Pakistan faces $18bn fine over Iran gas pipeline delayed by US sanctions
Pakistani officials say the US should pay the fine for blocking the pipeline's construction
By News Desk - May 18 2023

(Photo Credit: ATTA KENARE)

Pakistani officials warned on 18 May that Islamabad faces paying an $18 billion fine if it fails to complete the Iran-Pakistan Gas Pipeline project.

The project, which offers to supply Pakistan with 750 million cubic feet of natural gas, has been fraught with difficulties, among them being Pakistan’s failure to build its infrastructure section due to US sanctions on Tehran.

“The US should pay the penalty if it does not approve of Pakistan and Iran going ahead with the gas pipeline project. The US will have to do away with double standards – being lenient with India in meeting its energy needs while punishing Pakistan for the same,” said Noor Alam Khan, the head of Pakistan’s Public Accounts Committee (PAC) – a transparency watchdog for all ministries and public agencies.

The Pakistani foreign ministry said it would discuss the problems with “relevant parties.”

“In view of the great importance of the Iran-Pakistan (IP) gas pipeline project in the emerging regional situation, this ministry has been exploring all possible options, including close engagements and meaningful exchanges with relevant parties, including Iran and the US,” the foreign ministry statement reads.

According to the terms of the IP-GSPA (Gas Sales Purchase Agreement), each country was obligated to construct a portion of the pipeline on its territory, and the first flow of Iranian gas to Pakistan was to start on 1 January 2015.

Iran completed its portion in 2011. However, Pakistan still needs to construct its portion due to difficulties caused by US pressure.

According to The Cradle columnist F.M. Shakil, “US sanctions block Pakistan from purchasing Iranian gas, and this geopolitical risk has made Pakistani banks unwilling to finance the project.”

“Pakistan needs roughly $3 billion to lay a pipeline stretching over a radius of 781 kilometers inside the country. The question is who will finance this project, and secondly, the US sanctions on Iran, which took the air out of this project as far as Pakistan is concerned, need a revisit by the US authorities to protect the faltering economies of the region,” recently told The Cradle.

On top of being fined billions of dollars for failing to complete the IP pipeline, in recent months, Pakistan has suffered rolling blackouts due to European buyers hoarding liquified natural gas (LNG) supplies to overcome losing access to Russian fuel.

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