Pakistan faces threat of $18 billion penalty
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The Senate Standing Committee on Cabinet Secretariat has summoned the Ministry of Foreign Affairs and Attorney General for Pakistan (AGP) to provide information on reported objections from the US concerning the multi-billion-dollar Iran-Pakistan (IP) gas pipeline project.
Tehran has claimed to have finished its part of the 1,150-kilometer pipeline, which had a groundbreaking ceremony attended by former presidents Asif Ali Zardari and Dr. Mahmoud Ahmadinejad in March 2013, with an initial estimated cost of $7.5 billion. However as per agreement if Pakistan falls to fulfil the agreement then it has to pay penalty worth $18 billion.
Pakistan had initially committed to completing its part of the project by January 2015. However, in February 2014, then-petroleum minister Shahid Khaqan Abbasi informed the parliament that due to international sanctions, the Iran-Pakistan project was no longer being pursued.
Earlier this year, former petroleum minister Musadik Malik explained that despite honoring its contractual obligations under the Gas Sales and Purchase Agreement (GSPA), Pakistan couldn't start construction due to US sanctions on Iran.
Pakistan had requested a solution from Washington to address the project and energy shortages earlier this year but hadn't received a response.
In August, Pakistan issued a 'Force Majeure and Excusing Event' notice to Iran, effectively suspending its obligation to complete the gas pipeline. Essentially, Pakistan expressed its inability to proceed with the project as long as US sanctions on Iran remained in place, unless Washington gave tacit approval for it.
Today, during the Senate panel meeting, Petroleum Additional Secretary Hassan Yousafzai informed the committee that Iran had set a 2024 deadline for completing the gas pipeline, with potential fines for non-compliance. Efforts are underway to renegotiate the matter with Iran and explore alternative sources of gas.
