Wednesday May 22, 2024

Pakistan to seek relief from US on Iran gas sanctions

By Khalid Mustafa
February 02, 2023

ISLAMABAD: Top government authorities have decided to initiate diplomatic endeavours to seek relief from Washington on sanctions imposed on Tehran so that Pakistan could initiate building a portion of the Iran-Pakistan (IP) gas pipeline.

“This has been decided in a high-level meeting on Tuesday (January 31, 2023) with the prime minister in the chair over the Iran-Pakistan gas pipeline. The government would also initiate efforts to persuade Iran not to seek a penalty if Pakistan fails to build the portion of the pipeline in its territory up to the Iranian border by February-March 2024,” a senior official who was a part of the meeting told The News.

The official said: “Iran has already asked Pakistan in clear words to erect the pipeline by February-March 2024 or be ready to pay a penalty of $18 billion.” The News broke the story in its edition of January 31, 2023, with the headline “Iran dangles the threat of $18 billion penalty over the pipeline project.”

The project was to be implemented under a segmented approach meaning that Iran had to lay down the pipeline on its side and Pakistan had to build the pipeline in its territory. The project was to be completed by December 2014 and become functional from January 1, 2015. Iran had already completed the part of the pipeline in its own territory from the gas fields to the Pakistan border.

In the meeting, the official said, it was decided that diplomatic efforts would also be initiated to convince Iran that Pakistan was quite serious about the project and would persuade the authorities not to seek a penalty in case Pakistan fails to meet the deadline of February-March 2024. They said the country will be trying to get a waiver or relief from the US on the sanctions imposed on Iran.

“Now there are only US sanctions left as the UN curbs are no longer there on Iran for its nuclear programme,” the official said, adding that both countries signed the GSPA for the IP gas line project in 2009 under the French law. “Pakistan is an energy-starved country and it needs relief from US sanctions, so that it can erect the pipeline on its side and start getting gas from Iran to ensure sustainable gas availability in the country.”

Iran says that US sanctions are illegal and Pakistan should start constructing the pipeline in its territory to complete the project by February-March 2024. Experts say sanctions do not bar the construction of the pipeline but on gas flows from Iran. India also got the US waiver and has been getting crude oil from Iran for a long time.

The Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) signed a revised agreement in September 2019 for the construction of gas pipeline between the two countries. Under the revised accord, Iran would not approach any international court if there was a delay in the construction of the pipeline, and neither would Pakistan pay any fine to Iran till 2024. Pakistan would be able to construct its pipeline by 2024 after which it would have an intake of 750 million cubic feet of gas from Iran daily. The GSPA was signed in 2009 for 25 years, but the project could not get any shape. Almost 12 years have passed since the signing of the agreement, and the three-year construction period for the pipeline in Pakistani territory has been wasted. Under the agreement, Pakistan was supposed to lay down in its territory a pipeline of 781 kilometres from the Iranian border to Nawabshah under the GSPA. Under the original agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, under the penalty clause. And in case Iran moves an arbitration court, Pakistan would have to pay billions of dollars as penalty.