A worst setback to Pakistan Iran gas pipeline project

A worst setback to Pakistan Iran gas pipeline project

ISLAMABAD – Pakistan has suspended gas pipeline project with Iran and informed the neighbouring state in writing that execution of the project was not possible as long as Tehran is under United States (US) sanctions regime, Geo News reports on Saturday.

According to Inter-State Gas Managing Director Mobin Saulat “Under present US sanctions on Iran, it is impossible to execute the Iran-Pakistan gas pipeline project and we have conveyed it to Iran in writing recently.”

Earlier in February, both the neighbouring countries started a new round of negotiations after Tehran formally issued a notice to Islamabad stating that it was moving an arbitration court against Pakistan for failing to lay down the pipeline in Pakistani territory in the timeframe as stipulated in the bilateral agreement.

Sault said that Pakistan was still committed to executing the project only if international sanctions on Iran were lifted. He said that Pakistan cannot risk US sanctions by continuing with the project as Pakistan will risk US sanctions while working with Iran on the project.

Regarding Iran’s legal notice, Saulat informed that Pakistan has time till August 2019 to respond legally, adding to this he hoped that the issue will be settled through negotiations.

On the other hand, authorities in Iran were of the view that US sanctions did not apply to the IP gas project, to which Pakistan had sent Tehran a questionnaire to ascertain exactly how that was the case.

According to the Paksitan-Iran gas pipeline project, signed in 2009, the project was to be completed by December 2014 and would deliver 21.5 million cubic meters of gas per day to Pakistan. It was decided that the pipeline was to be constructed using a segmented approach, with Iran having to lay down the pipeline on its side and Pakistan to build the pipeline on its territory.

Under a penalty clause of Gas Sales Purchase Agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, for failing to build its part of the pipeline. If Iran takes the case to an arbitration court, Pakistan is likely to have to pay billions of dollars as a penalty.