, expected to cost some $1.5bn.

The pipeline is intended to help Islamabad overcome its increasing energy needs at a time when the country is facing increased blackouts and energy shortages.

There are serious doubts, however, about how Pakistan can finance the project and whether it can go through with the project without facing US sanctions, which Washington has put in place to pressure Iran over its nuclear programme.

Al Jazeera's Kamal Hyder, reporting from Islamabad, said the agreement with Iran could "entail a heavy price" on Pakistan.

"Pakistan is also very dependent on the United States when it comes to conventional weapons," Hyder said.

But Pakistan also faces an energy crisis and its needs gas that Iran can supply, he added.

Monday's event comes just days before the government's term is set to expire and could be designed to win votes by making the ruling Pakistan People's Party (PPP) look like it is addressing the energy crisis.

US opposition

The US has opposed the project, instead promoting an alternative pipeline that runs from the gas fields of Turkmenistan to Afghanistan, Pakistan and then to India.

Washington has also championed a number of electricity-generation projects within Pakistan such as helping to renovate hydropower dams.

Iran says it has already finished its side of the pipeline, which travels 1,150km from the gas fields to the Iran-Pakistan border.

Gas is supposed to start flowing in by the end of 2014, although few see that deadline as realistic considering the delays so far in the project.

"If this deal is finalised for a proposed Iran-Pakistan pipeline, it would raise serious concerns under our Iran Sanctions Act," said Victoria Nuland, the US state department spokeswoman, during a news briefing in Washington last week.

"We've made that absolutely clear to our Pakistani counterparts."

Under US regulations, a wide-ranging list of business-related activities with Iran can trigger US sanctions.

Certain sales of technology or equipment that allow Iran to develop its energy sector are barred, as are most transactions involving gas or other fuels, according to a January report by the Congressional Research Report.

The regulations also bar business dealings with Iranian financial institutions.

Iran also faces separate EU and UN sanctions over its controversial nuclear programme, which the West believes is geared for building nuclear weapons. Tehran denies the charge, insisting the programme is purely for peaceful purposes.