>>>STATE DEPARTMENT - The United States says Pakistan may face economic sanctions over a gas pipeline project with Iran. The $7 billion project is meant to help reduce Pakistan's crushing energy deficit.

After nearly 20 years, there is considerable progress on the Iran-to-Pakistan "peace pipeline," with Iranian contractors starting work on Pakistani sections of the project, having finished nearly 900 kilometers of pipeline in Iran.

That is of concern to the United States, which is backing international sanctions against Iranian energy exports because of its nuclear program.

Iranian President Mahmoud Ahmadinejad says the gas pipeline has nothing to do with the nuclear program.

"Foreign elements who are against the progress of Pakistan and Iran have found the excuse of our nuclear program.  The gas pipeline has no connection whatsoever with the nuclear case," he said. "With natural gas you cannot make atomic bombs."

Pakistani President Asif Ali Zardari says the pipeline is about economic survival. "We've got to be economically sound, and therefore this pipeline is a life pipeline as far as Pakistan is concerned," he added.

American University professor Akbar Ahmed says Pakistani energy demands outweigh U.S. opposition.

"It's in the interests of the Pakistani government to have access to energy and Iran is promising that through this gas pipeline," Ahmed said.  "At the same time the United States is doing everything to block this."

"We have serious concerns if this project actually goes forward that the Iran Sanctions Act would be triggered. We’ve been straight-up with the Pakistanis about these concerns," said State Department spokeswoman Victoria Nuland.

Other countries have gotten waivers from the Iran sanctions.  Pakistan thinks this pipeline should get a waiver too.

"I don't see why we cannot engage with the world and make sure that the world understands our point of view, and Pakistan also gets a waiver for this project," Zardari explained.

The Obama administration says there is no comparison.

"In the case of Japan, they’ve been making a steady decline, as have other countries that we have waived sanctions on. This pipeline project - if, as I said - if it actually goes forward - we’ve seen that promise many times - would take Pakistan in the wrong direction," Nuland stated.

Professor Ahmed says Tehran hopes that the U.S.-led sanctions will push Pakistan into a closer alliance with Iran.

"I don't think the United States should be pushing Pakistan to the point that it's at the brink," Ahmed said. "It's already at the brink in terms of the law-and-order breakdown in Pakistan, in terms of the economic crisis, in terms of really the sense of crisis that now envelopes Pakistan and the awareness in Pakistan that America is at the root cause of most of its problems."

U.S. Secretary of State John Kerry had hoped to go to Islamabad after his surprise trip to Kabul last week - and the pipeline issue was expected to come up.   But U.S. officials decided against the trip - given the political uncertainty in Pakistan ahead of upcoming elections.