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Geopolitical tensions mar the Pakistan-Iran gas pipeline project

September 28, 2023 at 9:47 am

Iranian President Ebrahim Raisi (R) meets Pakistan Prime Minister Shehbaz Sharif (L) on September 20, 2022 [Iranian Presidency/Anadolu Agency via Getty Images]

Pakistan is in “constant” touch with the US administration seeking a tacit green light to the long-stalled Pakistan-Iran gas pipeline project, but “there are only remote chances of a favourable response” from Washington, a foreign ministry official in Islamabad has told me. The official, who spoke on condition of anonymity, was referring to the persistent tensions between Washington and Tehran over Iran’s nuclear programme and the sanctions that are imposed as a result.

The project was launched in 2013 and, with several deadlines already missed, it is unlikely to meet next year’s deadline due to the long-standing US sanctions against Tehran. Pakistan requested Washington earlier this year for a solution to the problem, but has not yet received any response.

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“We have told Washington that the gas pipeline project is crucial in terms of meeting our growing energy needs,” explained the official. He added that Islamabad is finding alternative ways to cope with its energy requirements. In recent months, for example, Pakistan has signed agreements with Russia and Azerbaijan for crude oil and gas, and received its first liquified petroleum gas (LPG) consignment from Russia on Tuesday.

Moreover, the official said that Pakistan is not in a position to initiate a new controversy considering its sluggish economy and reliance on international loans. Islamabad secured a last-minute bailout from the International Monetary Fund in July to avoid defaulting.

Now Pakistan is negotiating with Iran to settle a financial row over the multi-billion-dollar gas pipeline project. Additional Secretary for Petroleum Hassan Yousafzai told a Senate committee on Wednesday that Islamabad is trying to negotiate with Tehran to avoid a whopping $20 billion in liabilities as the deadline for the long-stalled project approaches.

“The issue has also been raised with the US,” said Yousafzai, referring to Islamabad’s repeated attempts to woo its long-time ally Washington to greenlight the project tacitly, which is crucial to meet its domestic energy needs.

Pakistan has expressed its inability to pursue the project while US sanctions on Iran are in place

The development came weeks after Islamabad issued a notice of “Force Majeure and Excusing Event” to Tehran to suspend its contractual obligation on completion of the 1,150-kilometre pipeline. This means that Pakistan has expressed its inability to pursue the project while US sanctions on Iran are in place or Washington allows it to go ahead.

Earlier this year, former Petroleum Minister Musadik Malik had said that despite being committed to its contractual obligations, Pakistan had been unable to start construction of its end of the pipeline, which aims to supply 750 million cubic feet per day of gas, due to US sanctions on Iran.

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Tehran claims to have completed the pipeline up to the border. The groundbreaking ceremony of the project was conducted jointly by Pakistan’s then-President Asif Ali Zardari and Iran’s President Mahmoud Ahmadinejad near Iran’s port city of Chahbahar in March 2013, with an estimated cost at the time of $7.5 billion.

Yousafzai’s briefing prompted the Senate committee to summon top foreign ministry officials and the attorney general to explain Washington’s objections to the project, which was slated originally to be completed in 2015.

Senator Sadia Abbasi, who heads the Senate Committee on the Cabinet Secretariat, questioned why Pakistan is facing such treatment over its energy agreement with Iran. “Why has India never faced such restrictions?” she asked, citing the regular procurement of oil by India from Iran.

Senator Mushtaq Ahmed from the country’s mainstream religiopolitical party Jamaat-e-Islami, called for foreign ministry officials to be summoned in order to “find out why can’t we purchase cheap gas from a neighbouring country. We should know the reason for the obstruction.” 

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