Iran has threatened to fine Pakistan billions of dollars for not completing the gas pipeline. Iran asked Pakistan to build a part of the Pakistan-Iran (IP) gas pipeline project on its territory by March 2024, in case of non-completion Pakistan will have to pay a fine of $ 18 billion as a penalty.
Pakistan and Iran signed a revised agreement for the construction of the gas pipeline in September 2019. Under the revised agreement, Iran will not approach any international court in case of delay in the construction of the pipeline, nor will Pakistan pay any penalty to Iran until 2024. Under the agreement, Pakistan will get 750 million cubic feet of gas per day from Iran by laying its share of the pipeline by 2024.
A $7.6 billion gas pipeline deal was signed between Pakistan and Iran to connect the Fars gas field in southern Iran to Balochistan and Multan in Punjab. This project has been named ‘Peace Pipeline’ and the presidents of Pakistan and Iran officially inaugurated this project in March 2014. India was initially included in the agreement signed 18 years ago for this project, but later, India withdrew from the project due to international sanctions on Iran.
In Islamabad, a senior official at the Ministry of Energy confirmed EAT News that a couple of weeks ago Iran informed a visiting Pakistani official delegation that the US sanctions against Iran are illegitimate and that Pakistan must build the gas pipeline in its territory by February or March 2024 in accordance with the terms of their revised agreement. Iran could enforce a massive $18 billion penalty if Islamabad fails to complete a portion of the Iran-Pakistan (IP) gas pipeline project on its territory by February-March 2024. The pipeline from the gas field (Iran) to the Pakistani border, where it would link to the Pakistani section, has already been completed in part by Iran.
This gas project is being given great importance to solve the natural gas crisis in Pakistan. Sartaj Aziz, a former federal minister from Pakistan Muslim League- Nawaz (PML-N) spoke to EAT news on the telephone on the IP gas pipeline issue. He said, “Pakistan started the construction of a gas pipeline 11 years ago to obtain natural gas from Iran, but due to the global economic sanctions on Iran, this work could not continue for a long time. Transactions with any Iranian company are considered illegal due to international sanctions. In the past, several worldwide trading companies have been slapped with heavy fines for doing so. Being a neighboring country, there is also a great possibility of trade with Iran, which is suffering due to sanctions. Iran’s involvement in regional and global politics and economy will also benefit the Muslim Ummah throughout the globe”.
Iran is natural resources and oil-rich country in the Middle East. According to international data (2020), Iran is the largest producer of natural gas in the world after the United States and Russia. It has the second-largest natural gas reserves in the world after Russia. According to the Organization of the Petroleum Exporting Countries (OPEC), in terms of crude oil, Iran has the third largest reserves in the world, while it is the fourth largest consumer of natural gas in the world after America, Russia, and China. Moreover, Iran is ranked first in the world in terms of hydrocarbons.
Tehran informed Islamabad in February 2019, for failing to build the pipeline in Pakistani territory by the deadline for the IP gas line project, Iran will move forward to pursue arbitration court proceedings and it also invokes the penalty provision of the Gas Sales Purchase Agreement (GSPA). Then a new agreement for the building of the pipeline was signed in September 2019 by Pakistan’s Inter-State Gas Systems (ISGS) and the National Iranian Gas Company (NIGC). It states that neither Iran nor Pakistan would sue or impose fines on each other for delay in the construction of the IP gas pipeline till 2024. Once the pipeline is finished and put into service, Pakistan will be able to get 750 million cubic feet of gas per day from Iran. Earlier, the GSPA, which was signed in 2009 for a term of 25 years, gave Pakistan three years to build a 781-kilometer pipeline from the Iranian border to Nawabshah.
The two nations agreed to a 25-year deal to export natural gas from Iran to Pakistan through a pipeline in 2009; it was meant to go into effect by 2015, but Washington’s pressure on Islamabad and international sanctions against Iran have so far stopped that from happening. In September 2019, the two parties signed a new agreement that allowed Pakistan to complete the pipeline by 2024 and Iran pledged not to file a lawsuit with any international tribunal till Mar 2024.
The Iranian government has now issued a warning that March 2024 is rapidly approaching and that if Pakistan does not finish building the pipeline within 15 months, Tehran would seek $18 billion in reparations for the costs incurred in constructing the pipeline to the Pakistani border. This fear is expressed that if Pakistan fails to follow the terms and conditions of the IP gas pipeline project, and if Iran files a case against Pakistan in the international court, Pakistan may be forced to pay billions of dollars which is almost impossible for a crumbling economy.
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