Pakistan temporarily halts multi-billion dollar gas pipeline project with Iran amid US pressure: Report

In a recent development, Pakistan has decided to temporarily shelve a significant gas pipeline project aimed at importing cost-effective energy from neighbouring Iran.

The decision comes amid alleged pressure from the United States, which has imposed sanctions on Iran due to its nuclear programme, as pera Monday media release, reported the PTI.

Economic challenges and IMF assistance

Add WION as a Preferred Source

The timing of this decision is crucial as Pakistan grapples with the urgent need to stabilise its financially strained economy.

To address this, Pakistan has sought assistance from the International Monetary Fund (IMF), which has agreed to provide a substantial loan of US$3 billion.

Origins of the project

Initially conceived as a trilateral venture involving India, Pakistan, and Iran, the gas pipeline project later evolved into a bilateral undertaking between Pakistan and Iran after India's withdrawal.

However, the implementation of the project has been hampered by the extensive sanctions imposed on Iran by the United States.

Pakistan has reportedly issued a "Force Majeure and Excusing Event" notice to Iran, formally suspending its contractual obligations in relation to the multi-billion-dollar Iran-Pakistan (IP) gas pipeline project.

This suspension has been attributed to external factors beyond Pakistan's control, particularly the stringent international sanctions on Iran.

Challenges and uncertainties

The suspension of the gas pipeline project raises significant concerns, especially given Pakistan's acute energy shortages, affecting its population of over 240 million people.

The project's suspension underscores the inability to proceed with its construction while the US sanctions remain in effect. Minister of State for Petroleum, Musadik Malik, noted that the project's timeline and completion remain uncertain until the sanctions are lifted.

International arbitration and potential penalties

Minister Malik acknowledged that the dispute over the force majeure notice may eventually need to be resolved through international arbitration.

The outcome of this process would determine any potential penalties or fines, contingent on the arbitrators' decision.

Iran has consistently spotlighted the importance of completing the project, asserting that it serves the national interests of both countries.

Iran has completed its side of the 1,150-kilometrepipeline, with the groundbreaking ceremony taking place in 2013. However, various hurdles, including international sanctions, have prevented Pakistan from fulfilling its commitments.

Also watch |Pakistan's textile industry in tatters

Diplomatic efforts and future prospects

While Pakistan remains committed to the project, diplomatic negotiations are ongoing between Pakistan and the United States to seek exemption from the sanctions.

The indigenous gas supplies in Pakistan are depleting rapidly, exacerbating the demand-supply gap, which necessitates swift action to address the energy crisis.

(With inputs from agencies)

WATCH WION LIVE HERE: