China’slargest bank has backed out of a deal to finance a proposed Iran-to-Pakistan gas pipeline that is opposed by the United States, a potential sign of the lengthening reach of U.S. economic sanctions on Iran.

Pakistani officials confirmed Wednesday that Industrial and Commercial Bank of China had withdrawn from plans to head a consortium that would finance the $1.6-billion Pakistani portion of the cross-border pipeline, apparently over concern that the bank could be excluded from the U.S. economy.

The move suggests that even Chinese companies, which have staunchly resisted U.S. and European efforts to punish Iran for its nuclear program, are beginning to bend to the sanctions on Tehran. China’s unwillingness to fully cooperate had been one of the greatest challenges to the international effort to put economic pressure on Iran.


China’s decision is a setback for the Pakistani government, which fears that dire energy shortages could lead to civil unrest as well as economic strain.

Pakistani officials said they would press ahead with the project, which would deliver more than 750 million cubic feet of natural gas per day from Iran’s South Pars field. They said they would find replacement financing.

“There are always a multiplicity of funding sources which are available for any project,” Pakistani Foreign Minister Hina Rabbani Khar told reporters in Islamabad, the capital. “This is a fairly viable project and we hope we will not have any problem in trying to find ways and means of ensuring its funding.”

Secretary of State Hillary Rodham Clinton has warned that there would be “damaging consequences” if Pakistan continued with the pipeline because U.S. sanctions bar American financial institutions and companies from doing business with any concerns that have ties to Iran. The U.S. and its allies believe Iran is attempting to obtain nuclear weapons, despite Tehran’s insistence that its nuclear research is for peaceful purposes.


Washington backs an alternative pipeline project that would transport natural gas from Turkmenistan through Afghanistan and into Pakistan and India. But because of the war in Afghanistan, it’s unclear whether that pipeline will be built.

China has questioned the legitimacy of unilateral national sanctions on Iran, and several Chinese energy companies have ignored them.

But Chinese financial institutions that do business with the United States apparently don’t want to risk those dealings.

“U.S. banks increasingly are not willing to do business with foreign financial institutions doing business with Iran,” said Mark Dubowitz, an energy specialist at the Foundation for Defense of Democracies, a nonpartisan think tank.


paul.richter@latimes.com

alex.rodriguez@latimes.com

Richter reported from Washington and Rodriguez from Islamabad.