Pakistan Mulls Completion Of Iran Gas Pipeline Stalled By US Sanctions

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by Tyler Durden
Thursday, Feb 22, 2024 - 08:30 AM

Via The Cradle

Pakistan is mulling over completing a much-delayed pipeline project with Iran, which has been stalled for years and has failed to move forward due to US sanctions

Islamabad is considering finalizing the first phase of the 80-kilometer pipeline, according to Pakistani news site The Nation. "Islamabad is contemplating to kick-off construction work on the 80 kilometers portion of Iran-Pakistan gas pipeline project… to escape a potential penalty of $18 billion," the report said.

Associated Press

"Pakistan will submit an application to seek a waiver of US sanctions for the IP project. Initially, it has been decided that in the first phase of the IP project, work on the 80 km portion from the Pak–Iran border to Gwadar will be started," a source in the Pakistani energy ministry told the outlet. 

The project, which aims to connect the Pakistani port city of Gwadar to the Iranian border, was launched in 2013. It required Pakistan to complete the construction of its end of the pipeline by 2014. 

Iran said it has already completed its side of the pipeline and has invested $2 billion in the project. Pakistani officials warned in May last year that Islamabad could face an $18 billion fine if it fails to complete the Iran–Pakistan Gas Pipeline project.

Islamabad suspended its participation in the project a few months later, in August, due to the threat of US economic sanctions. 

At the time, Pakistani Minister of State for Petroleum, Dr Musadik Malik, said in written testimony to the country’s National Assembly that Pakistan "issued a Force Majeure and Excusing Event notice to Iran under the Gas Sales and Purchase Agreement (GSPA), which resultantly suspends Pakistan’s obligations under the GSPA."

"The matter will be finally settled through arbitration, should Iran take this matter to arbitration," the minister said back in August. "The exact amount of penalty, if any, is subject to the outcome of the arbitration to be determined by the arbitrators."

Malik said that Pakistan was "engaged" in talks with US officials to plea for an exemption from sanctions for the project. "All necessary actions are being taken to construct the gas pipeline at the earliest," he stressed, confirming that the project is stalled "due to international sanctions on Iran." The pipeline project is capable of supplying 750 million cubic feet of gas per day to Pakistan.