Earlier this year, Iran informed Pakistan of its plans to approach an arbitration court in Paris over Islamabad’s failure to uphold an agreement requiring it to construct a section of a cross-border natural-gas pipeline on its soil.
Pending since 2011, the $7.5 billion, 1,700-mile project was to bring gas from Iran’s South Pars Gas Fields through Balochistan into India, though Delhi subsequently opted for the alternative TAPI project. Unfortunately, any progress on the project has repeatedly stalled over fears of potential U.S. sanctions arising from any dealings with Iran.
Under the original deal, Pakistan was to complete its segment of the pipeline by 2014, with the contract inked between the neighboring nations warning of a significant penalty if it failed to do so. Recognizing the risk, the Ministry of Finance voiced concerns over funding in 2012, but was ignored, leading to Pakistan ratifying the agreement in January 2013, with work officially commencing in March 2013. In 2014, then-petroleum minister Shahid Khaqan Abbasi told the National Assembly the project was halted due to threats of potential sanctions and Pakistan secured a 10-year extension for building the pipeline, which expires in September. If Pakistan fails to secure another extension, Iran can take the country to an international court for recovery of fines amounting to $18 billion.
Earlier this year, then-Iranian President Ebrahim Raisi visited Pakistan and stressed on resuming the work, as Tehran had completed its portion and only Islamabad’s work remained pending. However, within weeks of this visit, U.S. Assistant Secretary of State for South and Central Asia cautioned Pakistan against importing gas from Iran or risk sanctions. In response, Pakistan maintained it would proceed with the project, but has yet to take any steps proving this claim. Amidst this impasse, U.S. scholar on South Asia, Michael Kugelman, believes Pakistan’s best bet is to build the pipeline with financing from China or some other external source; former senator Mushahid Hussain claims Russia has offered to fund an initial $160 million for the pipeline, while the Iranian consul-general has offered Tehran’s support to complete the project. None of these options have any solution for the economic penalties that potential sanctions would impose on the country.