Pakistan has reportedly abandoned a multi-billion-dollar gas pipeline project meant to obtain cheap energy from neighboring Iran due to US sanctions.
Iran-Pak gas pipeline
The gas pipeline project was initially envisaged as a trilateral collaboration that included India. However, India later withdrew, leaving only Pakistan and Iran as participants.
According to the Dawn newspaper, the US-imposed sanctions on Iran for its nuclear programme have discouraged Pakistan from proceeding with the pipeline construction.
According to the article, Pakistan submitted a ‘Force Majeure and Excusing Event’ notice to Iran, suspending its contractual responsibility on the completion of the multibillion-dollar Iran-Pakistan (IP) gas pipeline project due to external reasons beyond Islamabad’s control.
According to the source, Pakistan would not proceed with the project as long as US sanctions against Iran remain in place unless Washington grants permission to do so.
Despite the country’s chronic energy problems, the project has been dormant for nearly a decade.
“Pakistan has 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,” according to a written testimony Minister of State for Petroleum Musadik Malik has given to the National Assembly.
The Pakistani minister also stated in a policy statement that Iran contested the notice of force majeure and excused occurrence.
This was in answer to parliamentarians’ inquiries about whether the government of Pakistan had a target completion date for the cross-border energy project, whether fines were required in the event of delays, and whether other regional governments were strengthening commercial links despite UN sanctions.
“The Iran Pakistan Gas Pipeline Project is stalled due to international sanctions on Iran,” said Malik clarifying the project activities will begin once sanctions on Iran are removed and there is no threat that State Owned Entities (SOEs) would be hit by sanctions. “Given that, no date and deadline can be given for the completion of the Iran-Pakistan Gas Pipeline Project,” he added.
The minister also conceded that Pakistan’s notice of force majeure and excusing event and Iran disputing its validity could only be finally settled through international arbitration, should Iran take this matter to arbitration. As a consequence, “the exact amount of penalty, if any, is subject to the outcome of the arbitration to be determined by the arbitrators”, he said.
During his visit to Pakistan last week, Iranian Foreign Minister Hossein Amir Abdollahian emphasized the importance of the initiative. Tehran claims to have completed its 1,150-kilometer pipeline stretch, which was inaugurated in 2013 by former presidents Asif Ali Zardari and Mahmoud Ahmadinejad.
Pakistan pledged to finish its half by January 2015, however, construction was stalled in February 2014 owing to international sanctions. Musadik Malik, Pakistan’s current petroleum minister, emphasized Pakistan’s commitment to its GSPA duties but cited US sanctions against Iran as an impediment to pipeline building.
