Pakistan is set to negotiate with Iran to seek leniency on the Iran-Pakistan (IP) gas pipeline project deadline. The talks aim to avoid an $18 billion penalty for failing to complete its portion of the pipeline by February-March 2024. Last year, Iran mandated Pakistan to construct its pipeline segment or face substantial financial consequences.
The project entails Pakistan laying down a 781-kilometre pipeline from the Iranian border to Nawabshah, expected to consume 750 million cubic feet of gas daily. While Tehran has completed its part of the pipeline, Pakistan faces challenges due to U.S. sanctions against Iran for its nuclear activities.
The Pakistani delegation, including Energy Minister Muhammad Ali and other officials, is in Tehran to discuss potential solutions. They plan to propose implementing the IP gas line through a third party to circumvent U.S. sanctions, a strategy yet to receive a response from U.S. departments.
Revised Agreements and Strategic Alternatives
In September 2019, Pakistan’s Inter-State Gas Systems (ISGS) and the National Iranian Gas Company (NIGC) signed a revised agreement, allowing Iran to delay international legal action until 2024. After this period, Iran can seek the penalty through France-based international arbitration.
Pakistan intends to sensitise Iranian authorities about restructuring the project to avoid U.S. sanctions. An alternative proposal involves Pakistan purchasing gas indirectly through a third party, a plan that Iran reportedly supports. Given the risks of U.S. sanctions, Pakistan is cautiously proceeding with the project, seeking diplomatic avenues to fulfil its obligations without jeopardizing its economic interests.
