Pakistan's banks are reportedly refusing to open the letters of credit (L/Cs) required for a project to import 100 megawatts of electricity from Iran.

The banks are reluctant to enter into L/C transactions with Iranian banks because of international sanctions imposed on financial institutions in the Islamic republic.

Alternatives sought

Pakistan's banks are "reluctant to open L/Cs in favour of Iranian banks owing to sanctions [imposed] by the West," according to the Export Development Bank of Iran, which is participating in the project.

Islamabad has asked Tehran to consider alternatives to L/C payments, including barter deals against commodity exports.

Power plans

The two countries have already signed agreements for Pakistan to import of 100MW of electricity to provide power for the north-western district of Gwadar.

The neighbouring states hope to negotiate agreements for Pakistan to import at least a further 1,000MW of Iranian electricity over the next two years.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.